JPMorgan Net Income Drops 84 Percent on Writedowns

Oct. 15 (Bloomberg) — JPMorgan Chase & Co., the largest U.S. bank by market value, said third-quarter profit fell 84 percent on about $5.8 billion of writedowns, losses and credit provisions.

Net income dropped to $527 million, or 11 cents a share, from $3.4 billion, or 97 cents, a year earlier, the New York- based bank said today in a statement. Shares of the company rose as earnings beat the 18-cent loss analysts predicted on average in a survey by Bloomberg.

JPMorgan took $18.8 billion of writedowns and credit costs before today, less than a third of what Wachovia Corp. and Citigroup Inc. reported. Chief Executive Officer Jamie Dimon has capitalized on the market crisis by taking over Bear Stearns Cos. and Washington Mutual Inc. as they collapsed earlier this year. JPMorgan will get $25 billion from the U.S. government under a bank rescue plan announced yesterday.

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Smaller Banks Resist Federal Cash Infusions

Community banking executives around the country responded with anger yesterday to the Bush administration’s strategy of investing $250 billion in financial firms, saying they don’t need the money, resent the intrusion and feel it’s unfair to rescue companies from their own mistakes.

But regulators said some banks will be pressed to take the taxpayer dollars anyway. Others banks judged too sick to save will be allowed to fail.

The government also said yesterday that it will guarantee up to $1.4 trillion of private investment in banks. The combination of public and private investment is intended to refill coffers emptied by losses on real estate lending. With the additional money, the government expects, banks would be able to start making additional loans, boosting the economy.

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Secret White House memo endorsed waterboarding

A paper trail on the use of waterboarding and other controversial interrogation techniques by the CIA is emerging in the US

The Bush administration sent two secret memos endorsing the use of waterboarding against al-Qaida suspects, according to today’s Washington Post. They were prompted by worries within the CIA that the administration might later distance itself from the way suspects were interrogated, the paper reports.

Officials told the paper that the then CIA director George Tenet asked for written approval for secret interrogations, in June 2003. A few days later he got a “brief memo conveying the administration’s approval for the CIA’s interrogation methods”.

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The 56 Trillion Dollar Deficit

Bill Maher Interviews Fmr. Comptroller General David Walker about the huge deficit in America.

Source: YouTube

(CNN) — The Emergency Economic Stabilization Act contains plenty to make lawmakers on the left and right shudder. On the right, it’s the apparent abandonment of free-market principles. On the left, it’s the absence of punishment for high-flying Wall Street CEO’s.

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Roubini: US Will Suffer Worst Recession in 40 Years

Oct. 14 (Bloomberg) — Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, driving the stock market lower after it rallied the most in seven decades yesterday.

“There are significant downside risks still to the market and the economy,” Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. “We’re going to be surprised by the severity of the recession and the severity of the financial losses.”

The economist said the recession will last 18 to 24 months, pushing unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The U.S. government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy, Roubini added. Treasury Secretary Henry Paulson said today he plans to use $250 billion of taxpayer funds to purchase equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs.

``This will be the first round of recapitalization of the banks,” Roubini said. “The government has to decide to intervene much more directly in the provision of credit and the management of these companies.”

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U.S. 2008 Budget Deficit at Record $455 Billion

Oct. 14 (Bloomberg) — The U.S. government posted a record budget deficit for 2008 as financial market strains slowed economic growth and spending rose the most since 1990.

The shortfall widened to $455 billion in the fiscal year ended Sept. 30, compared with a $162 billion deficit a year earlier and the previous high of $413 billion in 2004, the Treasury said today in Washington. The gap was 3.2 percent of gross domestic product, up from 1.2 percent last year, the Treasury said. The 2008 deficit was the largest as a share of the economy since 2004, when it was 3.6 percent of GDP.

The excess of expenditures over receipts this year could get even worse. As the Treasury uses $700 billion to rescue the financial system from the credit crisis, Morgan Stanley chief economist David Greenlaw predicts the shortfall may almost quadruple to about $2 trillion.

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Coming Soon: The 600 Trillion Derivatives Emergency Meeting

Here is an update on the size of the derivatives market with the latest official figures (.pdf) from the Bank for International Settlements (BIS). Hold your breath, as we are not anymore talking paltry billions but TRILLIONS of whichever fiat currency.

Current emergency meetings on banks and markets are still only in the stage where politicians and central bankers are bickering over how to create a few more hundred billions Euros and FRNs. But toxic MBS pale in comparison to the mushrooming growth of the derivatives market. According to figures released in the quarterly review of the BIS (pp A103) in September the total notional amount of outstanding derivatives in all categories rose 15% to a mindboggling $596 TRILLION as of December 2007.

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Why should gold stop at $1,500?

LONDON (MarketWatch) — Euphoria over bank bailouts and the temporarily buoyant stock markets is masking a sober reality.

The piper still has to be paid.

One fairly sanguine estimate of the cost of salvaging Wall Street came Tuesday morning from analysts at Merrill Lynch. They figure the inflationary effect of all the bank bailout measures now underway will push gold to $1,500 an ounce and oil back to $150 a barrel. See related item.

Related: article: Why Gold Is Dropping When It Shouldn’t – and what it all means

The analysts don’t offer a timeline, but the way markets have been jumping around lately it could be any day now.

Perhaps the real question is: why stop at $1,500?

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Wall Street Turns South

Most U.S. Stocks Fall as Earnings Concern Overshadows Bank Plan

Oct. 14 (Bloomberg) — Most U.S. stocks fell a day after the market’s biggest rally since the 1930s as a worsening outlook for earnings forced investors to look beyond a $2 trillion global push to rescue banks.

PepsiCo lost as much as 14 percent, the most since October 1987, after lowering its profit forecast as customers cut back on snacks and soft drinks. Microsoft and Intel slid more than 5 percent as analysts said demand for computers is slowing. Morgan Stanley, Citigroup Inc. and Merrill Lynch & Co. added more than 19 percent, sending banking shares to a third straight advance.

“Notwithstanding the government and Treasury’s actions focusing on financials, the general economic environment has deteriorated quite a bit in the last five or six weeks,” said Jonathan Armitage, head of U.S. large-cap equities at the American unit of Schroders, the U.K. manager of $259 billion. “You’re just seeing different parts of the equity market reacting to that.”

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Europe stuns with €1.5 trillion bank rescue, as France plays role of saviour

Germany, France, Italy, Spain, Holland and Austria have joined forces to launch the greatest bank bail-out in history, offering over €1.5 trillion in guarantees and fresh capital in a “shock and awe” blitz to halt the credit panic.


French President Nicolas Sarkozy Photo: PHILIPPE WOJAZER

The move – unveiled simultaneously in the six states to maximise the show of unity – throws the full weight of the eurozone behind global efforts to stem the crisis.

The move gave a tremendous boost to bourses across Europe, lifting the Euro Stoxx index by 9.53pc in the biggest one-day rally ever.

The pan-European plan – totalling over $2 trillion, or £1.17 trillion – completes the third leg of a dramatic restructuring of finance across the Western world. Sovereign states have now absorbed the brunt of the credit risk in half the global economy.

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