Financial life in a big town

JPMorgan Chase & Co Chief Executive Jamie Dimon called the idea that any bank is too big to fail “ethically bankrupt” and said regulators should have the power to wind down even the largest lenders.

“If some unforeseen circumstance should put this firm at risk of collapse, I believe we should be allowed to fail,” Dimon wrote on Friday in The Washington Post. “Global economic growth requires the services of big financial firms. It also requires that big financial firms be allowed to fail.”

JPMorgan is the second-biggest U.S. bank by assets and is considered by many the healthiest of the country’s four largest traditional commercial banks.

Since the September 2008 bankruptcy of Lehman Brothers Holdings Inc, many analysts have viewed JPMorgan, American International Group Inc, Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc and others as too large to be allowed to fail, fearing the impact on markets and economies worldwide.

Dimon argued against caps on banks’ size, saying increased scale can benefit customers, shareholders and the economy by permitting better products to be delivered fast and cheaply.

He advocated a regulatory system that would ensure that even the biggest banks could fail “in a way that does not put taxpayers or the broader economy at risk same day payday loans.”

Dimon said regulators deserve authority to manage failures of large financial institutions, including the ability to replace management, sell assets, and wipe out shareholders and even unsecured creditors.

International cooperation is also necessary, he said, because of the global impact of a major failure. He pointed to the many multinational companies, not just in banking, that operate around the world.

The “too big to fail” idea is “politically, economically and ethically bankrupt,” Dimon wrote.

“As Treasury Secretary Timothy Geithner recently put it, ‘No financial system can operate efficiently if financial institutions and investors assume that government will protect them from the consequences of failure,’” Dimon went on. “The term ‘too big to fail’ must be excised from our vocabulary.”

(Reporting by Jonathan Stempel; editing by John Wallace)

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Creditors of Saad Investments Company Ltd (SICL) held their first official meeting on Thursday, accountancy firm Grant Thornton said, taking a next step in the troubled firm’s restructuring process.

Banks are seeking repayment of a loan of up to $2.8 billion taken out in 2007 by Cayman Islands-registered SICL, a unit of Saudi investment firm Saad Group.

The meeting took place in the Cayman Islands, SICL’s court-appointed liquidator Grant Thornton said in a statement.

A spokesman for Saad Group declined to comment.

Regulators and bankers are grappling with up to $22 billion of debt restructurings at Saad and a second Saudi firm, Algosaibi, viewed by some as the biggest financial blow to the region since the global credit crisis began.

The two groups are involved in a complex legal dispute. Algosaibi said in October it would ask a New York court for a default judgment against the billionaire head of Saad, Maan al-Sanea, over allegations he defrauded the company out of $10 billion payday cash advances.

A Cayman Islands court on Sept 18 appointed Hugh Dickson, Stephen Akers and Mark Byers of Grant Thornton as joint official liquidators of SICL, the accountancy firm said, after hearing a winding-up order from creditors.

In addition to SICL, the Cayman court has appointed Grant Thornton liquidators to a further nine Saad Group companies, the accountancy firm said.

One of these companies is Singularis Holdings, which acquired a 3 percent stake in HSBC in 2007.

In July, a Cayman court froze the assets of SICL and a number of other international Saad units.

(Reporting by Tom Freke; editing by Simon Jessop and Andrew Callus)

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Contracts in the $450 trillion derivatives markets would need to be cleared through central counterparties unless they are exempted by regulators, under a financial regulation reform bill introduced by U.S. Senate Banking Committee Chairman Christopher Dodd on Tuesday.

The bill here calls for all swaps to be centrally cleared, but said regulators may exempt the contracts if no central clearinghouse accepts the swaps, or of if one of the counterparties to the trade is not a dealer.

Details on what constitutes a swap and a major swap participant, both of which would fall under the regulation of the Commodity Futures Trading Commission and Securities and Exchange Commission, are included in the bill.

The CFTC and SEC would adopt rules further defining terms within 180 days of the act being implemented and the regulators would have the right to prescribe definitions for swaps to include transactions that have been structured to avoid the classification, under the bill online payday advance.

Regulators are pushing for the majority of derivatives to be cleared through central counterparties, which stand between trade counterparties and assume the risks of the trade, to reduce systemic risks posed by the interconnectiveness of the contracts.

Derivatives can be used to hedge against or bet on the changes in value of the underlying assets such as stocks, bonds, commodities.

(Reporting by Karen Brettell and Kevin Drawbaugh; Editing by Leslie Adler)

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The New York Yankees, who became World Series champs for the 27th time Wednesday night, logged the highest payroll in baseball for the 2009 season. This time, they definitely got what they paid for.

It wasn’t just the $201.4 million payroll that led to the Yankees’ successful season. It was how they spent that money — investing in the right players, not just the most expensive ones.

"One of the oldest truisms in business is that you have to spend money to make money, and the Yankees have clearly been successful in that this season," said Marc Ganis, a sports marketing consultant with SportsCorp Ltd. "But it’s all predicated on the success of the team on the field — if they didn’t win, it would be money poorly spent."

The Yankees stocked this year’s team with championship material players like CC Sabathia, A.J. Burnett and Mark Teixeira, and still managed to trim their payroll by about $8 million this season.

That wasn’t always the Yankee way.

The Bronx Bombers have had the highest payroll among all Major League teams since 1999, but they had no championship rings to show for it from 2001 to 2008. The team even embarrassingly missed the playoffs in the 2008 season despite strutting the highest payroll in baseball history.

During that eight-season stretch, the Yankees shelled out about $1.7 billion for their players’ salaries, including $148 million in luxury taxes that the team had to pay for sporting such a high payroll.

This season, the Yankees got a lot more bang for their buck … in more ways than one.

Adding up the dollars and cents. Applying a Society of Baseball Research metric, the Yankees were actually more efficient with their payroll this past season than were the hapless cross-town Mets, Cleveland Indians and basement-dwelling Washington Nationals.

The World Champs were only slightly less thrifty with their salaries than the Chicago Cubs, Houston Astros, and Kansas City Royals, all of whom missed the playoffs.

By those calculations, the Yankees paid $3.2 million per "marginal victory." That’s nearly twice as efficient as the Mets, who only won 70 games despite their $149 million payroll and paid $5.8 million per marginal victory.

In addition, a rough estimate of the team’s revenue in 2009 shows the Yankees cashed in on their success more than any other team. Multiply the number of people coming to games by the average ticket price ($73),and the Yankees took in about $270 million this season, or $69 million more than they shelled out for their payroll.

In 2008, the Yankees took in just $146.4 million from ticket sales, $63 million less than their payroll.

The Yankees’ 2009 revenue figure doesn’t even include additional playoff ticket sales they raked in, but most of that bonus playoff income will be offset by the hefty luxury tax that the team will have to pay this year.

Only five teams took in more revenue from ticket sales than they paid for their overall payrolls, and the Yankees’ $69 million in earnings was by far the highest net income of any team. The nearest competitor was the rival Boston Red Sox who took in $32 million more than the cost of their payroll.

Banking on the players. The team’s business strategies paid off more than just financially this season. The Yankees’ focus on top-of-the rotation pitching helped catapult them into the championship this year, said industry consultant Vince Gennaro.

Starters Sabathia, Burnett and Andy Pettite, set-up man Phil Hughes and closer Mariano Rivera pitched 52% of the Yankees’ innings during the regular season, but pitched 81% of the postseason innings and made 100% of the playoff starts.

Last year, the Yankees got the highest amount of innings from Pettite — their third starter in 2009.

The Yankees also got a big upgrade at first-base by signing Mark Teixeira, who not only out-performed last year’s starting first-baseman Jason Giambi at the plate, but Teixeira also provided gold-glove caliber defense.

But the Yankees’ new acquisitions also combined for something more than just improved skills. They played with a kind of exuberance that made them fun to watch and easy to like, even for non-Yankees fans.

"This team’s identity was about never giving up," said Ganis. "When you watch their walk-off celebrations, they look like giddy junior high schoolers out there."

(Payroll efficiency was created by the Doug Pappas of SABR. It is calculated by adding a team’s payroll that was above the minimum allowable payroll, and dividing that by the number of victories over 49 wins — a number of games Pappas figured a team of scrubs could win.)

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A deal between U.S. regulators and J.P. Morgan Securities to settle charges over secret payments to Alabama’s Jefferson County may prove a false dawn for the debt-ridden county.

County officials welcomed the settlement, but analysts said on Thursday it will not unravel its multibillion-dollar sewer-system bond debt, which still threatens to force the county into the biggest municipal bankruptcy in U.S. history.

While the deal may give the county leverage in talks over the debt that have lasted 20 months, it still faces a fundamental problem — Jefferson County’s sewer system generates insufficient revenue to pay creditors.

The settlement “is not a fundamental game changer,” said Melissa Woodley, assistant professor of finance at Alabama’s Samford University. “The biggest problem has always been the sewer bonds, and that is still there.”

On the face of it, the settlement announced on Wednesday is good news for Jefferson County, which accumulated its debt earlier this decade by using complex bond and swap transactions to refinance improvements to its sewer system.

But that debt mushroomed in February 2008, when ratings agencies downgraded the county’s bond insurers. Earlier this week, the debt stood at close to $4 billion and counting as interest costs of roughly $75,000 accumulate each day.

Under the settlement, J.P. Morgan Securities will pay a penalty of $25 million to the U.S. Securities and Exchange Commission (SEC) and will pay the county $50 million payday loans online.

The bank will also forfeit more than $647 million it claimed in termination fees, making a significant dent in the total owed by the county.

At the same time, the SEC has filed a civil complaint against two former J.P. Morgan employees in connection with their conduct during the swap transactions.

“VICTIM STATUS”

County commission president Bettye Fine Collins described the deal as “significant” and said it “greatly” enhanced the county’s financial position.

Yet she sought to couch the deal not so much in terms of the overall reduction of the debt, and more in terms of the assignment of responsibility for its accumulation.

She cited a letter she wrote to SEC chairman Mary Schapiro in June asking the commission to consider the county’s “status as a victim of these violations in negotiations with J.P. Morgan.”

“It is appropriate for the SEC to include, in its settlement, relief that will help Jefferson County in its efforts to resolve the sewer debt and avoid bankruptcy,” she wrote.

Jefferson’s debt matters to bondholders and banks as well as to Alabama’s economy because Birmingham, the state’s largest city is situated at the heart of the county. Bankruptcy for the county could limit the state of Alabama’s ability to raise money through bonds. 

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The U.S. job market will likely start to grow in early 2010, as signs of economic expansion should encourage companies to hire workers, said Macroeconomic Advisers LLC chairman Joel Prakken.

He cautioned the labor market will remain sluggish for a protracted period with full employment unlikely to be reached until 2014.

Prakken was speaking on a conference call with reporters after the release of the October ADP Employer Services report, jointly developed with Macroeconomic Advisers.

Earlier, the ADP National Employment Report showed U.S. private employers shed 203,000 jobs in October, fewer than a revised 227,000 jobs lost in September.

(Reporting by Richard Leong, Editing by Chizu Nomiyama)

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White House economic adviser Lawrence Summers will lead a high-level meeting on Monday to discuss the state of the economy, job creation and ways to achieve sustainable growth.

A White House announcement said the meeting would take place at 2 p.m. EST and would include Cabinet officials from Treasury Secretary Timothy Geithner to Health and Human Services Secretary Kathleen Sebelius, Agriculture Secretary Tom Vilsack and Energy Secretary Steven Chu.

National Security Adviser James Jones, White House climate czar Carol Browner, U.S. Trade Representative Ron Kirk and senior White House adviser Valerie Jarrett are also among those scheduled to attend.

A spokesman for Summers, who is director of the White House National Economic Council, described the meeting as one of the regular gatherings of the council

“This is akin to a Cabinet meeting but without the president, for the agency heads who participate in the NEC process to gather and discuss the state of the economy,” said NEC spokesman Matthew Vogel.

The Summers meeting will be separate from a gathering that President Barack Obama will hold with his panel of outside economic experts headed by former Federal Reserve Chairman Paul Volcker fast payday loan no faxing.

The Obama administration has been weighing options to address ways to try to restart job growth with the unemployment rate now at 9.8 percent.

Signaling the end to the deepest recession since the 1930s Great Depression, the government last week said U.S. gross domestic product grew at a robust 3.5 percent pace in the third quarter.

Obama trumpeted the GDP numbers in his weekly radio address on Saturday but said, “we have a long way to go before we return to prosperity.”

The White House has credited the $787 billion economic stimulus package passed earlier this year with helping to bring about the rebound.

Republicans have characterized the stimulus package as wasteful and say the continued job losses are an indication it has not worked.

New unemployment numbers due out on Friday are expected to show U.S. employers cut another 175,000 jobs in October, according to economists polled by Reuters. The unemployment rate is forecast to rise to 9.9 percent for October.

(Reporting by Caren Bohan; editing by Chris Wilson)

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