Receiving Wide Coverage ...
JPMorgan Sets the Tone for 3Q: …and it ain't reassuring. The company posted its first year-over-year decline in quarterly earnings since the nadir of the financial crisis, in large part due to a drop in investment banking fees. Also unsettling: the company is tempering its aggressive growth plans for retail bank branches. Financial stocks slid on the news, given that JPMorgan Chase is considered one of the better-run large banks; if it's doing fair-to-middling, that can't bode well for the company's peers, which are scheduled to report their third-quarter results next week. Revenues from JPMorgan's investment bank declined because the August downgrade of the U.S. debt rating and the European crisis have discouraged clients from issuing securities or making acquisitions. And the results would have looked even weaker were it not for an accounting quirk. On top of everything else, chief executive Jamie Dimon said JPMorgan is slowing the release of loan-loss reserves. "We are just trying to be conservative here," he told investors. According to the Journal's "Heard on the Street," this was regarded as "a canary-in-the-coal-mine moment for all banks. It is especially troubling since reserve releases have driven earnings gains at many banks in recent quarters." It was uninspiring enough when banks relied on the realization that "credit problems aren't as bad as we thought" to fuel the bottom line; now it may turn out that the problems aren't as not-so-bad as they thought, Dimon's assurance that "the recovery is still here" notwithstanding. Also in the Journal, the "DealJournal" blog notes that JPMorgan has exhausted its regulatory allowance of share buybacks for this year, and quotes Dimon as complaining that when it comes to managing capital, "It's hard to tell what we're supposed to do. … The regulators need to give not just J.P. Morgan Chase, but the banking industry, more guidance." The "Overheard" column in the Journal reports that the usually pugnacious Dimon sounded uncharacteristically apologetic on the company's earnings call — though he did take a dig at a New York Times reporter who asked about compensation expenses. Speaking of the Times, the "Reuters BreakingViews" column lauds Dimon's efforts to put his best foot forward, noting his sly segues from talking about the business to proselytizing about policy (e.g., he pivoted from an explanation of Chase's debit card revenue to a swipe at the Durbin amendment). Looking ahead to next week's reports from the other big banks, the FT's "Lex" column advises investors to "beware good news," by which they mean "don't lose sight of bona fide signs of improvement." (Or that's what we think they mean, based on the last two paragraphs of the piece. British irony goes over our heads sometimes.) And one more Journal story says the regional banks are expected to show continued improvement, in part because of commercial loan growth, not to mention the fact that these institutions don't rely much on investment banking for revenues. Wall Street Journal, New York Times, Financial Times
Wall Street Journal
"In the latest shift to its wealth-management business, Citigroup said it no longer wants to refer bank customers to independent investment advisers."
"The U.S. is considering a program to draw private investment back into the mortgage market by having Fannie and Freddie sell slices of securities that wouldn't carry a federal guarantee but would pay a higher interest rate than current mortgage-backed bonds."
New York Times
Columnist Floyd Norris surveys the complexities and absurdities in the debate over two of the most important proposed regulations to implement Dodd-Frank: the Volcker rule and the definition of "qualified residential mortgages" exempt from risk-retention requirements. In both cases, Norris blames Congress for leaving too many gray areas and delegating the details to regulators, thereby opening them up to bank lobbying that could water down the reforms.
"Nonbank A.T.M. owners are suing MasterCard and Visa, accusing them of price fixing."
Martin D. Feldstein, a Harvard economist who advised Reagan, makes a case for mortgage principal reductions to stop the decline in home prices in an op-ed.
Bloomberg: Warren Buffet's son defends the Occupy Wall Street movement. "I think it takes that to make things happen sometimes," Howard Buffett says. "We saw large corporations really screw people."
And Lastly ...
Consumer Reports: Think printing money is hazardous public policy? You don't know the half of it. According to an article in the smart-shopper magazine's latest issue, Bisphenol A, a chemical that's believed to cause all kinds of health problems, has been found on the paper currencies of 21 countries, including the U.S. dollar. Says an official from the New York State Department of Health, "If your job requires money handling, be sure to wash your hands often, especially before you prepare or eat food." Go tell your tellers.