A few billionaire investors have scored, but the average hedge fund worker isn't likely to see a fat bonus this year.» Read More
Allstate accused JPMorgan Chase of fraud in a lawsuit filed in New York State Supreme Court yesterday.
The insurance company claims that JPMorgan , Bear Stearns and Washington Mutual sold it over $750 million of mortgage-backed securities under the guise that they were highly rated, safe securities, while knowing that the underlying loan pools were "toxic." JPMorgan acquired Washington Mutual and Bear Stearns in 2008.
The banks "knew the pool was a toxic mix of loans given to borrowers that could not afford the properties, and thus were highly likely to default," according to Allstate's complaint.
The lawsuit also alleges that JPMorgan, Washington Mutual and Bear Stearns misstated the characteristics of the mortgages, such as the loan-to-value ratios. It says the banks lied to the ratings agencies to get higher ratings on the securities than they deserved.
"The systemic (but hidden) abandonment of the disclosed underwriting guidelines has predictably led to soaring default rates" in the underlying mortgages, according to the complaint.
JPMorgan Chase did not respond immediately to a request for comment on the lawsuit.
In December, 2010, AllState filed a similar lawsuit against Bank of America.
David James, an English Business professor, has been studying pirates.
Not the guys who sell illegally recorded music and movies—actual pirates. With boats and automatic weapons.
The general premise is this: Pirates get results.
Guest Author Blog by Leah McGrath Goodman, Author of: "THE ASYLUM: The Renegades Who Hijacked The World’s Oil Market"
Sanofi to Buy Genzyme. The price will be $20.1 billion— plus contingent value rights payouts for new drugs. [DealBook]
Madoff Busts Banks, Hedge Funds: They 'had to know;' were 'complicit'. [NY Times]
Goldman to shut down fixed income prop desk. [Bloomberg]
JPMorgan has three perfect quarters of trading—without a single negative day. [Bloomberg] Here are, perhaps, the key two sentences: "The perfect trading results are rare and were primarily driven by the Federal Reserve’s programs buying mortgage bonds and U.S. Treasury securities. That’s driven trading volumes higher, boosted asset values and provided backup liquidity in the markets, analysts say. " [Bloomberg | Hat Tip: Deal Breaker]
Speculation and myopia drive a new internet bubble. [Gigaom | Hat Tip Abnormal Returns]
Calling out Ferrari. [Jalopnik | Hat Tip: Felix Salmon] (I'm not exactly sure how this relates to Wall Street—but there's an allegory to be found somewhere. 'Tuning' numbers is a phenomenon we're certainly familiar with. Plus, it's about Ferarris)
President Obama focuses on US's long-term financial health—and calls for "adult conversation": Should we expect something more than punch lines involving 900 numbers? [CNN]
Slate's Annie Lowrey cleverly re-imagines our federal budget as a middle class household, where the federal government earns $60,000 a year—and spends $85,000. [Slate]
(Although you have to wonder: Why not pick $100,000 for either the income or outflow number? Isn't everything in the universe improved by decimalization and the use of a 100 point basis?)
NetNet contributors share how they spent Valentine's Day.
Many municipal bond investors who are shunning bearish forecasts of widespread defaults are relying on the fact that such a huge portion of the bonds issued are “general obligations” of the states and cities issuing debts. Historically, the default rate on general obligation bonds has been vanishingly small. Only 3 defaults have occurred since 1970.
That may change.
In many ways, this seems to be the perfect time to be buying municipal bonds. The yield on muni debt is now equivalent to the yield for treasuries, which means that investors can get the tax advantages of munis for free.
The headlines warning of a wave of defaults has scared away some buyers, potentially creating bargains. The default rate on munis remains microscopic.
Unfortunately, the bullish case for munis has a very frightening precedent. Two of the arguments for munis resemble those made for mortgages—just before the mortgage market melted down.
The budget battle lines have been drawn. The barbs are being thrown from both sides of the aisle and with hearings starting today on the President's budget, you know you can expect more verbal sparring.
But the politics play in front of the cameras, doesn't stop the reality that the continuing resolution on the government's authority to keep borrowing more will end on March fourth. Compromise from both sides of the aisle will be needed in order for a budget to pass.
I decided to get the perspective from Roger Altman, former deputy Treasury secretary, and Founder and Chairman of investment banking boutique Evercore Partners.
Less cash flow from oil firms may pinch loan payments to banks but gas savings for consumers will create new business.
Some big news this week, including Russia and North Korea. Did any change the game for the market? NYSE floor trader Kenny Polcari weighs in.
Oaktree Capital's Marks thinks that the drop in oil prices could finally expose low lending standards.