The Financial Landscape: Small Wins for Unions, Greece; A 'Small' Hit for JPMorgan

Greek Prime Minister George PapandreouA roundup of news from around the world of finance:

Unionizing Gets a Boost:
Labor got a piece of good news to take a bit of the sting out of Monday's massive Walmart (WMT) defeat: On Tuesday morning, the National Labor Relations Board proposed new rules to accelerate unionization elections, a process that took on average 57 days in 2008. "Unions have long complained that it takes too many weeks from when they petition for an election to when a secret-ballot election is held," explains The New York Times. Delays in the process give management "too much time to mount an aggression antiunion campaign with videos and one-on-one sessions with workers."

The Times also reports that congressional Republicans "are expected to attack the board's proposed rulemaking, saying it shows yet again that President Obama's NLRB is doing favors for organized labor" -- a curious charge to make against an agency whose purpose is to facilitate union representation and investigate unfair labor practices. Using rhetoric that more or less lays bare the adversarial view of labor taken by capital and management, Chamber of Commerce labor law policy director Michael Eastman told Bloomberg Businessweek, "We knew it was only a matter of time before the administration used the regulatory process to tilt the playing field in organized labor's favor."

The AFL-CIO, on the other hand, characterized the new regulations as "a modest step to remove roadblocks and reduce unnecessary and costly litigation" -- "good news for employers as well as employees." The NLRB's sole Republican, Brian Hayes, dissented from the proposal.

Greek Government Clears One Hurdle:
Greek Prime Minister George Papandreou (pictured, above) won a critical vote of confidence in Parliament Tuesday, meaning that he can proceed with the controversial austerity measures that other euro zone members have set as preconditions for further financial support. In the short term, disaster has been averted, but it's still far from clear whether Papandreou can lead his fractious society to accept all the concessions demanded by the EU, European Central Bank and International Monetary Fund: tax increases, wage cuts and privatizations.

Before the vote, U.S. Treasury Secretary Timothy Geithner criticized his European counterparts for failing to "speak with a clearer, more unified voice on the strategy" for Greece, citing uncertainty in the virtual parliament of global investors. Sounding like a stern father addressing a wayward child, Geithner insisted there "is no reason why Europe cannot manage these problems." The EU has "a very substantial financial arsenal," he said. It's just a matter of making "it available so banks can be recapitalized where they need capital, to make sure there is a funding available to the banking system." If nothing else, Geithner's advice seems an accurate reflection of economic policy priorities under Obama.

Justice, Wall Street Style:
Last year, the SEC slapped Goldman Sachs (GS) with a civil fraud suit relating to a mortgage-backed securities deal: An investment vehicle peddled by Goldman in 2007, called Abacus, had been put together by hedge fund manager John Paulson, who was in the process of massively shorting the housing market (which was then on the verge of collapse). In marketing Abacus, Goldman lied about Paulson's involvement, and certainly did not mention that the CDOs in question had been selected for the likelihood that they would fail -- that the deal was, in essence, just one part of Paulson's enormous bet against the subprime mortgage sector. (Paulson made $1 billion from Abacus.) On the day the suit was filed, Goldman said in a statement that the SEC's charges were "unfounded in law and fact." Three months later, the firm settled the suit for $550 million, a record, though it neither admitted nor denied wrongdoing.

Now JPMorgan Chase & Co (JPM) has announced its agreement to pay $153.6 million to settle SEC charges "that it misled investors about a mortgage securities transaction just as the nation's housing market was starting to plummet." As Bloomberg explains, "The company, the only major Wall Street bank to remain profitable throughout the financial crisis, didn't tell investors that hedge fund Magnetar Capital LLC helped pick assets linked to a synthetic collateralized debt obligation in 2007." Magnetar, like Paulson, was looking for subprime mortgage-backed CDOs to short.

When the Goldman case was announced, one line of defense was that the parties on the other side of the Abacus deal (i.e., a German and a Dutch bank) were "sophisticated investors" who ought to have been able to assess the risk of the investments even without disclosure of Paulson's role. The investors defrauded by JPMorganSecurities LLC (the company's brokerage unit) include Thrivent Financial, a membership organization for Lutherans based in Minneapolis; Security Benefit Corp., an insurance and retirement services company based in Topeka, Kan.; and General Motors Asset Management, which manages company pension plans.

I say "defrauded," but in fact JPMorgan "simply admitted that it 'messed up the documentation,' " according to an analyst who spoke to Bloomberg. Goldman, on the other hand -- despite the pro forma lack of acknowledgment of wrongdoing -- essentially conceded that it knew what it was doing. This despite the fact that JPMorgan reportedly worked more closely with Magnetar to select CDOs than Goldman had done with Paulson. The analyst continued, "This looks like a win for JPMorgan," and indeed, at the end of trading Tuesday, the company's stock was up 1.1%. Those looking for harsher justice -- and not holding financials stocks -- might take heart from the fact that "the KBW Bank Index (KBX) is down nearly 10%"; Goldman in particular is trading "only about 4% above the 52-week low it hit last summer when investors were nervous about the SEC's fraud charges." Paulson, meanwhile, just booked a $720 million loss for his investors by selling all his 34.7 million shares of Sino-Forest Corp. (TRE), a troubled Chinese logger. His fund is down 20% for the year; bets on the banks have also failed to pay off.

The parallel between the Goldman and JPMorgan cases was not lost on SEC enforcement chief Robert Khuzami: "It's the same general allegation of wrongdoing," he told Bloomberg Television. "The message in both cases is if you engage in this kind of wrongdoing, if you mislead investors, you're going to pay a fine."

But that's all that will happen: Khuzami all but admits that no criminal charges will be countenanced. "We look hard and long at the conduct of individuals," Khuzami insisted, "and make our decisions based on the evidence." It's strange that, in an industry notorious for lavishly compensating individuals -- on the theory that the absolute best talent must be recruited -- no particular managers should be obviously responsible for delinquent decisions.

A New Face in the GOP Race:
Former Utah Gov. John Huntsman -- Obama's former ambassador to China -- announced his entry into the race for the Republican presidential nomination Tuesday, calling the American economy "totally unacceptable." According to the AP, Huntsman "also sought to stress his background as a businessman and has said jobs would be a top priority -- seemingly taking a page or two from the Mitt Romney playbook. Huntsman's business credentials, however, are somewhat thin -- a year of work in Taipei, a stint as an executive for his billionaire father's Huntsman Corporation (HUN), a global chemical concern. But least he didn't make his money restructuring companies and eliminating jobs like Romney did. Huntsman also has the advantage of relative novelty, and has taken some interesting initial positions (for instance, against an interventionist foreign policy).

And a Familiar GOP Candidate Loses More Face:
Meanwhile, following the abrupt departure of 16 top campaign advisers earlier this month -- while he was on a Mediterranean cruise -- Newt Gingrich has received the resignations of two top fundraisers, described as a director and a consultant. His campaign is reportedly more than $1 million in debt -- and on the heels of the latest resignations comes news of a second thick line of credit at jeweler Tiffany & Co. (TIF) for as much as $1 million. "I will endure the challenges," Gingrich told an audience in a Beverly Hills ballroom recently. "I will carry the message of American renewal to every part of this great land. And with the help of every American who wants to change Washington, we will prevail."

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June 23 2011 at 3:55 PM Report abuse rate up rate down Reply
Relevant Data

Why is it called the National Labor Relations Board? Should it not be called the National Unionized Labor Relations Board? But the word Union is often dropped from statements made by Democrats such as when a Senator says "I have fought for workers all my political life." Unions have been the number ONE destroyer of our national economy for many years and will continue to be so as long as it is allowed to proliferate.

June 22 2011 at 5:03 PM Report abuse rate up rate down Reply

Wodelson, the unions didn't destroy any of the industries that you mentioned. The auto industry was destroyed by foreign competitors that were subsidised by various states to manufacture here. The playing field was tilted against domestic producers, by local state politicians who gave them all manners of breaks!
The domestic TV industry was destroyed by Japan, using illegal trade practicies such as dumping products below cost.
The shoe industry was destroyed by China, who severely undervalued it's currency.
I'm no friend of unions either, union bosses are in it for themselves (hence their huge salaries!)
The biggest destroyer of jobs is a perverse compensation system that rewards short term gains at the cost of long term economic stability.

June 22 2011 at 4:43 PM Report abuse rate up rate down Reply
1 reply to avdltd's comment

You do have a good reason, but because of high cost of the unionized labor the American companies cannot compete in prices and cannot afford to produce quality product so these American companies is better off to outsource their production. And in the case of GM and Chrysler, they fall totally, thanks to the money of every American, including those who are not born yet, they still exist.

June 22 2011 at 9:03 PM Report abuse rate up rate down Reply

As a past union member, the unions are nothing but bullies. They do nothing for the worker except take their money. They are just another form of BIG BUSINESS. They are worse than Wal-Mart, Exxon, Boeing,etc. The produce nothing and force companies to pay people more than they are worth and get less out of the employees. The unions have distroyed the car industry in America, the TV industry in America, the shoe industry in America, and with the help of this administration they are killing ALL OF AMERICA. The unions once were useful, but they have gone way too far, and are now hurting America more than helping. They are the cause of many of our problems.

June 22 2011 at 4:23 PM Report abuse rate up rate down Reply
1 reply to wodelson's comment

Everbody makes to much the ceo's make to much along with their bonuses it ruins the economy, The legislators make to much and it ruins the economy, the hourly organized laborer makes to much money and it ruins the economy. Just exactly what does help the economy , I know we work for a 1.00 a day like the chinese and indians do and all will be alright right?

Get back with me when you contact those ceo's of fortune 500 companies and also when you get the legislature to take a drastic cut in pay. Don't get me wrong the unions do not always make sane decisions but neither do you or I or anyone else for that fact. Is the greed in the unions? sure there is. But is their greed in the corporate world ?yep how about in our government? sure is greed is everywhere the church the office the grocery store. I am proud to be a union member and at least we stand up for whats right for the little guy. we don't always get our way but at least the country can hear our voice. Now back to your regular scheduled programming of the economic disaster we all know as the GREAT RACE TO THE BOTTOM!!! brought to you by those who dislike the middle class enjoy

June 22 2011 at 8:03 PM Report abuse rate up rate down Reply

Only in the finace sector can one commit a multi $million/billion fraud and not be held to account. Anywherer else and you'd be in the slammer for years!

June 22 2011 at 3:26 PM Report abuse +2 rate up rate down Reply

The fine levied against JPM is an example of tokenism and a slap on the wrist. A hundred million or so is just a drop in the bucket compared to the hundreds of billions these Wall Street wise guys got away with considering the economic havoc they brought to world financial markets by way of the real estate fiasco. The fine imposed on JPM is so disproportaionate to the crimes these guys commited as to be totally laughable. To the average uninformed person on the street, a hundred million or so sounds like a lot of money and a big fine. For JPM, AIG, Goldman and the rest of their ilk, this is pocket change and amounts to literally nothing. This fine is nothnig more than a dog and pony show put on for the media by the ineffectual and toothless SEC which is owned and controlled by Wall Street. It makes good press, otherwise, it is total BS. Half of these Wall Street wise guys and executives should be put behind bars, especially the top execs that called all the shots and who think they are such financial wizards doing "God's work." They think they can do anything and are above the law. And folks,.... don't think anything has changed. It continues to be business as usual on Wall Street. At best, these bastards will lie low until the spot light of the media is off of them, and then its back to all the inside trading, the smoke and mirror economics, secret offshore banking, devisive tax loopholes, alphabet soup derivatives, shell games, governent manipulation and ponzi schemes. These Wall Street wise guys are unconscionable, greedy and totally reprehensible. They are by and large responsible for why this country is behind the eight ball economically. And, unfortunately, since they control our goverment and have way too much influence, don't expect anything to change. I just hope I'm dead before this whole economic house of cards ultimately comes crashing down.

June 22 2011 at 2:31 PM Report abuse +1 rate up rate down Reply
2 replies to Artie's comment

You nailed it!!!

June 22 2011 at 6:09 PM Report abuse rate up rate down Reply

AHHHH yes the wonderful world of centralized banking and all of its manipulation and destruction. Artie don't forget those wonderful guys and gals at the federal reserve who paves the way for those on Wall St.

June 22 2011 at 8:52 PM Report abuse rate up rate down Reply

In answer to the question one poster asked. The fine amounted to less than &% of the profit JP made on the shady deals. They had these poor saps invest in ideas/companies that they knew would bomb and they hedged on that happening. No none of the investors have received any of their money back, but they were motivated by the same thing that gets most people in trouble when investing in high risk schemes. GREED! I say it serves them right, but lets do more than smack the hands of these culprits. A fine in the billions would be more like it.

June 22 2011 at 1:11 PM Report abuse +3 rate up rate down Reply

The NLRB fighting against american workers is what I meant. Sorry.

June 22 2011 at 12:21 PM Report abuse +1 rate up rate down Reply

No Sebens, you are reading it wrong.The first thing is I am of no party.But I was union.It is every american workers right under federal law to unionize for better wages,pensions and benefits.They would not have to utilize this right if employers were paying them enough,keeping them above inflation and offering them good pensions and benefits.Since the mid 1800;s when unionizing first began on the railroads and spread to the steel,lumber,coal and oil companies.People worked for slave wages,6 days a week, 12 hours a day.With no benefits or healthcare.Since then they have fought long and hard.The republicans have controlled th NLRB for a while.They were strictly for big business.So a non-union worker who lost his job because his boss didn't like him either had to have a lot of money to fight the company in court to get their job back or lose.Almost all lost.Unions through arbitration have been stalled for years in court with the NLRB fighting for american workers.If there are enough full time employees at one site,they can petition and use secret ballots.Because of the long delay in processing the petition,comapany snithches and management could weed out the employees wanting to unionize and fire them for made up reasons.Unions began using card check.Workers who wanted to unionize signed cards that were made public,so if any attack came on them then,the NLRB would have to back the employee.Obama appointed a democrat to the NLRB which broke the corporate monopoly.This gives american workers a fighting chance to keep their jobs while the rest go overseas.

June 22 2011 at 12:17 PM Report abuse rate up rate down Reply
1 reply to ruthsgardens's comment

ooooooh please with this union SCATOLOGY. IT IS EVERY AMERICANS RIGHT to freely WORK without union goons and shills DEMANDING THEIR MONEY--unions WERE necessary and now ARE NOT. and PLEASE WITH THE UNION BS on THEIR rationale for CARD CHECK---gawd forbid it WORKS IN REVERSE OF WHAT YOU'RE SAYING. The UNADULTERATED TRUTH on unions,their leadership and WHERE YOUR DUES GOES finally came out thanks to the unprofessionals in wiZZconsin and WE THANK THEM-- and use your head===jobs go OVERSEAS to ESCAPE THESE UNIONS--

June 22 2011 at 3:36 PM Report abuse -2 rate up rate down Reply
1 reply to Setanta's comment

don't ya just love how fast this race to the bottom is. Lets see in their height mid fifites and early sixties. The middle class did pretty well and the country was strong and vibrant. But with your philosphy and only 11.7 % of the total workforce now unionized we are losing the middle class and becoming again a society of haves and have nots. I see where your philosphy is genuine and I can relate to how it is working for the betterment of our society. So we just wait until we all work for slave wages from dawn until dusk just to make ends meet and the revival will happen. Your boss tryly cares about you and your family they really do. So could you take another 15% cut in pay and pay for all your healthcare out of your own pocket so we can keep you employeed because we here at ( insert company name here) really do care about you and yours. Yeah right oh now I see them unicorns and rainbows get with it people .

June 22 2011 at 9:05 PM Report abuse rate up rate down

How much did Chase make on the deal? Did the fine exceed the profit? Did the investors get their money back?

June 22 2011 at 11:30 AM Report abuse +1 rate up rate down Reply