JPMorgan Chase’s multi-billion dollar trading blunder dragged down bank stocks Friday, undermining investor confidence in other Wall Street finance firms.
JPMorgan (, Fortune 500) led the bank stock declines, with its stock dropping nearly 9%.
The bank revealed Thursday, after the close of markets, that it suffered trading losses of $2 billion since the start of April.
The problems affected other major bank stocks. Morgan Stanley (, Fortune 500), Citigroup (, Fortune 500) and Goldman Sachs (, Fortune 500) fell about 4%. Bank of America (, Fortune 500) declined less than 2% and Wells Fargo (, Fortune 500) managed to eke out modest gains, recovering from earlier losses.
JPMorgan suffers massive trading loss
"The problem is that there’s going to be a massive backlash," said Christopher Wheeler, bank analyst for Mediobanca in London.
Wheeler mentioned that the debacle was unfolding amid an ongoing debate over the Volcker Rule, which limits banks on investing with their money.
"The regulators are going to have a field day," he said guaranteed online personal loans.
Bank stocks were already under siege. The KBW () index of bank stocks has fallen 1.7% over the last five trading sessions, without even showing the impact of JPMorgan’s bad trade. On Friday, the index was down about 1%.
Who is the White Whale?
The trade prompted an unusual impromptu teleconference with Chief Executive Jamie Dimon and analysts, at which he divulged that net losses could exceed $800 million by the end of the second quarter for the company’s corporate unit. Before that announcement, a net gain of $200 million was forecast for the unit.
Dimon told analysts that the losing trades were the result of "sloppiness" and "bad judgment," but he shrugged off a question about whether other banks were affected.
"Just because we’re stupid doesn’t mean everyone else was," said Dimon on the call.
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International Monetary Fund Managing Director Christine Lagarde said she has received pledges worth about $320 billion so far in her campaign for a bigger reserve to combat threats to global growth.
Egypt’s election commission disqualified 10 presidential hopefuls, including Hosni Mubarak’s former spy chief and fundamentalist Islamists, from running Saturday in a surprise decision that left a field of moderates in the race for the country’s first post-revolutionary leader.
The elimination of the three most powerful and controversial candidates could go in two directions with just weeks to go before the vote, observers said. It could plunge the Arab world’s most populous nation into a new political crisis, or just the opposite, defuse it.
Farouk Sultan, the head of the Supreme Presidential Election Commission that was appointed by Egypt’s military rulers to oversee the vote, said that those barred from the contest included Mubarak-era strongman Omar Suleiman, Muslim Brotherhood chief strategist Khairat el-Shater and hard-line Islamist Hazem Abu Ismail. He did not give reasons.
Disqualified candidates have 48 hours to appeal the decision, according to election rules. The final list of candidates will be announced on April 26.
The announcement came as a shock to many Egyptians as three of the 10 excluded were considered among the front-runners in a highly polarized campaign that has left the nation divided behind two strong camps: Islamists and former regime insiders who are allegedly supported by the ruling generals.
Thirteen others had their candidacy approved, including former Arab League chief Amr Moussa, moderate Islamist Abdel-Moneim Abolfotoh and former prime minister and Mubarak-era minister Ahmed Shafiq, according to Sultan.
If upheld, the decision would reshape the electoral landscape by removing the most powerful and controversial candidates and leaving moderates such as Abolfotoh, an ex-Muslim Brotherhood leader who has been trying to project crossover appeal for both religious conservatives and liberals, and Moussa, who was a member of the old regime but is popular among middle class Egyptians and who is not so closely associated with it.
The presidential election is due on May 23-24, with a possible runoff on June 16-17. The winner will be announced on June 21, less than two weeks before the July 1 deadline promised by the military rulers who took over after Mubarak to hand over power.
Abu Ismail, a lawyer-turned-preacher whose eligibility had come under scrutiny in recent weeks over the question of whether his late mother had dual Egyptian-U.S. citizenship, accused the military rulers who assumed power after Mubarak’s ouster of trying to manipulate the race from behind the scenes and warned his followers would not stay silent.
“You will drown, God willing, because you are in showdown with the people, because you are playing with fire,” he said in an interview with the Islamist TV network Al-Hakma.
Abu Ismail has led the most aggressive campaign so far. On the eve of the announcement, hundreds of his supporters surrounded the election commission’s headquarters in Cairo, forcing Sultan and his employees to evacuate under the military protection.
A new election law passed after Mubarak’s ouster bars an individual from running if the candidate, the candidate’s spouse or parents hold any citizenship other than Egyptian, and the commission had ordered the Interior Ministry to provide evidence showing whether Abu Ismail’s mother was officially documented in Egypt as having dual U.S. -Egyptian citizenship.
A spokesman for el-Shater’s campaign, Murad Mohammed Ali, also called the decision “very dangerous” and said it gives a message that “there was no revolution in Egypt no checking account payday advance.”
The Muslim Brotherhood fielded the head of its political arm Mohammed Morsi as a back-up candidate last week, fearing that el-Shater would be disqualified on the grounds that his records were not entirely cleared after serving time in prison in connection with his banned political activity under Mubarak. His lawyers say the ruling generals had dropped the charges. Morsi was not disqualified.
Despite the fiery rhetoric and promises from those disqualified to appeal, some Egyptians welcomed the news.
“This is much better,” said Ahmed Khalil, a spokesman of the liberal Free Egyptians party, which was not fielding a candidate. “These three candidates were holding extremist ideologies or holding an intelligence agenda.”
The announcement was the latest twist in an already convulated political scene as the nation struggles to redefine itself and navigate a difficult transition to civilian rule.
In the last two weeks, a court suspended the work of an Islamist-dominated, 100-member panel tasked with drafting a new constitution on the grounds its makeup violated the spirit of the interim charter that governed its formation.
Islamists as well as the largely liberal and secular activists who spearheaded the protests that led to Mubarak’s ouster had hoped to have a new constitution in place before the election in order to curtail the powers of the president after nearly three decades of autocratic rule.
The Muslim Brotherhood _ which along with hard-line ultraconservative Salafis captured more than 70 percent of the parliament seats in the first post-revolutionary elections _ announced on March 31 that el-Shater would run for president.
That reversed an earlier pledge not to seek the office and came after weeks of complaints by the Brotherhood that the parliament they control is toothless and that the ruling military was preventing it from forming a government.
In what was seen as a countermove backed by the generals, Suleiman made an unexpected announcement a week later that he was entering the race for the presidential elections. Suleiman said he had decided to run to block Islamist rule and provide stability after more than a year of turmoil.
A judge close to the commission, who spoke on condition of anonymity because he wasn’t authorized to disclose the information, said that Suleiman has not presented the proper number of endorsements. Each candidate needed at least 30,000 endorsements, including at least 1,000 from each of the country’s 15 provinces, to join the race.
His campaign spokesman Mohammed Mishal promised to present extra endorsements that have not been used, giving him a gateway to re-enter the race.
Another campaign spokeswoman Reem Mamdouh said in an interview with the local CBC television network that they had not been officially notified about the decisions but would definite appeal.
“Suleiman will never withdraw and let down the hopes of the large constituency of Egyptians who supported him. This is not happening,” she said.
Ayman Nour, a liberal presidential hopeful, said the commission told him he was disqualified because of his imprisonment as a dissident under Mubarak’s regime and because his name was not listed among registered voters.
He also promised to appeal, saying the decision was “politicized as the whole race is deeply politicized.”
Indonesia
It should be a no-brainer: a popular bill with bipartisan support that bans insider trading by members of Congress.
The legislation is known as the Stop Trading on Congressional Knowledge Act, or the Stock Act. It gained momentum last year after an explosive 60 Minutes report that accused several prominent representatives of insider trading using government information. President Obama urged the bill’s passage in his State of the Union address last month.
Now, however, the bill is stuck in part due to a disagreement over a provision that requires so-called "political intelligence" professionals to register with the government and disclose their activities in the same way that lobbyists do.
The disagreement puts the spotlight on an industry that has previously escaped the notice of most Americans. But despite its relatively low profile, political intelligence is big business.
Political intelligence professionals get paid big bucks to gather information about government policy and pending legislation, often through lawmakers or other public officials. Their clients include hedge funds, mutual funds, pension funds and wealthy individuals who use the information to guide investment decisions.
Under one version of the Stock Act, political intelligence practitioners would have to reveal who their clients are, how much they get paid for their research, and what issues they’re hired to gather intelligence on.
"If you seek information from Congress in order to make money, the American people have a right to know your name and who you’re selling that information to," Senator Chuck Grassley of Iowa said in congressional debate earlier this month.
The idea is that shining a light on the industry will help ensure that such firms are confined to objective research and analysis and are not simply providing insider trading tips based on government knowledge.
Amazingly, there are no clear prohibitions on these kinds of insider tips at the moment.
The Senate passed a version of the Stock Act by a margin of 96-3 that included the registration requirement. The House version sailed through last week with similar support — a 417-2 vote — though it scrapped the registration requirement and called only for a government study of the political intelligence industry.
Even without the political intelligence provision, the Stock Act would prohibit Congressmen and other federal employees from exploiting non-public government information or using it to tip off others, and would require them to report investment transactions within 30 days.
Rep. Louise Slaughter told a congressional committee in December that the political intelligence industry brings in $100 million a year in the U.S., and Mayhew estimated that there are roughly 300 firms worldwide providing political intelligence and policy research.
"Political intelligence firms have increasingly become an issue — they have proliferated — and I think part of the issue here is that until the Stock Act, most Americans didn’t even know about the political intelligence industry," said Melanie Sloan, executive director of the progressive watchdog group Citizens for Responsibility and Ethics in Washington.
The political intelligence field bears some similarities to so-called "expert networking" firms in the corporate world, which connect hedge funds and mutual funds with consultants who provide insight about particular companies.
While such firms offer legitimate market research, some have also been accused of passing non-public, inside information to clients as part of the government’s ongoing crackdown on insider trading at hedge funds.
"There is an increasing problem with Wall Street recognizing that they can get inside information not just from corporate insiders, but from the government," Sloan said.
Some in Congress worried that the political intelligence registration requirement was drafted too broadly and required further study. Laena Fallon, a spokeswoman for House Majority Leader Eric Cantor, said in an email that it could affect a range of people from "local rotaries to national media conglomerates."
But Grassley, who added the registration requirement to the Senate bill, called it "astonishing and extremely disappointing that the House would fulfill Wall Street’s wishes by killing this provision." Grassley’s amendment passed the Senate by a vote of 60-39, and included an exception for journalists "disseminating news and information to the public."
"If Congress delays action, the political intelligence industry will stay in the shadows, just the way Wall Street likes it," the senator said in a statement.
Why three senators said no to an insider trading ban in Congress
Looking ahead: A spokeswoman for the Senate’s Governmental Affairs Committee said staffers were unsure of when the two congressional chambers would resolve their disagreement and when the Stock Act might be finalized.
Should the registration requirement go into force, hedge funds and other political intelligence customers who don’t want their identities disclosed may pull back from such services, Mayhew said.
Yet even if it passes without the registration requirement, the Stock Act will still likely have an impact on political intelligence firms, as it will become illegal for them to pass on non-public information gleaned from government officials.
Just as they did during the expert networking crackdown, Wall Street firms will have to beef up their internal regulations to make sure they don’t receive non-public information in the guise of legitimate research, Mayhew said.
"The information will continue to be extremely important, but ultimately, they’re going to be a lot more careful about how they use it," he said.
The European Central Bank is negotiating with Greece on behalf of its member central banks to exempt the Greek bonds in their investment portfolios from a debt restructuring, two euro-area officials said.
The ECB wants to swap the investment portfolio bonds for debt that
U.S. stock futures fell Monday as talks dragged on between Greek political leaders over a fresh austerity package that is required if the debt-ridden country is to get a crucial bailout package.
Dow futures are down 24 points at 12,769. The broader Standard & Poor’s 500 futures fell 4 points to 1,335. The Nasdaq composite futures fell 5 points to 2,519.
The declines follow a big gain Friday on the heels of surprisingly good U.S. employment figures.
In Europe, the leaders of the parties backing Greece’s coalition government are set to hold a second day of emergency talks over austerity measures that rescue creditors are demanding in return for more money.
Fears that a deal won’t emerge have reinforced concerns of a disorderly Greek debt default that could send shockwaves through the global economy. Prime Minister Lucas Papademos will meet with negotiators from the eurozone and the International Monetary Fund in the afternoon and then with the leaders of the three parties backing his coalition.
The parties all publicly oppose steep cuts in private sector pay demanded by the eurozone and IMF, but their backing is needed for the government to reach a deal for the bailout, which must be approved by the Greek Parliament. The new euro130 billion ($171 billion) bailout deal is vital for Greece to avoid bankruptcy next month as it cannot cover a euro14.5 billion ($19.1 billion) bond repayment due March 20 without the rescue funds.
The bailout’s implementation also depends on Greece’s progress in separate talks with banks and other private bondholders to forgive euro100 billion ($131 payday loans.6 billion) in Greek debt, in exchange for a cash payment and new bonds with more lenient repayment terms.
In Europe, the FTSE 100 index of leading British shares was down 0.2 percent at 5,892 while Germany’s DAX fell 0.2 percent to 6,756. The CAC-40 in France was 0.6 percent lower at 3,406.
Oil prices tracked the broader market trends, with benchmark oil for March delivery down $1.17 at $96.67 a barrel in electronic trading on the New York Mercantile Exchange.
Greece will likely remain the focal point over the week, though a raft of corporate earnings, particularly in Europe, and a host of central bank meetings could garner some interest. The European Central Bank’s monthly policy meeting on Thursday could be crucial in determining market expectations of whether there will be further interest rate reductions. Meanwhile, many traders think the Bank of England will clear the way to inject more money into the U.K. economy in the hope of boosting lending.
Earlier Asian shares mostly traded higher as investors there had their first chance to respond to join in the advance generated by Friday’s upbeat jobs data.
Japan’s Nikkei 225 index rose 1.1 percent to close at 8,929.20, its highest closing in more than three months but Hong Kong’s Hang Seng lost 0.2 percent to 20,709.94. Benchmarks in Singapore and mainland China also rose.
New Zealand central bank Governor Alan Bollard signaled interest rates may stay at a record low for longer than he intended a month ago, citing inflation that
An Italian coast guard official vehemently demanded that the captain go back to his crippled cruise ship to oversee its evacuation, but the captain repeatedly resisted, according to a shocking audiotape made public Tuesday.
Prosecutors have accused Capt. Francesco Schettino of manslaughter, causing a shipwreck and abandoning his ship before all passengers were evacuated during the grounding of the Costa Concordia cruise ship off the Tuscan coast on Friday night.
The death toll nearly doubled to 11 on Tuesday when divers extracted five more bodies from the ship’s wreckage. All were adults wearing life jackets and were found in rear of the ship near an emergency evacuation point, according to Italian Coast Guard Cmdr. Cosimo Nicastro. He said they were thought to have been passengers.
Prior to that discovery, the coast guard had raised the number of missing to 25 passengers and four crew. Italian officials gave the breakdown as 14 Germans, six Italians, four French, two Americans, one Hungarian, one Indian and one Peruvian. But there was still confusion over the numbers, with the German Foreign Ministry in Berlin listing 12 Germans as confirmed missing.
The Costa Concordia was carrying more than 4,200 people when it hit a reef off the Tuscan island of Giglio after Schettino made an unauthorized deviation from the cruise ship’s programmed course, apparently as a favor to his chief waiter, who hailed from the island.
Schettino has insisted that he stayed aboard until the ship was evacuated. However, a recording of his conversation with Italian Coast Guard Capt. Gregorio De Falco indicates he fled before all passengers were off _ and then resisted De Falco’s repeated orders to return.
“You go on board and then you will tell me how many people there are. Is that clear?” De Falco shouted in the audio tape.
Schettino resisted, saying the ship was tipping and it was dark. At the time, he and his second-in-command were in a lifeboat and the captain said he was coordinating the rescue from there. He also said he was not going back on board the ship “because the other lifeboat is stopped.” Passengers have said many lifeboats on the exposed port side of the ship didn’t winch down after the ship had capsized.
De Falco shouted back: “And so what? You want to go home, Schettino? It is dark and you want to go home? Get on that prow of the boat using the pilot ladder and tell me what can be done, how many people there are and what their needs are. Now!”
“You go aboard. It is an order. Don’t make any more excuses. You have declared ‘Abandon ship,’ now I am in charge,” De Falco shouted.
At one point, De Falco vowed “I’m going to make sure you get in trouble. …I am going to make you pay for this. Go on board, (expletive)!”
Schettino was finally heard agreeing to reboard on the tape. But the coast guard has said he never went back, and had police arrest him on land.
The 52-year-old Schettino, described by the Italian media as a genial, tanned ship’s officer, has worked for 11 years for the ship’s owner and was made captain in 2006. He hails from Meta di Sorrento, in the Naples area, which produces many of Italy’s ferry and cruise boat captains. He attended the Nino Bixio merchant marine school near Sorrento.
Schettino recounted his version of events before prosecutors and a judge at a preliminary hearing Tuesday as to whether he should stay jailed, as requested by prosecutors. The judge deferred an immediate decision. The captain could face up to 12 years in prison on the abandoning ship charge alone free online credit report.
Schettino’s attorney, Bruno Leporatti, said in the hearing, the captain had insisted that after the initial crash into the reefs, he had maneuvered the ship close to shore in a way that “saved hundreds if not thousands of lives.”
Passengers, however, described the evacuation as chaotic.
Steve and Kathy Ledtke, who live in Fort Gratiot, Michigan, said they were sitting down to a late dinner Friday when they realized something had gone wrong. Kathy Ledtke told WDIV-TV that it seemed no one was in charge.
“It was complete chaos and it was every man for himself,” Kathy Ledtke said. “Nobody knew where to go.”
Earlier Tuesday, Italian naval divers exploded holes in the hull of the grounded cruise ship, trying to speed up the search for the missing while seas were still calm. Navy spokesman Alessandro Busonero told Sky TV 24 the holes would help divers enter the wreck more easily.
“We are rushing against time,” he said.
The divers set four microcharges above and below the surface of the water, Busonero said. Video showed one hole above the waterline less than two meters (6 feet) in diameter.
Mediterranean waters in the area were relatively calm Tuesday with waves of just 12 inches (30 centimeters) but they were expected to reach nearly 6 feet (1.8 meters) Wednesday, according to meteorological forecasts.
A Dutch shipwreck salvage firm, meanwhile, said it would take its engineers and divers two to four weeks to extract the 500,000 gallons of fuel aboard the ship. The safe removal of the fuel has become a priority second only to finding the missing, as the wreckage site lies in a maritime sanctuary for dolphins, porpoises and whales.
Preliminary phases of the fuel extraction could begin as early as Wednesday if approved by Italian officials, the company said.
Smit, a Rotterdam, Netherlands-based salvage company, said no fuel had leaked from any of the ship’s tanks and that the tanks appeared intact. While there is a risk the ship could shift in larger waves, to date it has been relatively stable perched on top of rocks near Giglio’s port.
Smit’s operations manager, Kees van Essen, said the company was confident the fuel could safely be extracted using pumps and valves to vacuum the oil out to waiting tanks.
“But there are always environmental risks in these types of operations,” he told reporters.
The company said any discussion about the fate of the ship _ whether it is removed in one piece or broken up _ would be decided by Italian ship operator Costa Crociere and its insurance companies.
The Miami-based Carnival Corp., which owns the Italian operator, estimated that preliminary losses from having the Concordia out of operation at least through 2012 would be between $85 million and $95 million, along with other costs. The company’s share price slumped more than 16 percent Monday.
It was not yet clear if the ship _ which was completed in 2006 _ would ever be able to return to service.
Carnival said its deductible on damage to the ship was approximately $30 million. In addition, the company faces a deductible of $10 million for third-party personal injury liability claims.
Carnival said other costs related to the grounding can’t yet be determined.
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