Trading Places

UBS suing NASDAQ over Facebook losses, turn those machines back on!

http://www.marketwatch.com/story/ubs-profits-disappoint-amid-loss-on-facebook-ipo-2012-07-31-14854710

Shot In The Dark

Did JP Morgan really forget to tell employees and 401k plans the fund included private mortgages?

http://www.reuters.com/article/2012/07/20/us-labor-jpmorgan-idUSBRE86J1B720120720

Millenium Falcon

Facebook is looking for another billion users, China is the natural next step.

http://www.businessweek.com/articles/2012-07-25/chasing-facebooks-next-billion-users#p2

Agree To Disagree

Did he mean breaking up the big banks won’t make them any smarter?

http://www.bloomberg.com/news/2012-07-26/breaking-up-banks-won-t-make-them-safer-ex-senator-says.html

Glass Steagall, Act 2

Sandy Weill suggests it’s time to break up the big banks, no kidding.

http://www.cnbc.com/id/48315170/

Ivory Towers

Compensation for bankers during the Gilded Age compared with current levels, make sure your door is closed.

http://aheadoftheherd.com/Newsletter/2012/The-Gilded-Age-of-Bankers-rev.html

Controlled Chaos

Committees, where innovation goes to die. The more disruptive, the better.

http://wallstcheatsheet.com/stocks/this-is-what-kills-innovation.html/

Dumb And Dumber

Two years later, the benefits of Dodd-Frank are still unknown.  

http://freebeacon.com/dodd-frank-two-years-later/

The Heat Index

The severity of the current drought isn’t fully priced in at the market just yet, this won’t be pretty.  

http://www.businessinsider.com/implications-of-summer-drought-2012-7

Gone With The Wind

No less than half of alternative energy producers receiving guaranteed government loans are promptly going bankrupt.

http://www.businessweek.com/news/2012-07-11/solar-companies-to-tap-u-dot-s-dot-funds-halted-since-solyndra

Fredo, I Know It Was You

Organized financial crime is now so commonplace, we can’t avoid it.

http://www.oftwominds.com/blog.html

Boogie Nights

Is the Wall Street culture really changing? We remain skeptical.

http://www.businessinsider.com/goldman-sachs-to-open-private-bank-2012-7

Life Of Riley

Colleague Josh Brown takes aim at the Wall Street culture, and nails it.
http://blogs.wsj.com/financial-adviser/2012/07/16/investment-pros-forced-to-work-year-round/

Pony Express

This just in, investments have risk. IQ readers know we’ve been concerned about interest rate risk for more than two years.

http://www.smartmoney.com/retirement/planning/muni-bonds-require-more-caution-nowadays-1341945064065/?mod=1122

High Noon

As more former brokers sue over deferred compensation, it appears Merrill Lynch brought a knife to a gun fight.

http://www.cnbc.com/id/47924142

The Gong Show

Even if you think Merrill Lynch isn’t Bank of America, it’s still about the Clients. Not mentioned here, the Clients.  

http://www.onwallstreet.com/news/merrill-lynch-gets-bullish-on-advisor-training-2679733-1.html

Undaunted Courage

The author is only pointing out what Clients already know, the Wall Street model is broken.

http://www.smartmoney.com/invest/strategies/should-you-trust-the-antiwall-street-crowd-with-your-money-1341936419654/

Playing Semantics

There’s a very important distinction between a Broker and an Adviser, it’s called fiduciary duty.

http://www.nytimes.com/2012/07/07/your-money/beware-of-fancy-financial-adviser-titles.html?src=recg

Teenage Wasteland

Parents that just dropped six figures on higher education aren’t laughing.

http://blogs.smartmoney.com/advice/2012/07/06/the-jobless-class-of-2012/’’

Reality Check

It’s a sad state of affairs for the Middle Class right now, and there’s no signs of improvement anywhere.   

http://www.wealthwire.com/news/economy/3429

Love Story

Sheila Bair tells the markets to get over their crush on Jamie Dimon. This should sound very familiar to IQ readers.

 

May 25, 2012: 5:00 AM ET

Jamie Dimon needs to take a cue from J.P. Morgan's trading debacle and divide the banking giant into manageable pieces.

By Sheila Bair, contributor

FORTUNE - When I was a child, my sister and I loved watching the goings-on at a chicken farm near my grandmother's house in rural Kansas. Chickens are interesting social animals, resembling, somewhat, the way we in Washington interact with one another. They were always on the lookout for one vulnerable bird that they would corner in the coop and then peck relentlessly on its head.

Jamie Dimon, the CEO of J.P. Morgan Chase (JPM), is getting his head pecked these days. To be sure, he set himself up for it by very publicly leading the industry chorus of criticism against key financial reforms. He has made many good decisions for his bank, but Chase's recent serious missteps have provided reform advocates with loads of ammunition. I mean, really. Losing $2 billion (and counting) by "hedging" a bond portfolio against losses? What were he and his minions thinking? If Dimon wants to regain his place in the pecking order, he should take the initiative and shrink Chase to a manageable size.

In the meantime, the market is punishing his bank even more severely than the Washington pundits are. Chase's share price was down more than 20% in the week or so after it announced its trading loss on May 10. Chase's defenders point out that a $2 billion loss is less than 1% of capital, and perhaps the market is overreacting, but let's face it, no one really knows what is going on inside Chase any more than we understand the risks of the other megabanks.

As I wrote in this column in January, banks of the size and complexity of J.P. Morgan Chase, Citi (C), and Bank of America (BAC) are just too difficult to manage, even for talented managers like Dimon. Whatever economies the megabanks achieve from their size are more than offset by the challenges in managing trillion-dollar institutions that are into trading, market making, investment banking, derivatives, and insurance, in addition to the core business of taking deposits and making loans. This is one of the reasons why, even before the crisis, their shares performed more poorly than those of the well-managed regional banks, and continue to do so.

More: J.P. Morgan Chase - No. 16 on the Fortune 500

Given the poor shareholder returns, why are these unstable behemoths allowed to exist? There is the perception that the government will not let them fail. Also, their size and complexity protect them from market pressure, and shareholder activists with a mind to break up the big banks are stymied by the megabanks' complex web of thousands of legal entities.

In Washington no one is seriously discussing breaking up the big banks. That said, the best chance of restraining these giants is the hugely important regulatory reform, now being implemented by the FDIC and the Fed, that forces the banks to produce "living wills." These rules require that big banks map their business lines to their legal entities. So, for instance, Chase and others would have to identify the legal entities that support their investment-banking operations, their trading and brokerage activities, their commercial and retail lending, and so forth. The idea is to have a credible breakup plan in place if they get into trouble.

Meaningful enforcement of this rule and public disclosure of the plans would help convince the market that too-big-to-fail is over. It would also help shareholders figure out how to start breaking up the Goliaths.

Yet instead of waiting for the government or shareholders to act, the leadership of these megabanks should take the lead in downsizing. The best way for Dimon to provide a better return to his investors is to recognize that his bank is worth more in smaller, easier-to-manage pieces. Let's face it, making a competitive return on equity is going to become even harder for megabanks as their capital requirements go up, their trading and derivatives activities are reined in, and their cost of borrowing rises as bond investors recognize that too-big-too-fail is over. If, by downsizing, Dimon can achieve valuations comparable to the regional banks', he will potentially release tens of billions of value to his shareholders. And rule the roost once again.

This story is from the June 11, 2012 issue of Fortune.

Posted in: big banks, break up the banks, J.P. Morgan Chase, Jamie Dimon, Sheila Bair, too big to fail

Price Of Admission

Advanced degrees now essential, according to recruiters. Mark Zuckerberg disagrees.

http://www.businessinsider.com/value-of-an-mba-2012-4#mbas-are-absolutely-essentialbut-youve-got-to-find-the-right-program-for-you-1

It's Not Me, It's You.

Yes, a Ma Bell style breakup of the big banks is long overdue.

http://beta.fool.com/catominor/2012/07/02/breaking-bankscan-investors-and-occupiers-agree/6490/

Cream Of The Crop

Tuition costs keep rising, return on investment keeps falling.

http://www.thefiscaltimes.com/Articles/2012/06/18/12-Reasons-College-Costs-Keep-Rising.aspx?source=taboola#page1

Fishing With Dynamite

Brokers not being objective with client recommendations? It’s a world gone mad.

http://dealbook.nytimes.com/2012/07/02/ex-brokers-say-jpmorgan-favored-selling-banks-own-funds-over-others/