Big Banks Are Padding Profits With 'Reserve'
Cash - (online.wsj.com) Federal
regulators have warned banks to be careful about padding their profits with
money set aside to cover bad loans. But some of the nation's biggest banks did
more of it in the third quarter than earlier this year. J.P. Morgan Chase, Wells
Fargo, Bank of America, and Citigroup, the nation's largest banks by
assets, tapped a total of $4.9 billion in loan-loss reserves in the third
quarter, up by about a third from both the second quarter and the year-ago
quarter after adjustments. All the banks except Citigroup showed significant increases
compared with the second quarter. Accounting rules allow the money to flow
directly into profits. In all, it made up 18% of the banks' third-quarter
pretax income excluding special items, the highest percentage in a year,
according to an analysis by The Wall Street Journal.
A $13 Billion Reminder of What’s Wrong - (www.nytimes.com) It was the deal of the week — a possible
$13 billion settlement between JPMorgan Chase and the Justice Department to
resolve an array of crisis-related mortgage cases. Was it fair or flawed? While
arguments over the deal’s terms and numbers are to be expected, the discussion
so far has seemed to miss its significance as a teaching moment. This possible
settlement once again depicts the extensive and damaging behavior that led to
the 2008 crisis and its aftermath. For those with short memories, the deal is a
refresher course in how far-off the rails our largest financial institutions
veered in the years leading up to the mess. It also stands as a reminder that
not enough has been done to fix the flawed incentives in our sprawling and
powerful financial system. This applies to both the private sector — the mighty
banks — and their supposed minders, the regulators.
It's now crisis time for Obamacare - (www.cnbc.com) It's
quickly turning into crisis time in Washington for President Barack Obama's
health care reform law with the federal website crashing again and a series of
hearings set for this week along with a major address from the president. The
problems with HealthCare.gov are now well documented and continued with an
outage on Sunday. But even if the website gets fixed by the end of November, as
the White House promises, potentially bigger problems lie ahead. Middle income
consumers are starting to get hit with sticker shock as previously low-priced plans get
canceled and replaced with higher-dollar coverage. Stories of consumers getting
plans canceled directly contradict Obama's promise that people who like their
plans could keep them under the new law. Defenders of the law say that the new
plans will be better. But they will also cost more at a time when wages are
stagnant.
Batista vies for biggest loser as $34 billion
vanishes - (www.cnbc.com) Eike
Batista is quickly becoming the poster boy for the new age of high-beta wealth.
The Brazilian oil tycoon—who didn't have much oil, as it turned out—has seen
his fortune drop from an estimated $34 billion to under $1 billion in a year
and a half. The shares in his various companies have crashed and his main
company, oil and gas driller OGX, could file for bankruptcy in the coming days.
Batista declared in 2011 that he would soon become the richest man in the
world. Instead, he's closing in on a different wealth record: the largest
personal-wealth loss in the world. There are different ways of measuring wealth
losses, of course. You can measure it in dollar terms or percentage terms.In
pure dollar terms, there are others who have lost more paper wealth than
Batista. In 1999, when Microsoft stock plunged, Bill Gates saw his fortune fall by nearly $40 billion.
But he still had around $60 billion left.
Insight
- Delays, clashes hinder attempts to salvage Batista's OGX - (www.reuters.com) Attempts
to save Eike Batista's flagship oil company, the business most responsible for the meltdown of his
once high-flying industrial empire, have been hampered by internal conflict and
unpredictable decisions by the Brazilian tycoon, sources with direct
knowledge of the situation told Reuters. The difficulty of reading Batista, who
less than 18 months ago owned the world's seventh-largest fortune, and mixed
signals from advisors and managers to his companies, has disrupted attempts to
renegotiate about $5 billion (3 billion pounds) of bond and bank debts at OGX
Petróleo e Gás Participações SA. Meanwhile, the company is running out of cash to
keep its operations going.
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