President Obama, Ben Bernanke and Tim Geithner want us all to believe that the US economic recovery started in the 3rd quarter of 2009. The recovery theory is based on technical factors, specifically, that Gross Domestic Product (GDP) has been growing. Historically, anytime a recession is followed by two quarters of positive GDP growth, the recession is considered over. This is the case here.
However, not everyone is convinced, including the Chief Executive Office of JPMorgan Chase, Jamie Dimon:
JPMorgan Chase & Co reported deep losses on mortgage and credit card loans in the fourth quarter, dashing hopes that consumer credit is on the mend and sending the bank’s shares down 2.1 percent.
Quarterly profit soared to $3.3 billion, topping Wall Street expectations, but analysts had been hoping for signs that the bank’s credit costs were leveling off or even starting to fall.
In a conference call with investors, Chief Executive Jamie Dimon said, “We don’t know when the recovery is.”
JPMorgan is the first of the major banks to report fourth-quarter numbers, and its results may bode ill for competitors.
The bank’s large mortgage and credit card businesses have seen rising credit costs in the last year, offset only by record investment banking revenue.
Losses on mortgages and credit cards? You don’t say…
JPMorgan Chase made money becuase of one reason and one reason only: stock market manipulation. Call it a conspiracy theory, I call it conspiracy fact.
In 1988 President Ronald Reagan signed into law Executive Order 12631, creating an organization called the Working Group on Financial Markets. It is often times referred to as the Plunge Protection Team (PPT). Their job? To prop up the stock market and bring confidence back to the marketplace in the event of a crash. There’s little argument that we had a massive crash in the stock market which bottomed in March of 2009. Is there any doubt that the easy money being printed by The Fed and distributed to banks in the forms of bailouts and loans was used to prop up financial markets and keep them from continuing to plunge?
Without their investment banking arm, JPMorgan Chase (and a host of others) would be dead in the water.
Like Goldman, JPMorgan uses high frequency trading and a host of other machinations to make billions of dollars on stock trading. On top of that, they have insider information directly from the policy makers in Washington D.C.
So, when JP Morgan Chase says they made money, they are right, technically. But the money they made came from, essentially, stock market investing from their investment banking arm.
Their commercial banking arm lost upwards of $500 million last year on prime mortgage defaults.
Regardless of whether or not companies like Wells Fargo, Bank of America or JP Morgan show profits, their exposure to consumer and business credit poses a significant risk and shows how serious the economic situation really is.
As we have opined on many occasions, there is simply no recovery taking place if you consider continued credit contraction in the consumer and business sectors. In addition to that, consumers and businesses alike are defaulting on mortgage, credit card and business loan debt and will continue to do so, probably at an accelerated pace, going forward.
We’ll stick with Jamie Dimon’s assessment and not make any predictions. We don’t know when the recovery is going to happen and don’t expect it to be anytime soon.