Breaking News This Morning ...
Arrest in 'London Whale' Case: Javier Martin-Artajo, former JPMorgan Chase employee and "London Whale" supervisor, was arrested Tuesday in Madrid after turning himself in to Spanish police. Martin-Artajo is one of two former JPM traders facing criminal charges filed by U.S. prosecutors over the bank's $6 billion trading debacle. Julien Grout, the other trader charged, has yet to be arrested. Wall Street Journal, Reuters
Receiving Wide Coverage ...
More Bad News for JPM: A New York state judge has found JPMorgan Chase liable for breach of contract in a lawsuit filed by billionaire investor Len Blavatnik. Blavatnik was awarded $50 million after the judge found JPM violated investment guidelines by investing too much of his funds in risky subprime mortgage-backed securities. The judge, however, did find against Blavatnik's claim of negligence. A JPM spokesperson tells the Journal the bank is considering its options regarding the breach of contract finding. In other JPM news, top litigator Michael Coyne, who has been responsible for government investigations, is leaving the "lawsuit-laden" bank to become general counsel of Union Bank and its holding company, UnionBanCal Corp. The Journal reminds everyone Coyne's departure is "the latest in a string of high-profile departures or reassignments as the bank works to improve its internal controls and satisfy regulators."
Payday Lender Quits: Western Sky Financial, an online lender that offers short-term loans at extremely high interest rates, announced on its website on Monday that it will stop funding such loans on Sept. 3. A spokeswoman tells the Journal "action by out-of-state regulators has forced us to lay off nearly all of our employees and suspend our operations." Both New York State Attorney General Eric Schneiderman and New York Department of Financial Services Superintendent Benjamin Lawsky are among regulators who have recently taken action against the South Dakota-based lender. Western Sky's exit is likely to serve as fodder for the ongoing great payday loan debate: Payday proponents have argued regulatory crackdowns will cut off consumer access to badly needed short-term credit, while opponents maintain that loans with triple-digit annual percentage rates constitute little more than debt traps. Meanwhile, "as states redouble their efforts to police payday lenders, consumer and industry groups are waiting to see what steps the Consumer Financial Protection Bureau will take toenhance federal oversight," the Washington Post notes.
Another Debt Ceiling Deadline: The Treasury Department said it will hit its borrowing limit in mid-October and will be unable to pay its bills shortly after, unless lawmakers agree to raise the debt ceiling. Wall Street Journal, New York Times, Washington Post
Wall Street Journal
Credit card issuers, including JPM, Discover and Citigroup, are "flooding mailboxes" with zero-interest balance-transfer offers in an effort to woo new customers. "The strategy carries some risk for card issuers, which historically haven't done a good job of getting the customers who transfer balances to use the cards for new purchases," the paper notes.
Financial Times
Standard Chartered Chief Executive Peter Sands argues that simplicity in the form of a straightforward, standalone leverage ratio will make the industry more prone to crisis. "As a true measure of solvency, the leverage ratio fails since it tells you nothing about the nature of the assets," he writes, noting that risk-weighted measures should play a crucial in capital planning. "We should not be too reliant on any one tool."
New York Times
Columnist Peter J. Hennings predicts the "significant matters" U.S. Attorney General Eric Holder said he plans on taking in regards to banks' financial crisis misdeeds will not involve criminal charges. "And at some point you wonder whether more lawsuits against Bank of America, JPMorgan Chase
and other big banks are particularly meaningful," he writes. "When cases are filed for discrete acts, it is hard to see how they have much effect on the banks beyond making another payment or the public perception that misconduct is being successfully redressed."
Andrew Ross Sorkin's summary of an interview he conducted with Hank Paulson on the Troubled Asset Relief Program closes out with this quote from the former Treasury Secretary: "I understood that people were angry. They wanted to hear that those that made the mistakes were going to be held responsible. Then on the other side was stability. It's hard to punish and save the banks at the same time."
