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JP Morgan heats up bank regulation debate

Dimon

Jamie Dimon, CEO of JPMorgan Chase, will face shareholders at the bank's annual meeting in Florida today for the first time since the company revealed its $2 billion trading loss.

An editorial in the New Jersey Star-Ledger says this latest incident is proof that, despite bringing the American economy to its knees in previous gambles, big banks continue to take risks that put the entire economy in danger.

"Dimon and other bankers must now admit their human penchant for error — errors that can bring down the economy, as we learned in 2008 — and get out of the way of common-sense regulations such as the Volcker rule and its parent, Dodd-Frank, the major banking reform of the post-meltdown era," the editorial board writes.

Warren

Elizabeth Warren has called for Dimon's resignation from his board post at the New York Federal Reserve. "The banks cannot regulate themselves," she said on 'CBS This Morning.' (Read more of her opinions in this Washington Post blog).

Newsweek correspondent Michael Tomasky thinks Dimon should resign, too--from JPMorgan.

"I’m well aware that the suggestion will strike most people as ridiculous. And I am here to say that the very fact that it sounds ridiculous demonstrates the sickness that we have come to accept as normal. We live in a society whose elites do everything they can to take no responsibility for anything," Tomasky writes in the Daily Beast.

 Obama

President Obama, in an appearance on TV talk show "The View," said the fact that one of the country's smartest, best bankers can make such a huge mistake in the derivatives market shows the need for its regulation.

"Keep in mind if we get all the rules that we proposed and were passed by Congress implemented into law, it should prevent this kind of stuff from happening ,"Obama said . "But this, again, is going to be part of what the election is about. We've got real differences here, because Governor Romney, members -- some of the Republican members of Congress and the financial industry have been arguing that this is unnecessary, that this is impeding capital formation."

A really big bank blunder

J.P. Morgan's $2 billion trading loss is the big story today, and has tongues wagging.

Dimon

It is the lead story in both the Wall Street Journal , Forbes and the New York Times, but for bank reformers, the story is like manna from heaven.

While he failed to foresee his company's huge losses from risky trading, J.P. Morgan CEO Jamie Dimon did accurately predict the feeding frenzy among critics that would ensue.

"It plays into the hands of a bunch of pundits but you have to deal with that and that’s life,” Dimon said in a conference call.

BetterMarkets.com, a non-profit reform group, said the incident at J.P. Morgan is all the proof necessary to show that reform is needed.

"Jamie Dimon and JP Morgan Chase just proved what anyone not getting a paycheck from a Wall Street bank already knows: gigantic too-big-to-fail banks are too-big-to-manage," writes Dennis Kelleher, the group's president.

Here is more of Kelleher's statement:

"Ignoring the trillions in dollars of damage done by Wall Street in causing the economic collapse, JPMorgan Chase CEO Jamie Dimon has been a relentless critic of financial reform.  He has denied that the biggest banks continue to threaten our financial system and our economy and claims they are well run and know how to manage risk.  JPM's announcement today of a surprise $2 billion in losses from illiquid derivatives proves him wrong and shows the need for financial reform, especially a strong Volcker Rule, to limit such risky betting."

Levin

The Volcker Rule would, among other things, restrict banks' ability to make risky trades.

"Today’s announcement is a stark reminder of the need for regulators to establish tough, effective standards to implement the Merkley-Levin language to protect taxpayers from having to cover such high-risk bets," said U.S. Senator Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations and co-author of the Merkley-Levin language establishing the Volcker Rule.

But more than making the case for a Volcker rule, some say the incident exposes a major flaw in the proposed legislation.

Matthew Yglesias at Slate.com writes:

"Dimon repeatedly insisted that the whole operation is Volcker-compliant, and JP Morgan is describing the operation as an effort at hedging gone wrong. Nobody knows exactly what happened, but in general if you just lost $2 billion that's a good sign that you're not hedging. The idea of hedging is to accept a small cost in order to insure yourself against the risk of a big loss. Two billion dollars is a big loss even for JP Morgan. So why call it hedging? Presumably because the Volcker Rule allows proprietary trading for the purposes of hedging. This turns out to be a big loophole."

Americans for Financial Reform believes that's why the Volcker Rule not only needs to be enacted, but strengthened.

JPMorgan

"The regulators current rule has a loose, permissive standard for portfolio hedging that might have permitted these trades under a hedge exemption, even though they clearly violated the proprietary trading ban. We hope that regulators will heed the warning here, and move speedily to finalize a Volcker Rule that is stronger than their initial proposed rule," its statement reads. 

But according to the Journal's Steve Goldstein, blogging in MarketWatch, "The simple fact is that no rule is going to be strong enough to prevent a bank from acting with hubris and stupidity."

"The best way to combat 'too big to fail' is to make banks small enough that failures wouldn’t matter," Goldstein writes. "Short of that obvious step, best to be prepared for the worst."

Has government regulation gone too far?

Foreclosure

The Consumer Financial Protection Bureau is in the process of defining a "qualified residential mortgage," which determines what makes a loan safe. It requires banks to retain 5% of the risk on non-QRM loans it securitizes before packaging and selling them to investors.

The risk retention requirements were called for in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The rule is an attempt to correct market practices that led to the housing crisis: allowing people to buy more house than they could afford with no financial stake in whether they were able to repay their loans or not.

But critics are saying the regulation will do more harm than good, cutting perfectly capable borrowers out of the market or into higher cost loans.

Singletary

"I want to be sure that our government fixes whatever broke the housing market," writes Michelle Singletary, a syndicated columnist who appears in The Buffalo News. "But if borrowers have to wait to save up a 20 percent down payment to qualify for the best mortgage deal, we will be putting home ownership out of the reach of a lot of people, particularly low- to middle-income borrowers."

She's not alone in believing the regulation could negatively affect low-income families and people of color

The Woodstock Institute, a non-profit research and policy organization, said the idea behind the so-called "QRM" is a good one, but that "unfortunately, regulators went overboard in defining [it]."

It sees other problems, too.

Foreclosure

"Lenders may raise prices to compensate for having to retain some risk and it may crowd out smaller lenders who can't afford to retain risk, shrinking the mortgage credit market," writes the Woodstock Institute. "More importantly, a 20 percent down payment doesn’t significantly lower the default rate."

The National Association of Realtors is against it. So is the Center for Responsible Lending. The Mortgage Bankers Association, too.

Where do you stand on the issue? If larger down payments aren't the answer, what is?

 

 

State hanging "open for business" sign

Cuomo

Gov. Andrew M. Cuomo's $50 million advertising campaign to attract businesses to New York State is set to launch next week. The money will pay for ads around the country letting business owners know that New York is "open for business."

There is debate over whether that is money well spent.

The Manhattan-based agency that landed the contract to handle the campaign, BBDO, is certainly happy about the launch, as are many economic development agencies and other groups.

But not everyone is singing the project's praises.

"If Governor Cuomo really wanted to make New York "open for business," he could do it without spending a dime," writes the Suffolk County Liberal Report. "Just focus on cutting the three New York State business killers--taxes, regulations and eco insanity."

Cuomo has also vowed to pump $1 billion directly into the Buffalo economy in the form of incentives offered to companies willing to build or expand here. In his keynote address at The Buffalo News' Prospectus launch, M&T Bank CEO John R. Koelmel said the money presents the opportunity of a lifetime.

"We as a region need to get behind and help--and be part of what will be and must be a real success. We finally have a road map for sustainable success, and we just need to get after it," he said.

 What do you think? Is this influx of money a good investment in Buffalo and New York State?

Concerned bank investors speak out.

From Business Today:

Koelmel

First Niagara Financial Group CEO John R. Koelmel spent much of the company's annual meeting defending himself and the company's business strategies Wednesday. He spoke before about 75 investors, many of them disgruntled about First Niagara stock's decline and dividend cut in 2011. Koelmel attributed the bank's slipping performance to several factors outside the company's control and said it had nothing to do with its $1 billion purchase of 195 HSBC Bank USA branches.

CEONasca

Profits were up at Evans Bancorp during the first quarter. Profits rose at the 26.9 percent from a year ago.  It reported net income of $2.4 million, or 58 cents per share, up from $1.9 million, or 46 cents per share, in the same period a year ago. The increase was attributed to growing loan revenues, rising deposits and strenghtened credit. Evans Bancorp is the Hamburg-based parent of Evans Bank.

Pinnacle

Pinnacle Airlines will be under the microscope of federal aviation safety inspectors since filing for bankruptcy, to be sure the company's financial problems will not encourage it to take shortcuts that might put passengers at risk. Enhanced oversight is the standard policy for the Federal Aviation Administration when any passenger airline files for bankruptcy.

Calspan

The New York State Power Authority's Recharge New York program will give 64 Western New York Companies low-cost electricity. The biggest local recipient, Calspan Corp., will receive 5,500 kilowatts. Others to receive the low-cost power include Roswell Park Cancer Institute, Buffalo General Hospital, and Yahoo Inc.

 

FiveStarBank

Profits were up at Financial Institutions during the first quarter. Profits rose six percent, while the company reported net income of $6.2 million, or 42 cents per common share, up from $5.8 million, or 33 cents per share, a year ago. The bump is attributed to an increase in loans and lending income. Financial Institutions is the Warsaw-based parent company of Five Star Bank.

Who is getting hired, promoted and honored?

The Reverend Horton Heat will be at the Tralf tonight:

 

Embrace our Canadian visitors.

From Business Today:

CanadianShoppers

 Retailers in Western New York know what a boon Canadian shoppers are to their bottom line, but businesses in other industries apparently don't, according to new market research. Visiting Canadians spent $933 million here last year, but just 13 percent of it was spent on sightseeing and recreation. That's an untapped audience with huge potential and spending clout. Executives from Visit Buffalo Niagara and the Niagara Tourism and Convention Corp. shared ideas for how local businesses could better take advantage of the opportunity at two seminars Monday.

AllisonDuwe

A public authority oversight agency has determined that, according to current laws, a company that eliminated workers here committed no job piracy. After taking 15 years of tax breaks from the ECIDA, VWR Education eliminated 41 jobs at its warehouse in the Town of Tonawanda. At the same time, it added seven jobs at its facility near Rochester, and received tax breaks from the Monroe County IDA for doing so. Politicians and activists filed a complaint, saying the company was shifting jobs around New York State at taxpayer expense, but the New York State Authorities Budget Office disagreed, according to a report resulting from its investigation.

CEOBoldt

Profits were up during the first quarter at a Buffalo-based information technology staffing and services company. Computer Task Group saw an 18.8 percent increase in profits. It reported net income of $3.36 million, or 20 cents per share, up from 42.83 million, or 17 cents per share, compared to the same period a year ago. The increase is attributed to higher revenues, especially from electronic medical records and other health care technology solutions.

Cuomo

After being ordered by state regulators to check their insurance records against federal death data, life insurance companies found that hundreds of millions of dollars in insurance policy claims have gone unpaid. More than 30,000 policies and $262.2 million in benefits went unpaid because insurers failed to check whether their policyholders had died. In New York State, 7,525 policyholders have received $95.9 million in unpaid benefits. The results came after an investigation was launched by the state Department of Financial Services. To search for a lost policy, click here.

Who is getting hired, promoted and honored?

Looks like another lovely spring day:

 

Getting back to work.

From Business Today:

JobSeekersThe job-growth rate in the Buffalo Niagara region accelerated in March. The region saw a one percent annual growth rate compared to the same month last year, adding 5,400 jobs. It's the strongest growth rate in six months. The labor department attributes the improvement to strong growth in construction work and a rebound in manufacturing.

  AGSchneiderman

Sprint Nextel Corp. has been purposely dodging taxes since 2005, according to Attorney General Eric Schneiderman. The cell phone company failed to collect $100 million in state sales tax from customers, ducking out of its obligation to pay New York State $200,000 per week. Schneiderman called the failure to pay a "deliberate" plan to keep the cell phone company's prices more competitive.  Dupont

  The blast that killed a welder and injured an Angola man two years ago was partly caused by procedures followed at the DuPont plant on River Road in the Town of Tonawanda. According to a report released Thursday by the U.S. Chemical Safety and Hazard Investigation Board, technicians should have tested the tank the welders were working on to be sure they weren't flammable.  

 The Clarence Industrial Development Agency will consider tax breaks for a new office park on Sheridan Drive near the Eastern Hills Mall. The IDA will hold a public hearing next month in consideration of granting tax breaks to the $2.1 million project. The Rockledge Professional Office Park is being proposed for vacant land at 8175 Sheridan Drive, on the south side of the street, just east of Transit Road.

Koelmel

Profits soared at First Niagara Financial Group during the first quarter. First-quarter profits were up 22 percent from a year ago, thanks to higher loan and fee revenues offsetting higher expenses from an acquisition in Connecticut. The company reported net income available to common shareholders of $54.8 million, up from $44.9 million.

 Who is getting hired, promoted and honored?

I'll bet Grant Cardone is glad it's Friday. The motivational speaker who appeared in Buffalo this week was on the Delta flight that had to make an emergency landing after striking birds. Here is a video from Cardone after it happened:

 

Scams and consumer help.

From Business Today:

Schneiderman

Attorney General Eric T.Schneiderman has warned consumers of two scams that are making the rounds and victimizing people via the Internet and telephone. One scam has criminals impersonating bank or government officials claiming to offer mortgage settlement assistance as a way to gain access to personal or financial information. The other scam involves consumers lured into making deposits on fake rental properties advertised on Craigslist.

Sup.Lawsky

Want to see the reasons your property and casualty insurer gave for increasing your premium? You'll be able to find out online, thanks to the actions of the state Department of Financial Services.  The state insurance regulators are posting documents online submitted by insurance companies to support rate increases, introduce new products or change existing offerings. You can find them here. The Department of Financial Services did the same thing last fall with health insurance.

PersonalFinance

In observation of Financial Literacy Month, Consumer Credit Counseling Service of Buffalo is hosting four free financial seminars at its office in West Seneca, 40 Gardenville Parkway, suite 300. They are: "Money in Motion," at 5:30 p.m. today; "Dollars and Sense," at 10 a.m. Saturday; "Credit Counts," at 6 p.m. April 19 and "Credit Reports Review Express," at 9 a.m. April 28. For more information, call 712-2060.

Jobfair

A career fair will be held today from 12:30 p.m. to 4 p.m. at the Walter J. Mahoney State Office Building, 65 Court Street. Job listings are posted here. For more information, call (888) 4-NYSDOL or visit the Department of Labor's Web site.

Who is getting hired, promoted and honored?

Here's more on that common Craigslist scam:

 

First Niagara deal gets approval

From Business Today:

  Koelmel

The last step has been completed toward making First Niagara's purchase of HSBC's New York State branches official. The Office of the Comptroller of the Currency has approved the acquisition, which is set to be complete May 18. First Niagara has begun sending out letters to HSBC customers to keep them informed about the transition.

Clinic

The New York State Health Foundation has given grants of $100,000 each to two local health clinics. Neighborhood Health Center/ Northwest Buffalo Community Health Care Center in Buffalo will use the money to expand its management infrastructure, while Southern Tier Community Health Center in Olean will use its grant to expand services in Allegany and Cattaraugus counties.

 

Who is getting hired, promoted and honored?

Sugarland is coming to the Fallsview Casino Avalon Theatre in Ontario tonight:

  

The seaway is open!

From Business Today:

TopHat

The St. Lawrence Seaway kicked off its 54th navigation season Thursday. The Welland Canal bypasses Niagara Falls to connect Lake Erie and Lake Ontario and is an important part of the Seaway. An opening ceremony celebration was held at the canal, during which the captain of the first vessel to enter the waterway was honored with a beaver pelt top hat. The captain and his chief engineer signed the hat, which will be kept in a nearby museum, per tradition. The Seaway is expecting a 3 percent increase in the cargo that passes through this year. You can follow the ships in the seaway at this site.

PinkSlime

In response to consumer concerns, several national grocers have taken ground beef with the so-called "pink slime" filler off store shelves. So who in Western New York is still using it, who is not and who never has? Pink slime refers to "lean finely textured beef," beef tissue that is treated with ammonia as part of the harvesting process and added to ground beef to get a leaner product at a lower cost.

E&E

Profits were down 70 percent at Ecology & Environment during the second quarter. The drop is attributed to higher administrative costs, higher indirect staffing costs and a loss on foreign exchange rates. Profits were $504,000, or 12 cents per share, from $1.8 million, or 42 cents per share, a year earlier. The company's revenues were down just 4 percent. Ecology & Environment is an environmental consulting firm in Lancaster.

Verizon

The Communications Workers of America union is pressuring Verizon to extend its FiOS fiber-optic service to the City of Buffalo. Verizon has proposed a deal to purchase wireless spectrum from cable companies for $3.6 billion and cut deals with some cable companies, which has raised anti-trust concerns. The CWA wants the Senate antitrust subcommittee that is looking into the situation to put conditions on the deal that would make bringing FiOS to Buffalo possible.

Who is getting hired, promoted and honored?

Happy Friday:

 

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