The Financial Landscape: Banks Get No Love; OPEC Argues With OPEC

×
James DimonA roundup of news from around the world of finance:

Investors Aren't Banking on Big Banks:
The New York Times reports that bank stocks, which are "selling at near their lows for the year, and trading at well below the valuation of other large companies," are not even seen as a good deal by many bargain-hunting investors. The Times cites "worries about a possible debt downgrade," "investigations into the role they played in the financial crisis," "weaker-than-expected economic data," and new federal regulations that are "set to cut deeply into revenue on everything from debit card transactions to trading on Wall Street."

A couple of hedge-fund big shots have exited the sector, including John A. Paulson, the subprime mortgage-shorting billionaire who worked with Goldman Sachs (GS) on a deal that earned the bank a civil fraud lawsuit by the SEC (settled for $550 million). Retail investors, who generally like bank stocks for their dividends and reliability, have been left holding the bag. (Despite his apparent prescience on the banks, Paulson's fund -- the world's third largest -- lost close to 6% of its value last month.)

New Faces at the Top of Chase?
According to The Wall Street Journal, a management shakeup is predicted by insiders at J.P. Morgan Chase (JPM), which made it through the financial crisis "with one of the most stable management teams in the financial world," emerging "as one of the strongest banks in the U.S." Among those reported to be in play is Jes Staley, chief of the investment bank, the company's most profitable division. CEO James Dimon (pictured, above) might remain for five more years while various subordinates vie for his position. The newspaper also reports that Goldman Sachs is contemplating a release of documents intended to undermine Sen. Carl Levin's (D-Mich.) report on subprime mortgage-related malfeasance (i.e., securities fraud). Apparently, Goldman has run the numbers and convinced itself it has a strong case against the allegations that it massively shorted the housing market before selling loads of mortgage-backed securities to its clients.

OPEC vs. OPEC:
The Organization of the Petroleum Exporting Countries looks set for an internal battle over whether to raise oil production quotas. Saudi Arabia, Kuwait, and the United Arab Emirates are said to be in favor, but Iranian OPEC Governor Muhammad Ali Khatibi told Dow Jones Newswires, "I don't accept this situation that we need more oil. It is difficult to understand. The market is balanced. It is not fair to change to overproduction. We should respond based on facts and figures, not based on rumors or expectations from OPEC." The split seems to reflect the broader geopolitical situation, in which Iran's rising influence is set against the Arab states.


Airlines Profits Decrease Altitude:
The Financial Times reports that the world's major airlines will make a net profit of just $4 billion in 2011 compared with $18 billion in 2010, citing the International Air Transport Association. Among the reasons cited are the earthquake and tsunami in Japan, political upheaval in the Middle East and North Africa, and increased oil prices. IATA Director General Giovanni Bisignani said "the airlines' collective profit margin would fall to 0.7% on forecast revenues of $598 billion, compared with last year's 'pathetic' 3.2% on revenues of $562 billion," but also noted that the sector could suffer a collective loss "if fears of a slowdown in global economic growth are realised following poor economic data from the the U.S. last week." (The industry lost money in every calendar year since 2001.) Bisignani sounded almost surprised that the airlines "are making any money at all in a year with this combination of unprecedented shocks."

Bisignani denounced European Union plans to introduce a carbon trading regime in January 2012 ("a $1.5 billion cash grab," in his words). The head of Airbus has also spoken out against the measure, which would be applied to all international carries, warning of trade war with China and "retaliatory measures" from the U.S.


French Minister Likely to Lead Post-DSK IMF:
Bloomberg speculates that Treasury Secretary Timothy Geithner will feel compelled to support French Finance Minister Christine Lagarde in his bid to become the next head of the International Monetary Fund, following Dominique Strauss-Kahn's resignation, since "backing a non-European for the IMF could mean relinquishing U.S. control of the World Bank -- an outcome members of Congress who decide on funding for development banks are not ready to contemplate." (Traditionally, "the IMF has always been led by a European while the World Bank has been headed by an American.") Mexican central bank governor Agustin Carstens is another leading candidate, and many have called for a representative of the developing world to win the appointment. But there appears to be no consensus among the "emerging economies," while European elites have decided to back Lagarde. American officials seem determined to preserve the perceived advantage of controlling the World Bank: According to Marisa Lago, Geithner's assistant secretary for international markets and development, "We have been very well served by the U.S. leadership and the World Bank has been well served."

What's Ahead From the Fed?: Both Geithner and Fed Chairman Ben Bernanke are schedule to speak today at the International Monetary Conference in Atlanta. According to Politico, "markets will listen closely for any sign that Bernanke is concerned enough about weak employment growth to think about more quantitative easing."





Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

Add a Comment

*0 / 3000 Character Maximum

12 Comments

Filter by:
NJPACKFAN

If you want to lower the price of gasoline...raise the margin rqirements on oil speculators trading. They benefit by cheap money, low margin requirements and running up the price of crude. Only about 17% of oil traders actually take delivery. Don't blame the oil companies, they don't set the prices but, they do benefit.

June 08 2011 at 12:18 AM Report abuse +1 rate up rate down Reply
caohellsux1978

We at GolDAMN Nut Sachs, and Exxon/Mobil are proud to be reducing global warming one bankrupt driver at a time.

June 07 2011 at 2:28 PM Report abuse +1 rate up rate down Reply
dgs755

It all starts and ends with the "FED" the sooner it ends the better this planet will be ! I am so Fed up, pun intended

June 06 2011 at 3:40 PM Report abuse rate up rate down Reply
jkennedy806

Hey bankster shylock goons, the US public and those on Main don't like you much either. You wore out your welcome here and abroad, and no more entitlements for you. BANKS better find a new game, Your hand is gonna fold

June 06 2011 at 1:03 PM Report abuse +2 rate up rate down Reply
tsgarperving

Evan I love you,come home I will let you ride my new joy stick.

June 06 2011 at 11:16 AM Report abuse rate up rate down Reply
1 reply to tsgarperving's comment
jkennedy806

Does the goat miss evan too??

June 06 2011 at 1:00 PM Report abuse +1 rate up rate down Reply
watson83

The only "presience" any of these fund managers have is insider information that thieves, namely Goldman Sacks of Crap have created a false market, generated hugely leveraged profits and were then betting against the very investments they were touting. Look at what they just did last month; they came out pushing for $ 135.00/barrel oil and effectively stopped the inevitable slide oil would have taken. Now they will ride it for a while and then massively sell and make huge profits on that end before they push it back up again. Wake up America! We are being hoodwinked by the Wall Street hucksters!

June 06 2011 at 10:52 AM Report abuse +2 rate up rate down Reply
BRUCE

The banks and Wall Street have created the financial mess this country is in right now! Also, add in the poor government over sight of the financial market. How many executives and traders have you seen given the boot at Wall Street, the CME or CBOE? The only people that lost their jobs were middle class administrative postions. To say that the market will take care of the country is pure bull since it only takes care of those who know how to manipulate it for their profit.

June 06 2011 at 10:49 AM Report abuse +3 rate up rate down Reply
jkennedy806

NO More Quantative Easing all that will do is devalue the dollar more. Here comes the new soverign dollars that OPEC and IMF keep threatening US with. And the reason we are not spending IS WE HAVE NO JOBS and CAN NOT AFFORD IT. God please help US -- the DC lamebrains are ignorant.

June 06 2011 at 10:06 AM Report abuse +7 rate up rate down Reply
1 reply to jkennedy806's comment
tbbikerdad

My name is T i m . THE D C LAIMBRAINS , KNOW EXACTLY WHAT THEY ARE DOING . .....yeah , i lost my house because i lost my job . CORPORATE AMERICA AND THE JUGES WHO SIGNED THE BANKRUPTCY SHOULD GO TO JAIL ...................THERE IS A SIMPLE SOLUTION TO AMERICAN ECONOMY . AFTER WE FIRE ALL OF CONGRESS , I AM GOING TO MAKE MY OWN CLOTHES , ESPECIALLY SINCE I FOUND OUT MY UNDERWEAR IS MADE IN VEIT NAM . ........THE PRICE OF GAS AT THE PUMP HAS NOTHING TO DO WITH OPEC , OR PRODUCTION COST . IT IS MOSTLY AMERICAN COMMERCE TAXES . ...IT HAS NOTHING TO DO WITH ANYTHING ELSE ....................T i m

June 06 2011 at 1:28 PM Report abuse +1 rate up rate down Reply
2 replies to tbbikerdad's comment
BRUCE

The price of oil is set by the traders/speculators. They make their money through options and high frequency computer trading on small/large price fluctuations that they trigger. The icing on the cake are the taxes we pay. Their should be a transaction tax on all high frequency trading. There is no longer a level playing field for the average investor.

June 06 2011 at 3:21 PM Report abuse +1 rate up rate down
jkennedy806

I am sorry Tim, do you want your house back or better yet do you want your great credit back look into recission -- I know this to be true, as I have talked to Fannie Mae at length, most of the notes, at least 80 to 90% of them have been sold, flipped, diced chopped and processed thru the system. I knew what was happening right from the get go. JOhn Stumpf didn't want to wait 30 years, he wanted my Fannie now, so he and his shylocks made up a whole new mortgage note. Wells bought my Norwest Mortgage in 2004 made up a whole new mortgage note with Wells Fargo's name on it. And my signature and my husbands signature as well. Wells then took the new 2004 mortgage note to Fannie Mae and our good friend Barney invested in it. the only problem is my husband died in 1998. How did he sign thea Wells Fargo mortgage in 2004?

June 06 2011 at 5:15 PM Report abuse rate up rate down