Fantastic Short Film about GOP Greed by Actor Ed Asner

This is a great short film by Ed Asner, reminiscent of the simplistic Schoolhouse Rock vids from the 1970s, explaining the stock market crash of 2008 in terms of the greedy 1% versus the struggling 99%. We need more clear explanations like this to give everyone some perspective - especially folks who vote against their own self-interests time after time. It's obvious to the Democrats that the super-wealthy just need to pay more taxes and honor the social contract, but it will take years to reverse the damage done by the Tea Party and Grover Norquist.

Still - this is an educational and well-done video. Thanks, Mr. Asner ~ Lou Grant would be proud! :)

J.P. Morgan Bank Faces Criminal Charges

I've been covering JP Morgan Chase Bank for a long time, and there is just so much wrong with the way they do business! But because CEO Jamie Dimon is slippery and charismatic, they have drifted along without legal consequences even while making shady deals (The London Whale) and losing tons of money for their investors.

Let's face it - we need accountability to have closure for what happened in 2008 when the stock market crashed. And these Wall Street banks are still playing fast and loose with OUR money! As Elizabeth Warren said, "Too big to fail has become too big for trial."

Previous Posts:
May 12, 2012: The London Whale
May 18, 2012: JP Morgan Fall-Out Continues
June 14, 2012: Dimon Cozies Up to Senate Banking Committee
March 17, 2013: Senate Grills JP Morgan Bank

Now JP Morgan is under criminal investigation from both Federal and State Officials:

From Huffington Post

The Justice Department told JPMorgan in May that prosecutors had “preliminarily concluded” that the bank violated civil securities laws related to mortgage securities it packaged and sold from 2005 to 2007, the bank disclosed in a quarterly securities filing. JPMorgan has already been sued over similar practices by Eric Schneiderman, New York attorney general, and has settled similar cases brought by the Securities and Exchange Commission.
. . . JPMorgan -- once a darling in Washington -- on Wednesday disclosed a raft of expected enforcement actions that have been broadly mentioned by the bank and its chief executive and chairman, Jamie Dimon, but never before in such detail. Once finalized, the enforcement orders may further damage the bank’s already-battered reputation and lead to heightened scrutiny of its practices.
The Consumer Financial Protection Bureau is investigating JPMorgan's collection and sale of delinquent consumer credit card debt, including its use of sworn documents to pursue bad debts. Kamala Harris, California attorney general, has sued the bank over similar practices.

From Reuters

One of the major criticisms by homeowners, investors and politicians is that federal and state investigators have failed to bring criminal charges against high-level executives over lending and securitization activities that contributed to the housing and financial crises. No top executives at large Wall Street or commercial banks have been convicted of criminal charges related to the crises.
"Criminal probes of banks over MBS have been exceedingly rare," said Adam Levitin, a professor at Georgetown Law.

Senate Grills JP Morgan Bank

The saga of the JP Morgan Bank "London Whale" disaster continued last week with the release of a major Senate report and public hearings on Capital Hill.

Previous Related Posts:
Economic News Round-Up ~ The London Whale
JP Morgan Fall-Out Continues
Dimon Cozies Up to Senate Banking Committee
Economic News Round-Up ~ London Whale Leaving JP Morgan

Cnn Money

During a press briefing Thursday, Levin said the investigation of 90,000 documents, and more than 200 phone conversation and instant messages, showed how the bank "ignored limits on risk taking, dodged oversight and misinformed the public."
But the report also criticized regulators at the Office of the Comptroller of the Currency for not following up on red flags.

From AFP, via Google

Senator Carl Levin, at a hearing on JPMorgan's ill-fated "whale" trades, slammed the bank's trading operation that lost $6.2 billion over just a few months in 2012 as a "runaway train barreling through every risk limit."

"Derivative values that can't be trusted are a serious risk to our financial system," said Levin, the chairman of the Senate subcommittee on investigations.

The incident is a "reminder you just can't rely on a major bank... without a strong regulator looking over," Levin added.

A 300-page report by the subcommittee said that JPMorgan kept adding risky bets on top of earlier ones, hid losses, disregarded its own rules for risk limits, avoided oversight by its regulator and "misinformed" investors, regulators and the public.

Former and current JPMorgan executives testifying at the Senate hearing painted a picture of confusion and disbelief over the scale of the losses, which blindsided the Wall Street powerhouse in the first quarter of last year.

Ina Drew, JPMorgan's chief investment officer at the time with responsibility for the London trading operation which racked up the losses, admitted errors even as she pointed the finger at others.

"I was, and I remain, deeply disappointed and saddened that such significant losses occurred in the business unit I oversaw," said Drew, who resigned last year to take responsibility for the debacle, according to her prepared testimony.

But Drew also pointed a finger at London employees that she said misled her on the scale of the problem and "let me, and the company, down."

Elizabeth Warren Shames Bank Regulators

Senator Elizabeth Warren hit the ground running in her first Banking Committee Hearing. She wasted no time lambasting the spineless regulators who are letting off the big banks with fines and slaps on the wrist instead of taking them to trial. Her goal was to expose the weakness of regulators who see fines as enough penalty for the crimes committed, and she pointed out that when these cases aren't taken to trial then no testimony of wrongdoing is ever put down on the record. So in effect, the bankers get off scott-free without any new information that congress could use to improve the banking system.

Marketwatch

“I want to note that there are district attorneys and U.S. attorneys who are out there everyday squeezing ordinary citizens on sometimes very thin grounds and taking them to trial to ‘make an example,’ as they put it,” she told bank regulators testifying at a Senate Banking Committee hearing. “I am really concerned that too-big-to-fail has become too-big-for-trial.”

. . . Warren acknowledged that trials are expensive but she insisted that if an agency is unwilling to go to trial it is because they are “too timid” or lack resources. She said that the consequence is that if large financial institutions can break the law and “drag in billions” in profits and settle, then they don’t have much incentive to follow the law.

“Every time there is a settlement and not a trial, it means we didn’t have the days and days and days of testimony about what those financial institutions were up to,” Warren said.

Senator Elizabeth Warren at the Feb. 14, 2013 Banking Committee Hearing titled "Wall Street Reform: Oversight of Financial Stability and Consumer and Investor Protections." The witnesses were: The Honorable Mary Miller, Under Secretary for Domestic Finance, U.S. Department of the Treasury; The Honorable Daniel Tarullo, Governor, Board of Governors of the Federal Reserve System; The Honorable Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation; The Honorable Tom Curry, Comptroller, Office of the Comptroller of the Currency; The Honorable Richard Cordray, Director, Consumer Financial Protection Bureau; The Honorable Elisse Walter, Chairman, U.S. Securities and Exchange Commission; and The Honorable Gary Gensler, Chairman, U.S. Commodity Futures Trading Commission.

Paul Krugman for Secretary of the Treasury?

I'm a fan of Nobel-Prize winning economist and NYT writer Paul Krugman. He is also author of great books like The Conscience of a Liberal, The Price of Inequality: How Today's Divided Society Endangers Our Future, and End This Depression Now!. He's a force to be reckoned with in the world of economics - few can match his breadth of knowledge, or his willingness to be outspoken. Did I mention he is anti-austerity? Yeah, that's good, too.

Now there's a petition started by actor Danny Glover asking President Obama to seriously consider him for Secretary of Treasury to replace out-going Wall Street guy, Tim Geithner, who is like the anti-Krugman.

As of right now the petition has 208,755 signatures out of the 225,000 that was the original goal. That's huge! And yes, I signed it, too, because I want to join others in sending a message to President Obama that picking another Wall Street insider might not be the most creative idea in the world, or the best thing for our country.

Petition at Sign-On.Org

We urge you to nominate Paul Krugman for Treasury Secretary. Krugman will protect Social Security and Medicare from benefit cuts, promote policies to create jobs, and help defeat the austerity dogma in Washington and around the world.
Petition Background
Press reports say President Obama will soon nominate a new Treasury Secretary . Press speculation has centered on candidates likely to support the Wall Street agenda of cuts to Social Security and Medicare benefits and other domestic spending rather than government policies to create jobs. We want President Obama to nominate Nobel prize-winning economist Paul Krugman, who opposes austerity and wants the government to focus on creating jobs.

Mark Weisbrot, Co-Director of the Center for Economic and Policy Research in Washington, D.C., on why this is a good idea:

Krugman has been right about the major problems facing our economy, where many other economists and much of the business press have been wrong. A few examples: he wrote about the housing bubble before it collapsed and caused the Great Recession; he has forecast and explained that large budget deficits and trillions of dollars of "quantitative easing" (money creation) would not cause inflation or long-term interest rates to rise; and that the "confidence fairies" would not reward governments that pursued austerity in the face of recession.
Most importantly, Krugman is on the side of the majority of Americans. He has written extensively in favor of policies that favor job creation, explained the folly of budget cutting in the face of a weak economy, and opposes cuts to social security and Medicare benefits.
. . . since most of Wall Street's money went to Republican nominee Mitt Romney in the run-up to the November election, Obama doesn't owe anything to the people who crashed our economy and are now fighting to make senior citizens, working and poor people reduce their living standards.

Krugman has responded that maybe he does more for the country playing devil's advocate as the "Outside Man" on the New York Times:

Part of the reason is that I am indeed the World’s Worst Administrator — and that does matter. Someone else can do the paperwork — but an administrative job requires making hiring and firing decisions, it means keeping track of many things, and that, to say the least, is not my forte.
Oh, and there’s not a chance that I would be confirmed.
But the main point, as I see it, is that it would mean taking me out of a quasi-official job that I believe I’m good at and putting me into one I’d be bad at.
So first of all, let’s talk frankly about the job I have. The New York Times isn’t just some newspaper somewhere, it’s the nation’s paper of record. As a result, being an op-ed columnist at the Times is a pretty big deal — one I’m immensely grateful to have been granted — and those who hold the position, if they know how to use it effectively, have a lot more influence on national debate than, say, most senators. Does anyone doubt that the White House pays attention to what I write?

He's got a point about the confirmation, but then again, Obama can get things through Congress that few Presidents can. And the GOP might rather have someone who is a true liberal, someone they can bash daily, unlike Geithner who was a more low-profile Wall Street insider and therefore respected by the GOP as pro-business. Hey - that's another good reason to choose Krugman!

I think it's time to give Krugman a shot to actually work in the Administration instead of being their most vocal economic critic. I signed the petition because I think Krugman is right up there with Elizabeth Warren in his understanding of real Americans, and he cares more about the social safety net than Wall Street.

I am curious how Obama will respond to this. If he thinks Krugman isn't right for Treasury, then heck - make up a new post for him where he can help people! Put him in, Coach!

Elizabeth Warren Will Serve on Banking Committee

Sources told Huffington Post today that Senator Elizabeth Warren, D-MA, has been tapped to serve on the Banking Committee. This is happy news and a coup for Democrats since Warren, a consumer advocate and economics expert, was blocked by Republicans from serving as head of Consumer Financial Protection Bureau during Obama's first term.

From Wall Street Journal

Ms. Warren, who beat Republican Sen. Scott Brown for the Senate seat in November, emerged as a high-profile Wall Street critic after the financial crisis and hit on many of the same populist themes during her campaign. "Wall Street CEOs, the same ones who wrecked our economy...still strut around Congress...demanding favors," she said in her speech at the Democratic National Convention in September.

She embraced several policy positions that bankers dislike, including calling for a return to Glass-Steagall, the Depression-era law that separated commercial and investment banks.

. . . Several financial industry officials admit they're concerned about Ms. Warren being on the panel, given her policy positions and industry criticisms, but they said they don't know of any banks or lobbyists working against her selection.

With Ms. Warren on the banking panel, it may be harder for Republican critics of that agency and the banking industry to win any changes, such as replacing its director with a bipartisan commission structure.

Going Down the "Fiscal Slope" in January

What is the Fiscal Cliff?  Or is it more of a Gentle Slope?

Source: San Francisco Chronicle

The term refers to the tax cuts that would expire and the automatic spending cuts that would take effect if Congress fails to act by year's end.

Why the deadline? Congress created it to compel action if a so-called supercommittee failed to find common ground on deficit reduction. It failed.

Tax increases: Expiration of the Bush-era tax cuts, along with a scheduled increase in the payroll tax, would raise taxes on all Americans by several percentage points.

Spending cuts: Federal spending would be trimmed by $1.5 trillion over the next decade. The few exempted areas include Social Security, Medicaid, military pay and veterans benefits.

Unemployment: About 2 million Americans will lose jobless benefits if the extended safety net program expires on Dec. 29.

Source: The Economist

What has Obama offered the Republicans so far? 
He sent Tim Geitner to Capitol Hill with this plan:

From Huff Post

Geithner's offer would delay the sequester -- automatic spending cuts to the Pentagon and social programs -- for a year, and effectively eliminates the congressional requirement to lift the debt ceiling in perpetuity. The offer included an extension of unemployment insurance, the payroll tax and even money to help homeowners modify mortgages and invest in infrastructure. "I think there was a leprechaun in there somewhere, too," quipped one GOP aide.
The proposal is based on a two-step plan that would decouple the high-end tax and capital gains rates from the middle-class rates, extending only those for the middle class. It would revert estate taxes to their higher 2009 level, and raise an additional $600 billion in taxes elsewhere, according to the GOP summary. It then proposes tax reform required to raise at least as much as the tax hikes, and entitlement reform that would trim $400 billion from the programs.

Are Republicans really going to reject all offers to deal with Obama?
Will they remain loyal to the Tea Party and Grover Norquist?
Most sources behind the scenes say the smart people among them know taxes have to go up and they have to deal. Speaker Boehner seems to be holding to the Tea Party talking points, but interestingly his back-up team are getting the word out, so we can assume he is probably posturing for the camera.

Oklahoma Senator Tom Cole on NPR's All Things Considered:

SIEGEL: . . . a surprise from one of the top Republicans in the House. He broke ranks with his GOP colleagues. While they are holding out for an extension of all Bush-era tax cuts, Oklahoma Republican Tom Cole told members of the leadership team yesterday that they should hurry up and extend tax cuts for the bottom 98 percent of taxpayers.

BLOCK: As for the top 2 percent, Cole argues, Congress can worry about them later. NPR's David Welna caught up with Cole today and has this report.

DAVID WELNA, BYLINE: Oklahoma Republican Tom Cole just got re-elected to a sixth term in the House. He serves there as the GOP majority's deputy whip, and he's a close friend of Speaker John Boehner, which is why a lot of his colleagues were surprised when Politico first reported that Cole urged his colleagues in a closed-door meeting to approve an extension this year of all the expiring tax cuts except those that affect only the top 2 percent.

REPRESENTATIVE THOMAS JEFFERY COLE: We have an opportunity to make sure that the tax rates for 98 percent of the American people don't go up. I think we should do that sooner rather than later.

WELNA: That's Cole this afternoon.

COLE: I'm not trying to persuade anybody. I was asked: In my opinion, what's the best position for us to take? You know, what's in the best interest of the American people? What's in the best interest politically? I think that position that I outlined - that is, making sure that 98 percent of the American people have tax security, so to speak, and then continuing to fight on the other issues, and it doesn't mean giving in to rate increases. I don't believe in that. That's the right thing to do.

Senator John Thune (R-SD) on Fox News via ThinkProgress

MARTHA MAcCALLUM (HOST): What I’m asking you is are Republicans willing to hold the line, to say to the President, I am sorry, we will never agree to a deal that involves an increase in taxes? Are they?

THUNE: I think any deal that passes up here that raises taxes and raises taxes as I mentioned earlier on small businesses, Martha, is not going to enjoy Republican support. Now, there may be enough Republicans who would vote for something like that to pass it in the House of Representatives, they need to get to 218 votes.

MAcCALLUM: Then it would be done, right?

THUNE: We’ll see about that. We don’t know what that. We don’t know what the contours of a final deal might look at this point. Everybody right now is sort of in their corners and doing the posturing.

What happens if Congress does nothing? 
This article has a good explanation of what would probably happen:

Guardian UK

. . . all this discussion about a fiscal cliff is a bit of a misnomer – a cliff suggests a precipitous fall to a likely demise. But in reality, this cliff is more of a slope, or a slow but steady decline, down the road of fiscal austerity. Yes, tax and spending policies will shift after 1 January: taxes will go up and spending cuts mandated by law will begin to go in effect. But these are changes that will unfold over many months, and even years. Indeed, the immediate impact of the "fiscal cliff" will be relatively minor. As the Center for Budget and Policy Priorities noted recently:

"A relatively brief implementation of the tax and spending changes required by current law should cause little short-term damage to the economy as a whole."

This isn't to say that markets won't have a collective freakout or that confidence in Congress to actually do its job will decline further, but those are manageable issues, particularly because, once Washington goes over the cliff, it becomes much easier to quickly reach a deal between Republicans and Democrats.

. . . Let the tax cuts expire on 1 January, with taxes going up on every American. Then, Congress can quickly pass a massive tax cut for those making less than $250,000, retroactive to 1 January. Neither side will want to wait long and force Americans to pay higher taxes, but especially Republicans won't – as they will likely be blamed if no deal is swiftly reached. To do so would mean that all sides are politically satisfied: President Obama can say he stuck to his word about raising taxes on rich Americans, and taxes will have gone up without Republicans having to cast a vote; and both parties can reap the political benefit and claim credit for having cut taxes for the middle class.

Google Has a Terrible Horrible No-Good Very Bad Day

Today Google "accidentally" released some type of earnings report that wasn't even edited, and the market responded in a such a bad way that Google trading was halted for at while, plus it pulled the total tech stock market into the dumps. What is going on here? 

From Bloomberg

Trading in Google’s stock was halted at about 12:50 p.m. New York time, and resumed at 3:20 p.m. after the company released a finalized version of its earnings document. The company said R.R. Donnelley (RRD) & Sons Co. released a draft of the quarterly results without permission. Google tumbled 8.1 percent to $694.01.

The company’s profit and sales missed analysts’ estimates, a sign that Google’s tools are becoming less valuable to advertisers while costs associated with expansion into new businesses are chipping away at profitability. The average amount advertisers paid each time a user clicks on a promotion declined about 15 percent from a year earlier, and was 3 percent less than the prior period.

From BuzFeed

Google makes virtually all of its money from contextual advertising in its own products, such as search and Gmail, and through partners that use its ad product, AdWords. That entire business model is based on the value of user clicks. (I click an ad in Gmail, Google gets a penny. I click on ad on a website that uses Adwords, the site owner and Google each get a half a penny. Repeat billions of times.)

The value of those clicks is going down, and there's no reason to believe it will go back up: this type of unintelligently targeted advertising is not popular on social networks, which are luring away advertisers, and AdWords specifically has no place on social networks that Google doesn't own.

This is a startling reminder that no tech company's position, no matter how towering, is permanent. And a clear illustration of why Google has been so, so insistent on making Google+ work, even to the detriment of its current, non-social users.

CNBC Story: Google Earnings, Revenue Miss Wall Street Forecasts

Following the earnings release surprise, the company issued a statement blaming its financial printer for the early release.

"Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization. We have ceased trading on NASDAQ while we work to finalize the document. Once it's finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT," the company said.

A spokesman for RR Donnelley said: "We are fully engaged in an investigation to determine how this event took place and are pursuing our first obligation – which is to serve our valued customer."

Google posted third-quarter earnings excluding items of $9.03 per share, down from $9.72 a share in the year-earlier period.

Elizabeth Warren For the Middle Class

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Elizabeth Warren is a Harvard Law Professor who is running for U.S. Senate in Massachusetts. She was especially uplifting to the Occupy Wall Street Movement last year, giving an inspirational speech that inspired millions. She was on track to be Head of Consumer Protection for the Obama Administration, but the Republicans blocked her confirmation so long that President Obama had to choose someone else.

But Warren rose again as a strong Senate candidate in Massachusetts, and just this week the Progressive Change Campaign Committee raised a million dollars for her campaign.


Complete Transcript of Elizabeth Warren's Speech Here

I grew up in an America that invested in its kids and built a strong middle class; that allowed millions of children to rise from poverty and establish secure lives. An America that created Social Security and Medicare so that seniors could live with dignity; an America in which each generation built something solid so that the next generation could build something better.

But for many years now, our middle class has been chipped, squeezed, and hammered. Talk to the construction worker I met from Malden, Massachusetts, who went nine months without finding work. Talk to the head of a manufacturing company in Franklin trying to protect jobs but worried about rising costs. Talk to the student in Worcester who worked hard to finish his college degree, and now he's drowning in debt. Their fight is my fight, and it's Barack Obama's fight too.

~~~~~~~

These folks don't resent that someone else makes more money. We're Americans. We celebrate success. We just don't want the game to be rigged. We've fought to level the playing field before. About a century ago, when corrosive greed threatened our economy and our way of life, the American people came together under the leadership of Teddy Roosevelt and other progressives, to bring our nation back from the brink.

~~~~~~~

Americans are fighters. We are tough, resourceful and creative. If we have the chance to fight on a level playing field—where everyone pays a fair share and everyone has a real shot—then no one can stop us. President Obama gets it because he's spent his life fighting for the middle class. And now he's fighting to level that playing field—because we know that the economy doesn't grow from the top down, but from the middle class out and the bottom up. That's how we create jobs and reduce the debt.

~~~~~~~

The Republican vision is clear: "I've got mine, the rest of you are on your own."

Republicans say they don't believe in government. Sure they do. They believe in government to help themselves and their powerful friends. After all, Mitt Romney's the guy who said corporations are people.

No, Governor Romney, corporations are not people. People have hearts, they have kids, they get jobs, they get sick, they cry, they dance. They live, they love, and they die. And that matters. That matters because we don't run this country for corporations, we run it for people. And that's why we need Barack Obama.

~~~~~~~

He believes in a country where everyone is held accountable. Where no one can steal your purse on Main Street or your pension on Wall Street. President Obama believes in a country where we invest in education, in roads and bridges, in science, and in the future, so we can create new opportunities, so the next kid can make it big, and the kid after that, and the kid after that. That's what president Obama believes.

~~~~~~~

I grew up in the Methodist Church and taught Sunday school. One of my favorite passages of scripture is: "Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me." Matthew 25:40. The passage teaches about God in each of us, that we are bound to each other and called to act. Not to sit, not to wait, but to act—all of us together.

Bye-Bye to Best Buy?

The Best Buy company is in big financial trouble these days. I can't really remember the last time I shopped there - it's been years. I never enjoyed the feeling of being in a big warehouse with loud music blaring. I'd rather be able to think straight while making purchases . . . but that's just me.

My kids were the ones who usually begged to go there to look at the latest video games, and we would indulge them. The problem is, we could get the same game for half the price at Target, and even less on Amazon. I figured out quickly that Best Buy "sales" weren't really sales.

Their dvds and cds are always overpriced and not stocked well, and when we had to buy a refrigerator we chose the local neighborhood appliance store where we could get a better deal, a good warranty, and same day delivery. Also, while I know they have great sales around Thanksgiving, I hate to get in line at 4 a.m. and fight with other shoppers, so I just stay home and get the exact same half-price deal on Amazon with free Super Saver shipping. And no loud music - just Christmas Carols.

To me this is a problem very much like Netflix causing Blockbuster to lose business. Convenience matters, and service matters. And greed is not that good if your sales are making customers walk out the door without buying anything. I can't tell you how many times we used to go to our local Blockbuster with money in our pockets around Christmas, but nothing was discounted except used movies, and those don't make great presents. I wasn't even surprised when our BB closed down - corporate jerks.

This is more bad news for cities across the country. Each Best Buy store provides lots of local jobs, and they are talking about closing down 50 locations (see story below). That's a shame. I'm sure the corporate overlords are preparing their golden umbrellas, while the kids that work at Best Buy have to go work at fast food restaurants or Home Depot. And the adult employees with families face an uncertain Christmas season with only unemployment pay. Sad.

From Wall Street Journal

Best Buy Co....may be running out of time to turn around its troubled electronics business after posting a 91% plunge in quarterly profit Tuesday and suspending its annual earnings forecast heading into the holiday shopping season.

The world's largest electronics chain reported second quarter earnings fell to $12 million from $128 million a year earlier. Its business eroded by almost every measure, from revenue to gross profit margins to same-store sales, as gains in smartphones and tablets failed to make up for computer and television declines.

Story from CNBC

Best Buy's problems have been compounded by "dinosaur (store) formats that we just don't need any longer," Widlitz said.

Critics have complained that Best Buy has become a showroom for Amazon.com Inc and other online retailers as shoppers go to its stores to check out electronics like high-definition televisions, then buy them elsewhere for less.

Ending the practice of showrooming is a top priority, Best Buy said in June.

The company has also said it is working to improve its online business and wants to reduce retail square footage further than a March plan to close 50 of its 1,100 large U.S. stores. Many investors were looking for deeper cuts to turn around the chain.

Facebook Still Falling on Wall Street

I'm interested in economics mainly from a pschological or historical point of view, and I admit am not an investor of any kind, so from that perspective, it makes me a little proud of the prediction I made back in May when the Facebook IPO was about to be offered to the public:

In my opinion, and I'm not an economist but just an observer of human nature, this IPO may be happening just a little too late. Yes, there will be billionaires who build fortunes by selling out quickly, but some people - probably the small investors again, *sigh* - are going to lose a mint.

All my Posts about the Facebook IPO Here

What I discovered as the Facebook story unfolded was that the offering price of $38 was set way too high to begin with, and there was buyer's remorse right away due to problems with the Nasdaq (see Wall Street Journal video below). So there was a very small window of happiness with the stock which was mostly due to pre-IPO hype. Some buyers wanted to sell but were prohibited for 3 months. That period ended today and what happened ~ they sold off big time, so that Facebook's value fell to a new low.

From Reuters:

More than 270 million shares owned by early investors became available for trade on Thursday after a 3-month curb on sales ended. That's more than half the 421 million shares sold in its initial public offering on May 18.
. . . Analysts say Thursday's frenetic trading offers a taste of what may transpire in November, when many of the social network's employees get to cash in stock awards for the first time.
"An incredible amount, all the shares coming," said Steve Birenberg, president of Northlake Capital Management and portfolio manager for Entermedia Growth Partners, a hedge fund.
. . . The stock, which debuted at $38, fell as much as 7.1 percent to a all-time low of $19.69 before ending the day at $19.87.

Will employees really display a lack of brand loyalty and flood the market with shares in November? I think they probably will. None of it has played out in the market as promised, and the chance for making a killing is gone now. Most predictions for the economy are negative going into next year, so why hold a risky stock? It does worry me that it might happen close to the presidential election but that's unavoidable.

Facebook is still around and millions of people use it every day, but I still believe that it peaked a long time ago and isn't really the gold standard of social media anymore. I'll make another prediction just from my gut - Facebook will drift along sideways for the next couple of years, but probably won't rise above $25 a share again. If I'm wrong - if Facebook revamps with some fabulous new technology and becomes relevant again - I will be the first to admit that I was wrong. But I don't think I'm wrong. It might even fall lower or disappear entirely, but I won't go that far.

Warnings About the Eurozone

The Republicans can blame President Obama or do-nothing Ben Bernanke for all the economic problems, but this mess in the Eurozone gets worse week after week, and while you can possibly put blame on the Bush Administration and Wall Street for starting the crisis in Europe, this is also a political problem that only those countries can solve. However, while we wait for that to happen, the angst and fear emanating from the Eurozone make the markets seem unstable even on a good day, and every weekend there is some dire warning just before the Monday opening. This week is no different.

A few weeks ago, Mario Draghi, European Central Bank President, made a speech promising to do "whatever it takes" to save the Euro. But his words didn't calm the markets, which instead reacted negatively. They just aren't buying what he is selling, so to speak. Then he spoke again last Thursday, to mixed reviews.

"It's pointless to bet against the Euro," he said.


Can Draghi Turn the EU Ship Around?

Draghi, when he spoke late last week in Frankfurt, did not step away from his sweeping “whatever it takes” reassurance of the week before. In fact, he reaffirmed that the ECB would enter the bond markets to keep sovereign borrowing rates down. And he put this every which way he could. The central bank would “undertake outright open-market operations of a size adequate to reach its objective.” Interest rates, he said later, “that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner.”

What changed? Nothing of consequence. Draghi spoke a little more technocratically, offering details and leaving behind the billboard headlines. He implicitly acknowledged a target yield on European sovereign debt. That amounts to another commitment to whatever it takes.

In the meantime, Germany’s central bank president, Jens Weidmann, repeated that Germany was against the ECB’s latest thinking about bond buying.

Meanwhile: Italy's President is in a panic, and sees the Euro collapsing:

Mario Monti Sees Euro Alliance Dissolving

Monti, in an interview with Germany’s Der Spiegel magazine published yesterday, said that disagreements within the 17- nation euro area are detracting from the policy response to the debt crisis and undermining the future of the European Union.

“The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe,” Monti told Der Spiegel. While he backed the ECB’s willingness to address “severe malfunctioning” in the government bond market, Monti said the problems “have to be solved quickly now so that there’s no further uncertainty about the euro zone’s ability to overcome the crisis.”

. . . Monti told Spiegel that he intends to stay in office until April 2013, when Italy is due to hold elections, and he hopes he “can save Italy from financial ruin until then, with the moral support of some European friends, and Germany foremost. But I say very clearly: moral support, not financial.”

An article reprinted on CNBC from Financial Times hints that Spain might actually be leaving the Eurozone:

Wall Street Warned of Possible Euro Exit

The eurozone continues to be the predominant concern of US bank executives, ahead of the faltering US recovery. Last summer the worsening of the eurozone crisis produced wild swings in US banks’ stock prices and led the Securities and Exchange Commission to demand they provide more disclosure of assets in Spain, Greece, Italy, Ireland and Portugal.

. . . Last week the speculation on whether Mario Draghi, European Central Bank president, would take more aggressive action to tackle the crisis produced further gyrations in US stock prices.

One senior Wall Street executive said his bank was approaching derivatives counterparties to say: “‘We’ve got this contract, it’s in euros, what I want to know is in the event that Spain were to be redenominated are we going to end up being adversaries on this or can we just agree that this is a euro contact? Let’s just move it to London law so we each agree that we know where we stand.’

Wall Street: Knight of the Rogue Algorithm

Lost in the news because of the Romney Shambles tour and the London Olympics, a big thing happened on Wall Street this week - another "Flash Crash" caused by the technology that now runs the markets.

There have been several of these over the past few years, with real financial consequences including multiple lawsuits, including the Nasdaq crash the day the Facebook IPO was offered.

When Algorithms Go Bad . . .

From the New York Times

Traders on Wednesday said that a rogue algorithm repeatedly bought and sold millions of shares of companies like RadioShack, Best Buy, Bank of America and American Airlines, sending trading volume surging. While the trading firm involved blamed a “technology issue,” the company and regulators were still trying to understand what went wrong.

The debacle comes after the botched Facebook initial public offering on the Nasdaq exchange in May and the aborted effort in March by another exchange, BATS Global Markets, to bring its own stock public. The episodes, along with the flash crash of 2010 when the market lost trillions of dollars of value in minutes, have stoked suspicions that stocks are safe only for specialists, and sometimes not even for them.

“The machines have taken over, right?” said Patrick Healy, the chief executive of the Issuer Advisory Group, a capital markets consulting firm. “When events like this happen they just reaffirm that these aren’t investors, these are traders.”

The errant trades began hitting exchanges almost as soon as the opening bell rang and came from a single New Jersey broker that specializes in computer-driven trading, the Knight Capital Group. Shares of more than 100 companies, including big names like Alcoa, Citigroup and Ford suddenly spiked up or down. The New York Stock Exchange had most of the mistaken orders, but all of the nation’s exchanges executed trades for Knight and all agreed to cancel the trading in six stocks that had especially extreme movements.

Via ZDNet

Knight Capital Group this week botched a software upgrade that triggered erroneous New York Stock Exchange orders at market open Aug. 1. These orders resulted in a $440 million pre-tax loss. The problem? As of June 30, Knight had $364.8 million in cash and equivalents.
The company has until Monday night to find enough cash---via credit lines, cash infusions or an investor---to settle the trades.
In a statement, Knight Capital, which also lost $35.4 million related to the Facebook IPO in its second quarter, outlined the software glitch.

. . . Overall, about 150 stocks were affected as a wayward algorithm flooded them with buy and sell orders. Knight's software update was tied to a new NYSE trading platform.

. . . What's shocking about the Knight situation---as well as other algorithm and software issues with Wall Street systems---is that one screw-up can wipe out a company. Knight isn't some dinky player. Year-to-date Knight has traded $21.5 billion worth of stock a day on average as well as 3.3 billion trades a day.

Knight Capital called it a "technical problem," but it was way beyond that, and seemed to have no human oversight for many hours, which bothered many traders and market watchers.

From the LA Times:

. . . the debacle highlights concerns on Wall Street and in Washington about structural flaws in the U.S. financial system. Observers are worried that the reliance on computer-driven trading, where stocks are bo"ught and sold in the blink of an eye, could lead to a major equities meltdown.
"The ghosts in the machine have gotten out of control," said Larry Tabb, chief executive of Tabb Group, a financial research and advisory firm. "There are increasingly more problems and we haven't been able to get this right."

. . . Former Sen. Ted Kaufman, a vocal critic of high-frequency trading and how Wall Street has evolved, criticized Congress for denying the SEC adequate funding to do its job. He said post-"flash crash" regulations — even those that have yet to take effect — fail to address the larger structural problems on Wall Street.

What was once a duopoly of two major exchanges, the New York Stock Exchange and the Nasdaq, has evolved into more than a dozen separate trading platforms. There are also numerous "dark pools" where hedge funds and other large investors trade out of public view — what Kaufman likened to the Wild West.

"This is like a volcano that keeps sending out signals," said Kaufman, a Democrat from Delaware who is now teaching at Duke University's law school. Wall Street keeps sending out warnings like Knight's loss, he said, "and we're not doing anything about it."

Story from Forbes: Knight Unhorsed

Of course, who can forget May 18, 2012, when NASDAQ’s much heralded launch of the greatly anticipated Facebook initial public offering wound up in the toilet. After taking some time to first remove the ample amount of egg on their faces, the good folks at NASDAQ seemed to concede that they weren’t quite prepared for what many viewed as the single-most important IPO launch in that electronic market’s history. The Facebook IPO crash and burn is now attributed to some software glitches – whatever that truly means. The price of Facebook continues to drop as the talk of litigation against NASDAQ seems to rise.

As the piling-on of NASDAQ grew after the disastrous opening day, who can forget the no-holds-barred criticism of NASDAQ’s Facebook IPO performance by Knight Capital’s Chair and CEO Thomas Joyce ? It was only a few weeks ago, on May 21, 2012, when Joyce appeared on CNBC “Squawk On The Street” and slammed NASDAQ:

“First of all, I want to point out that this wasn’t in anyway, shape or form an industry failure. This is not a systemic issue. All of the financial services firms that were out there handling client flow handled it perfectly. This is not the first IPO that’s ever come down the pipe. They understand the process and handled it perfectly. The failure was Nasdaq’s. It was Nasdaq’s failure . . .
[T]his was a technology problem. This was like a server going down except on a massive scale and instead of stepping back and rebooting, they kept plowing ahead. . .

. . . It must be with some devilish joy that the folks at NASDAQ watch today’s unfolding developments as Knight itself experienced severe disruption of its ability to handle and transmit orders. A situation so severe that the company’s stock is down nearly 33%. We’re told, preliminarily, that there’s a software glitch that impacted order routing. Ah yes, the ever-popular high-tech scapegoat: the software glitch!

World Markets Watching Spain

For a long time, market watchers have predicted that Spain might be the next economy to crumble after Greece fell apart and needed a bail-out. Don't you hate it when the doomsayers are right? It just doesn't bode well for the world economy to see all this instability in Europe, and unfortunately it's nowhere near over because Italy is next in line. The pain continues, and could leave the rest of Europe ~ and the world ~ overwhelmed.

 Ezra Klein on Rachel Maddow

. . . If you're picking one indicator to watch to see if it was going to survive or fall, you would pick Spanish bond yields because it would be bad if Greece had to leave the euro, but it would be survivable. There is no world where Spain goes down and the euro endures. If Spain goes down, the euro is going down. Spanish bond yields, the thing you need to remember is the higher a bond yield is, the higher a country has to pay when they borrow money.
Spain can't afford to borrow the money necessary to finance itself, and the Eurozone is going down. and that means our economy might be going down, too.
Well, Spanish bond yields have kept going up. This is way above the level which Spain and the euro can survive.
Tonight's Ezra Klein challenge is to explain why this happened. . . . Austerity isn't working! . . . Spain has been doing what the Eurozone has asked them to do, austerity, cutting budgets. They're trying. everybody agrees they have been a good faith actor. but that treatment is driving them deeper and deeper into recession, and these bond yields are the market . . . saying 'this is not working.'

Visit NBCNews.com for breaking news, world news, and news about the economy

From MSN Money UK:

The Dow Jones Industrial Average, after falling 239 points earlier in the day, ended down 101.11 at 12,721.46. Yields for US government bonds sank to record lows as traders sought the safety of American debt.

Borrowing costs rose sharply for Spain and Italy after news that the Spanish economy contracted by 0.4% in the second quarter. Falling economic output makes it more difficult for Spain to deal with its debts. The Standard & Poor's 500 index fell 12.14 points to 1,350.52. The Nasdaq composite index dropped 35.15 points to 2,890.15.

"Increases in Spanish borrowing costs have brought back questions about the health of Europe," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia. "That's driven a flight to safety."

More Scary Stuff from Bloomberg

Now, that worst-case scenario has re-emerged. The catalyst is Greece. Over the weekend, Germany’s economy minister, Philipp Roesler, said he doubted that Greece would keep the fiscal promises it made in return for its bailout. If help for Greece is cut off, a disorderly exit from the euro becomes much more likely. For the rest of Europe and the world, that’s alarming less in its own right than because of the risk of contagion.

Spain would probably be the first to suffer, and as things stand there’s nothing to stop the situation from unraveling. With anxiety about Greece rising again, it was reported that Spain’s regional governments were seeking bailouts from Madrid, threatening to add to the central government’s debt burden. The Spanish economy is contracting, the latest figures showed last week. At the same time, Prime Minister Mariano Rajoy sparked protests when he said he would press on with further fiscal tightening, which is likely to slow growth even further.

On Monday, Spain’s 10-year bond yields rose for the first time above 7.5 percent. Rates sustained at this level are unaffordable and, in effect, make the Spanish government insolvent. Disturbingly, yields rose sharply at shorter maturities, too, and the cost of insuring against a Spanish default set a record -- both signs that confidence is evaporating.

Spain is the fourth biggest economy in the euro area. If it has to be bailed out, the EFSF and ESM will be overwhelmed. Then comes Italy, whose 10-year bond yield just climbed to a six- month high, remaining well above 6 percent. That’s no less crippling than Spain’s cost of borrowing, because Italy’s debt burden is far greater.

If Europe’s governments continue to stand aside, they will sink not only Greece, Italy and Spain, but the wider European and global economies as well. Europe’s leaders must either greatly expand the ESM and start to use it more proactively, or urge and empower the ECB to buy or somehow guarantee distressed sovereigns’ debt. One way or another, bond yields have to be capped at a supportable level.

The Bain Buck Never Stops Anywhere

Romney keeps explaining and explaining, but it still makes no sense that he CEO, President, and Top Shareholder at Bane Capital from 1999-2002, and yet he had no responsibilities to the company.

Although that does sound like the stereotype of a do-nothing CEO. But he also earned a ton of money in those years (and we'd know the exact amount if he would release his tax returns, but he just won't.) What was he paid for, exactly, if not for the jobs that were listed in the SEC filings? All this semantical denial just sounds lame and etch-a-sketchy.



Wall Street Journal ~ Romney Defends Bain Tenure

On Friday, President Barack Obama in an interview with Washington, D.C.'s ABC affiliate, directly addressed the matter. "My understanding is that Mr. Romney attested to the SEC, multiple times, that he was the chairman, CEO and president of Bain Capital and I think most Americans figure if you are the chairman, CEO and president of a company that you are responsible for what that company does," he said.

Mr. Romney said again that the buck did not stop with him at Bain Capital between 1999, when he left to head the Salt Lake City Olympics operation and 2002, when he transferred his shares in Bain to active partners.

"Actually when you leave an enterprise, when you have other people who are managing the enterprise, who take responsibility for all the investment decisions, who decide who's going to get hired and fired, who decide compensation decisions, they're the managers," he told CBS News. He also said: "The documents show that there's a difference between ownership, which is I owned shares in Bain, but I did not manage Bain."

Government officials and a Republican who ran the SEC from 2001 to 2003 said in interviews that it is not unusual for the top shareholder, or person with the "controlling" interest, to be listed on SEC documents.

Reports also emerged this week that Mr. Romney traveled back and forth from Utah to Massachusetts in 2002 to attend meetings for companies like Staples Inc., SPLS -0.24%one of Bain's investments.

Economic News Round-Up

Scranton, PA, Cuts Worker Pay to Minimum Wage

Unions representing civil servants in Scranton, Pa., filed suit Tuesday after the mayor cut pay for police, firefighters, garbage collectors and other public workers to minimum wage, saying that was all the city could afford. Unions representing police, fire and public workers in the city of 76,000 filed three lawsuits after the city defied a judge's order and issued paychecks Friday that paid 398 city employees at the minimum wage of $7.25 an hour, according to the Scranton Times-Tribune.

The lawsuits against Mayor Chris Doherty include one filed in federal court under the Fair Labor Standards Act accusing the city of failing to pay wages on time and failing to pay overtime. Another lawsuit seeks to hold the mayor in contempt for violating a judges order. Yet another alleges that benefits for disabled police and firefighters were cut without a hearing.

Bloomberg Interview with Warren Buffet   He says Euro will fail without rule changes in European banking: "It can't survive with the present rules - that's what they're learning. So the question is, can seventeen countries get together in a way to essentially re-do something in some fundamental ways that require much closer cooperation when they're individual conditions are so different." On the Supreme Court Health Care Ruling: "A lot of businessmen complain about corporate taxes. Corporate taxes are less than 2% of GDP. So if you eliminated all of corporate taxes, you've got seven points against you on health care. It's the tapeworm essentially of the American economy and we've not dealt with that yet. Obamacare is a step in the right direction." Many More Quotes from Buffett on CNBC Robert Reich explains the LIBOR scandal

. . . We trust that the banking system is setting today’s rate based on its best guess about the future worth of the money. And we assume that guess is based, in turn, on the cumulative market predictions of countless lenders and borrowers all over the world about the future supply and demand for the dough. But suppose our assumption is wrong. Suppose the bankers are manipulating the interest rate so they can place bets with the money you lend or repay them . . . . . . Sad to say, there’s reason to believe this has been going on, or something very much like it. This is what the emerging scandal over “Libor” (short for “London interbank offered rate”) is all about. Libor is the benchmark for trillions of dollars of loans worldwide – mortgage loans, small-business loans, personal loans. It’s compiled by averaging the rates at which the major banks say they borrow. So far, the scandal has been limited to Barclay’s, a big London-based bank that just paid $453 million to U.S. and British bank regulators, whose top executives have been forced to resign, and whose traders’ emails give a chilling picture of how easily they got their colleagues to rig interest rates in order to make big bucks. (Robert Diamond, Jr., the former Barclay CEO who was forced to resign, said the emails made him “physically ill” – perhaps because they so patently reveal the corruption.) But Wall Street has almost surely been involved in the same practice, including the usual suspects — JPMorgan Chase, Citigroup, and Bank of America – because every major bank participates in setting the Libor rate, and Barclay’s couldn’t have rigged it without their witting involvement. In fact, Barclay’s defense has been that every major bank was fixing Libor in the same way, and for the same reason. And Barclays is “cooperating” (i.e., giving damning evidence about other big banks) with the Justice Department and other regulators in order to avoid steeper penalties or criminal prosecutions, so the fireworks have just begun. ~ more at link~ 

London Whale Leaving JP Morgan

Bruno Iksil, the JPMorgan Chase trader known as the "London Whale" has left the bank in the wake of a trading scandal, a person familiar with the situation said. Iksil's departure had been widely expected after he became the focus of attention in the trading scandal, because of the huge positions he took in credit markets. Achilles Macris, who headed CIO in Europe, and a third colleague, Martin Javier-Artajo, were also no longer listed in the company's internal employment database as of Thursday, the Wall Street Journal reported earlier on Friday.

JP Morgan's Profits Fell 8.9%

Overall, the bank's second-quarter earnings fell 8.7% from the year-ago quarter, as the bank saw a 16% decline in revenue. J.P. Morgan has been in the spotlight since early April as its outsized, complex trades on derivatives tied to corporate bonds came under intense scrutiny. The Justice Department and the Securities and Exchange Commission are investigating the trading loss, which has played into the Washington political and policy battle over the shape of financial overhaul. Just prior to releasing its results early Friday, the bank said it would reduce its previously reported first-quarter profit by 8.5%, or $459 million, on valuations of certain positions in the chief investment office's synthetic credit portfolio. It said there was "a material weakness" in its internal control over financial reporting for the first quarter, and its internal review is continuing.

Economic News: Major Banks Downgraded as Stocks Fall

There is no good economic news. The only bright side is that people were too focused on the Supreme Court and the Sandusky Trial to let this bother them. *sigh* That is a sad state of affairs.
For the preoccupied, this is how it all unfolded over the past few days: Ben Bernanke, Head of the Federal Reserve, held a press conference on Wednesday in which he basically said our economy is going sideways and he's not going to do too much about it except keep the interest rates near zero. The Stock Market reacted today by going down . . . down . . . down. Then to top that off, Moodys announced late in the day that they were downgrading nearly every major bank In THE WORLD.

That can't be good.

About Bernanke, from Wall Street Journal:

During his press conference Wednesday, Federal Reserve Chairman Ben Bernanke said monetary policy had been helping the general public. In particular, borrowers are benefiting from extremely low interest rates.
. . . Policy makers hope cheap borrowing will spur businesses and consumers to finance big purchases to boost demand.
What tends to be glossed over is the flip side to the Fed’s zero-rate strategy: Savers are getting whacked. And while some portion of interest earned is left to accumulate in savings account, any loss of income is a drag on consumer spending and consumers’ sense of financial well-being.

Bernanke mainly said that the Fed would act more aggresively if things got worse, implying that the economy will certainly get worse. That was not the optimistic message that markets wanted to hear, according to Nasdaq:

"Growth in employment has slowed in recent months," the Fed said in its policy statement, adding that "household spending appears to be growing at a somewhat slower pace than earlier in the year" and that financial strains from overseas posed "significant downside risks to the economic outlook."
Investors were initially disappointed the Fed didn't take more aggressive action Wednesday. The Dow Jones Industrial Average finished the day down 12.94 points, or 0.1%, to 12824.39, after at one point dropping by nearly 100 points.

Bloomberg: Stocks Tumble Due to Global Slowdown

U.S. stocks tumbled, while commodities entered a bear market, after signals of a global slowdown in manufacturing added to disappointing housing and labor market data at the world’s largest economy.
Stocks from Hong Kong to London and Sao Paulo slumped on concern about a global slowdown. Data showed euro-area manufacturing shrank at the fastest pace in three years and a Chinese output gauge indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank and sales of existing homes fell.
The reports came out a day after the Federal Reserve lowered its growth and employment estimates while signaling it may add to its record stimulus. The central bank yesterday extended its so-called Operation Twist program to replace short- term bonds with longer-term debt, disappointing some investors who expected more asset purchases. Former Fed Chairman Alan Greenspan today said the U.S. economy “looks very sluggish.”

Reuters: Moody's Downgrades 15 Banks

Financial markets have been bracing for the credit rating actions since February, when Moody's Investors Service said it had launched a review of 17 banks with global capital markets operations. These companies face diminished profitability and growth prospects due to difficult operating conditions, increased regulation and other factors, Moody's said.
. . . "The biggest surprise is the three-notch downgrade of Credit Suisse, which no one was looking for," said Mark Grant, managing director at Southwest Securities Inc. "In fact, it was Morgan Stanley that was supposed to be downgraded by that amount and Morgan received only two notches of cuts."
. . . Bank stocks fell on Thursday as investors prepared for an announcement, which leaked to the market as Moody's informed banks that it was coming, according to sources.
Morgan Stanley shares declined nearly 1.7 percent to $13.96 (8.94 pounds), while Bank of America shares fell nearly 4 percent to $7.82. The KBW Banks Index was down 2.3 percent.
But after suffering only a two-notch cut, instead of three as anticipated, Morgan Stanley shares rose about 3 percent in after-hours trade.

In addition to Morgan Stanley, downgraded by two notches were Barclays, BNP Paribas, Royal Bank of Canada, Citigroup, Goldman Sachs Group, JPMorgan Chase, Credit Agricole, Deutsche Bank, and UBS. Falling one notch were Bank of America, HSBC Holdings, Royal Bank of Scotland and Societe Generale.
Nomura and Macquarie were included in an original list of global banks, but have already been downgraded.

Dimon Cozies Up to Senate Banking Committee

Confident Much?

JP Morgan CEO Jamie Dimon got a warm and fuzzy welcome from the Senate Banking Committee. In fact, they rolled out the red carpet for the notorious banker who just lost billions due to the "London Whale" hedge fund debacle now being investigated by the FBI. Senators were falling all over themselves asking softball questions, while Dimon sailed calmly through it and offered only non-apology apologies while his stock rose on Wall Street.

He knew he didn't have to show any real remorse because JP Morgan was a donor to everyone in the room including the Banking Committee Chairman. They are all in bed together.
New York Post called this The Cozy and the Clueless:

“We have let a lot of people down, and we are sorry for it,” Dimon told the committee, which says it wants to know if the company is taking abnormal risk that could come back to bite taxpayers.
In other words, was JPMorgan gambling instead of simply investing when one of its employees — nicknamed the “London Whale” by Wall Street — made trades Dimon said were originally meant as portfolio insurance but turned into something else?
I think it’s telling that this guy was known as a “whale.” That’s what casino high rollers are called in the gambling world. It’s fitting that the folks who were trading against the London Whale knew that he was a gambler but that senators, who have been stalling for years on reforming regulations in the financial industry, are clueless.
Yesterday’s hearing reminded me of when Captain Renault in the movie “Casablanca” goes into Rick’s and feigns shock at what’s going on.
“I’m shocked, shocked to find that gambling is going on here,” Renault says, you’ll recall.

On Huffington Post, Bill Moyers called this "Jamie Dimon's 'Family Reunion' With the Senate Banking Committee." His point was that all of the people on both sides of the aisle had either worked for Jamie Dimon or were looking forward to working for him someday. On his PBS Show he said: "This wasn't a hearing, it was a reunion of the Gambino family." LOL

Facebook Falls Again - Updated

Facebook Stock is selling for $28 a share this afternoon. I will update the final price when the markets close at 4:30 EST.


Some predict it will bottom out at $25, but I think that might be optimistic. Of course it might bottom out today at $25, but what about the rest of the week? Just kidding - I really have no idea how this will end. I'm watching it fall for the entertainment value only. :)

Reuters reports:

As Facebook shares dipped below $30 in afternoon trade, buying picked up in the August $29 strike puts.
Put options, generally considered bearish bets, give the holder the right to sell shares at a specific price by a certain date, while calls, generally considered bullish bets, give the holder the right to buy shares at a specific price.

 Update: Yep - ended the day at $28.84 per share.

How Bad a Day Did Facebook Have? 

 So bad that a short-sale circuit breaker was tripped because the stock price kept falling. Circuit breakers kick in when a stock drops more than 10 percent from the previous session's closing price. On the day, Facebook fell 9.6 percent to $28.84, and since the company went public earlier this month, the stock has plunged more than 24 percent.

Facebook Sued - Morgan Gives Refunds - Refunds?!

Wow - things are getting more "Zucked Up" all the time!

From CNN

Facebook shareholders have filed a lawsuit against the social network, CEO Mark Zuckerberg and a number of banks, alleging that crucial information was concealed ahead of Facebook's IPO. The lawsuit, filed in the U.S. District Court in Manhattan on Wednesday morning, charges the defendants with failing to disclose in the critical days leading up to Friday's initial public offering "a severe and pronounced reduction."

Facebook defended themselves on Wednesday saying they "believe the lawsuit is without merit and will defend ourselves vigorously."

The report, and now the lawsuit, raises questions about whether Morgan Stanley, one of the underwriter companies that handled Facebook's IPO, or other banks knowingly offered certain investors privileged information that should have been made public. Other underwriters targeted by the lawsuit include Barclays Capital, Goldman Sachs, JPMorgan Chase and Merrill Lynch, a unit of Bank of America.

And Morgan Stanley Bank is adjusting prices for some investors in case they paid too much for Facebook stock! As the used-car-salesman father exclaimed in the movie Breaking Away: Refunds?!!! OMG.

WSJ Marketwatch has the story:

In a memo sent Wednesday to the nearly 17,200 financial advisers of its Morgan Stanley Smith Barney retail brokerage joint venture, the firm says "in order to ensure best execution, we expect there will be a number of price adjustments." The securities firm said, "the largest adjustments will be processed over the next several days and the remaining adjustments will be completed as quickly and as thoroughly as possible."

In the memo Wednesday, Morgan Stanley said "many of the remaining executions have been processed and are now appearing in clients' accounts," though the firm said a "very limited number of orders are pending" and it's still reviewing the appropriate action with its trading partners. Morgan Stanley didn't specify how many orders haven't been executed or how many are still pending.