jpmorgan chase

DealBook: In Shift to New Court, Risks for Madoff Trustee’s Case

July 5, 2011 by NewsMaker Leave a Comment

Shannon Stapleton/ReutersIrving H. Picard, the court-appointed trustee in the Madoff fraud case.

When it comes to the Madoff bankruptcy case, the venue matters.

Prominent lawsuits filed by Irving H. Picard, the trustee in the case, will be reviewed in Federal District Court rather than in United States Bankruptcy Court. It is an important shift, one that may result in the dismissal of some claims and limit the amount Mr. Picard can recover for investors.

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Mr. Picard is looking to recover billions of dollars from banks he has accused of aiding Bernard L. Madoff’s huge Ponzi scheme by turning a blind eye to the fraud. He is seeking $19.9 billion from JPMorgan Chase; $1 billion from the New York Mets owners Saul Katz and Fred Wilpon; $10 billion from HSBC; and nearly $60 billion from UniCredit and other banks affiliated with Sonja Kohn.

The bankruptcy court is viewed as a friendlier venue for Mr. Picard, not the least because it has sided with him on important issues regarding who can make claims as part of the liquidation.

The court adopted his approach in holding that those who withdrew more from their accounts than they invested — the so-called net winners — were subject to a lawsuit seeking to have them repay their profits while denying any claim for losses based on their final account statements. The net winners issue was appealed to the United States Court of Appeals for the Second Circuit, and a decision is expected in the near future.

Mario Tama/Getty ImagesBernard L. Madoff

Last week, the bankruptcy court again sided with Mr. Picard in holding that those who invested with Mr. Madoff indirectly through feeder funds were not “customers” under the law. Therefore, the court said, investors can only look to the feeder fund for compensation and are not eligible for a payment of up to $500,000 through the Securities Investor Protection Corporation. There is likely to be an appeal to the Second Circuit on that issue as well.

For some of Mr. Picard’s most important claims, Judge Jed S. Rakoff and Judge Colleen McMahon of United States District Court for the Southern District in Manhattan have temporarily withdrawn the cases from the bankruptcy court since they involve issues outside of bankruptcy law.

Here is a rundown of some of the issues the judges will decide, and their potential effect on Mr. Picard’s recovery efforts.

Sterling Equities
Mr. Picard is seeking $1 billion from Sterling Equities and dozens of other entities controlled by Mr. Katz and Mr. Wilpon, in what is called a “fraudulent conveyance” action, usually referred to as a clawback suit. The lawsuit seeks repayment of $300 million in fictitious profits the two withdrew and an additional $700 million because, the suit claims, they ignored red flags about the fraud.

On July 1, Judge Rakoff decided to withdraw the case from the bankruptcy court to rule on whether Mr. Katz and Mr. Wilpon bear any responsibility for allowing the Ponzi scheme to continue. Under fraudulent conveyance law, the responsibility is based on whether there were “badges of fraud,” which can include circumstantial evidence to infer fraudulent intent. That is a fairly low threshold that would make it much easier for Mr. Picard to establish liability against Mr. Katz and Mr. Wilpon.

Judge Rakoff, however, questioned whether that was the proper standard. In a Bloomberg News article, the judge asked: “How can it be that the law governing someone’s duty to inquire is determined, not by what the governing laws in place were at the time, but by the happenstance that the entity later went into bankruptcy?”

Under federal securities law, proving fraud requires establishing “scienter,” which means intent or at least recklessness. One means of establishing intent is through what is known as “willful blindness,” that a person deliberately ignored signs of misconduct.

The Supreme Court recently explained in Global-Tech Appliances Inc. v. SEB, S.A. that “a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.”

Mr. Picard’s lawsuit highlights various warnings signs over the years. But whether that shows that Mr. Wilpon and Mr. Katz had actual knowledge of the fraud is open to question, especially given how Mr. Madoff repeatedly fooled so many others, including the Securities and Exchange Commission.

If Judge Rakoff requires proof of a higher level of intent to establish fraud in dealings with Mr. Madoff, that may also affect other cases by Mr. Picard that seek to hold financial institutions responsible for being complicit in the Ponzi scheme.

The fact that Mr. Madoff succeeded in covering up his scheme for as long as he did may limit what can be recovered from banks and feeder funds that can claim they were misled like everyone else.

HSBC and UniCredit
The lawsuits against HSBC and UniCredit stem from the $9 billion funneled by Ms. Kohn to Mr. Madoff’s firm, transfers that the banks facilitated. The HSBC case seeks $10 billion based on the bank’s alleged breach of common law duties for failing to monitor Mr. Madoff or make any effort to protect investors. The UniCredit suit makes many of the same claims, with the additional twist of seeking nearly $60 billion based on violations of the Racketeer Influenced and Corrupt Organizations Act, better known as R.I.C.O., which authorizes triple damages.

On June 27, HSBC pushed to dismiss the case in a motion before Judge Rakoff. The bank argued that Mr. Picard did not have standing to file a claim on behalf of the investors who lost money in the Ponzi scheme because he only represented Mr. Madoff’s firm.

If that argument succeeds, then Mr. Picard may be limited in whether he can pursue the financial institutions through which Mr. Madoff funneled billions of dollars for anything more than the profits they made from acting as his bankers, almost a pittance compared with the billions of dollars in investor losses.

As for the lawsuit against UniCredit of Italy, it is not clear whether R.I.C.O. can be applied to foreign parties that did not act in the United States. The Supreme Court has ruled that American law cannot extend to activities outside the country unless the statute clearly states otherwise. R.I.C.O. does not contain any explicit reference to extraterritorial application, which may block the claim.

The $60 billion R.I.C.O. claim against UniCredit and other European banks is the trustee’s largest single claim. So if those allegations are dismissed, then the potential recovery will be significantly diminished.

JPMorgan Chase
Mr. Picard recently amended his suit against JPMorgan, which held Mr. Madoff’s primary bank account, to ask for $19 billion for failing to properly monitor his operations. Like other claims, the suit alleges that there were enough indications of fraud that the failure to act made the bank liable to investors.

Judge McMahon has agreed to consider JPMorgan’s argument that a federal law designed to limit private securities fraud claims should block Mr. Picard from pursuing his case.

A federal statute called the Securities Litigation Uniform Standards Act prohibits claims based on state law when the underlying transaction involved trading in securities subject to the federal securities law. Congress adopted it in 1998 to prevent plaintiff class action firms from bypassing the federal courts to pursue claims under more friendly state laws.

JPMorgan argued that Mr. Picard’s claim essentially alleges that it helped Mr. Madoff engage in securities fraud, and therefore, under the federal statute, it must be dismissed.

The same argument for dismissal under that statute is being pursued by HSBC and UniCredit, so Judge Rakoff will also have to deal with this issue along with Judge McMahon. If the state common law claims are blocked by the law, then billions of dollars could be whittled from Mr. Picard’s claims against the banks.

The issues in these cases turn on fairly narrow legal questions, including what is the proper standard to assess intent to defraud and how to determine standing to pursue a claim. As is often the case, legal technicalities may well have the greatest effect. If Judge Rakoff and Judge McMahon rule against the trustee, the potential recovery ultimately available to Mr. Madoff’s investors could shrink drastically.

Peter J. Henning, who writes White Collar Watch for DealBook, is a professor at Wayne State University Law School.

Article source: http://feeds.nytimes.com/click.phdo?i=a03c407f2367caed9538ca268f1f1ebe

Filed Under: Business News Tagged With: jpmorgan chase, picard, shannon stapleton

DealBook: In a Bill, Wall Street Shows Clout

July 5, 2011 by NewsMaker Leave a Comment

Wall Street often tries to play down its influence in Washington. As Congress pushed through financial regulations that seemed to get watered down last year, Wall Street’s chief executives tried to suggest, somewhat surprisingly, that their highly paid lobbyists did not have much sway.

If there is still any question about how much power Wall Street actually has in Washington, here is some fresh evidence worth examining.

In a piece of legislation recently passed by the House and the Senate to revamp patent law, a tiny provision was inserted at the last minute called Section 18.

The provision, which my colleague Edward Wyatt detailed in an article ahead of the House’s vote on the bill last month, has only one purpose: to allow the banking industry to skirt paying for certain important patents involving “business methods.”

The provision even allows “retroactive reviews of approved business method patents, allowing the financial services industry to challenge patents that have already been found valid both at the U.S. Patent and Trade Office and in Federal Court,” according to Representative Aaron Schock, an Illinois Republican who tried to strike the provision.

The legislation was initially introduced by Senator Charles E. Schumer, a New York Democrat, with an even narrower view: to protect the interests of his big bank constituents in a dispute with DataTreasury Corporation of Plano, Tex., a company that owns dozens of patents for processing digital copies of checks.

Wall Street fought for the bill because it says it has been held hostage by holders of “business method” patents that should never have been granted by the patent office in the first place. Banks like JPMorgan Chase have been fighting DataTreasury over its patents for years.

The language in the bill is expansive. It covers patents for “a financial product or service” as well as “corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”

But since the bill and Section 18 were passed and word has spread about it, dozens of other companies are starting to worry that the breadth of the provision may affect them too. And they are fighting back, hoping that the Senate — which still has to reconcile the House’s bill with its own — tosses the provision out.

“It would be a tragedy if the greed of the big banks and their willing accomplices in Congress use this important legislation to trample the rights of legitimate patent holders and in the process weaken the integrity of our patent system,” Tom Giovanetti, the president of the Institute for Policy Innovation, a conservative research group, said in a statement.

Steven F. Borsand, executive vice president for intellectual property at Trading Technologies International, which develops high-performance trading software for derivatives professionals, is worried that Section 18 will allow many of his banking clients to simply copy his company’s software.

“This isn’t just about DataTreasury,” he said. “Section 18 will affect many companies, including ours.” He expects that his company will be forced to “spend more time and money defending” its patents, he said in a statement, adding, “Only lawyers stand to benefit from this.”

Other companies, including high-tech firms like VeriFone and Square, the mobile phone payment start-up, could be affected by the law, putting their patents in jeopardy. Cantor Fitzgerald, known for its computer-based bond brokerage, has a number of valuable patents that could similarly fall under the legislation.

Of course, in the grand scheme of things, a new patent law may seem to be unimportant or to affect only a few inventors.

But Section 18 represents a much larger issue: It is perhaps the most blatant demonstration of the lobbying power of Wall Street and, just as important, the willingness of Congress to support the interests of the banks, even in the face of clear evidence that the law has no purpose other than to benefit the financial services industry.

When anyone suggests that Wall Street owns Congress — whether true or not — Section 18 will be Example A of a pork-barrel project for Wall Street. For lack of a better cliché, it might even be considered another backdoor bailout of the banks.

The banks “are attempting to write into law what they have been unable to achieve in litigation,” Representative Maxine Waters, Democrat of California, wrote in a letter to colleagues.

Mr. Schumer has said he is simply defending New York banks against a company that has made a “cottage industry out of extracting legal settlements” from a dubious patent provision.

Admittedly, it seems somewhat preposterous that simply processing scanned checks, as DataTreasury does, could be a patentable business method. But we have courts, which have upheld these patents, for a reason.

Perhaps it would be acceptable if the law was about a specific patent, but experts like F. Scott Kieff, a professor at George Washington University Law School and a senior fellow at the Hoover Institution at Stanford, worry that the law is too broad. “The scope is enormous and almost any method patent can qualify,” he wrote in a Hoover Institution journal.

He is worried about the law’s impact not just on investors in the United States, but also about even broader implications. “When word gets out that intellectual property rights are not being taken seriously in the U.S., especially for any class of patents that can be a convenient political target of powerful, well-heeled interest groups like banks, our voracious international competitors will pounce,” he said.

He may or may not be right about that. But if the legislation does become law, it will be another reason the “powerful, well-heeled” will appear to have bought Congress again.

Article source: http://feeds.nytimes.com/click.phdo?i=8e6ef95c9381cfa003aa8dfd84eef778

Filed Under: Business News Tagged With: business method patents, jpmorgan chase, lobbyists

Bank of America Settles Claims Stemming From Mortgage Crisis

June 30, 2011 by NewsMaker Leave a Comment

Bank of America announced Wednesday that it would take a whopping $20 billion hit to put the fallout from the subprime bust behind it and satisfy claims from angry investors. But for its peers, the settlements may just be starting.

Heavyweight investors that forced Bank of America to hand over billions to cover the cost of home loans that later defaulted are now setting their sights on companies like JPMorgan Chase, Citigroup and Wells Fargo, raising the prospect of more multibillion-dollar deals.

“Bank of America has charted a path that our clients expect other banks will follow,” said Kathy D. Patrick, the lawyer who represented BlackRock, Pimco, the Federal Reserve Bank of New York and 19 other investors who hold the soured mortgage securities assembled by the Bank of America.

Ms. Patrick’s clients are seeking $8.5 billion from Bank of America — a settlement that needs a judge’s approval and could still face objections from investors seeking a better deal. A date to review the blueprint has been set for Nov. 17 with Justice Barbara R. Kapnick in New York Supreme Court.

All told, analysts say the financial services industry faces potential losses of tens of billions from future claims — real money even by the eye-popping standards of the nation’s biggest banks. Indeed, even that $20 billion announced Wednesday will not be enough to completely stanch the bleeding at Bank of America — it says litigation over troubled mortgages could cost it another $5 billion in the future.

The proposed settlement is more than just another financial blow to a company staggering from the collapse of the mortgage bubble. It also represents a major acknowledgment of just how flawed the mortgage process became in the giddy years leading up to the financial crisis of 2008, typified by the excesses at Countrywide Financial, the subprime mortgage lender Bank of America acquired in 2008.

Ms. Patrick and her clients claim that Countrywide created securities from mortgages originated with little, if any, proof of assets or income. Then, they argue, Bank of America did not properly service these mortgages, failed to heed pleas for help from homeowners teetering on the brink of foreclosure and frequently misplaced documents.

Most of the loans in the pools covered by the settlement were underwritten at the height of the mortgage mania: in 2005, 2006 and 2007. But with borrowers soon unable to meet their monthly payments, defaults soared.

For the banking industry, the reckoning could not come at a worse time. On Wall Street, trading revenue has been devastated by the economic uncertainty in Europe, the anemic recovery in the United States, and the stock market swoon of the last two months.

What’s more, new regulations have already taken a big bite out of profits. Despite a modest amount of relief on Wednesday, when the Federal Reserve completed new rules governing debit card swipe fees, the banks stand to lose billions when the regulations take effect next month.

If all this were not enough, further weakness in the housing and job markets has reduced lending by the banks to businesses and consumers alike, cutting yet one more source of profits.

Nevertheless, investors appeared to endorse the proposed settlement, with Bank of America shares rising nearly 3 percent, to $11.14, a move mirrored by shares of other big financials.

Some experts said the settlement could prove good news for consumers and the broader economy, speeding the foreclosure process for hundreds of thousands of homeowners while potentially making it easier to obtain modifications of existing mortgages.

By providing a template for cleaning up past claims and setting standards for future practices, the settlement could make it easier for banks to bundle and sell mortgages again, a business that has been all but dead since the financial crisis.

“That is important for providing funding for people to buy homes, grow their businesses and create jobs,” said Michael S. Barr, a former assistant Treasury secretary who now teaches law at the University of Michigan.

The accord does not resolve an investigation by all 50 state attorneys general into allegations of mortgage service abuses by Bank of America and other major lenders that could ultimately cost the industry billions more in fines and penalties. Nor does it cover liability from soured home equity loans or bonds the bank created with mortgages from lenders other than Countrywide.

Gretchen Morgenson contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=191b3cb0fc65f09932a69666c8bf44e9

Filed Under: Business News Tagged With: home loans, jpmorgan chase, wells fargo

DealBook: Wall Street Frets Over New Rules

June 16, 2011 by NewsMaker Leave a Comment

Brendan Smialowski/Bloomberg NewsBarry Zubrow of JPMorgan Chase.

Wall Street is stepping up its attacks on new financial regulation, warning Congress on Thursday that a wave of restrictions threatens to weaken big banks and the broader United States economy.

“The regulatory pendulum clearly has now begun to swing to a point that risks hobbling our financial system and our economic growth,” Barry Zubrow, JPMorgan Chase’s chief risk officer, said in prepared testimony before the House Financial Services Committee.

The concerns center on the Dodd-Frank Act, the financial regulatory overhaul that has emerged as the scorn of Wall Street. Enacted in the wake of the financial crisis, the law reforms some of the industry’s biggest profit centers, including derivatives trading and debit card fees.

JPMorgan Chase, Morgan Stanley and other financial titans are positioning themselves as victims of the law, amid rising fears that it will enable big European banks to poach their business. Foreign regulators, the banks complain, have a lighter touch than Washington policymakers.

“U.S. regulations that are being implemented on a unilateral basis are threatening the competitiveness of the U.S. markets,” Timothy Ryan, president and chief executive of the Securities Industry and Financial Markets Association, told the committee.

The banks in particular loathe the thought of tougher capital requirements. Under Dodd-Frank, a council of regulators must designate the financial firms — including mutual funds, private equity shops and hedge funds — that pose a systemic risk to the financial system. These firms, and banks like JPMorgan that have more than $50 billion in assets, will face higher capital requirements.

JPMorgan and its fellow Wall Street firms object to the additional layer of capital, calling it a “surcharge.” The banks note that the Basel Committee on Banking Supervision already is enforcing its own international capital requirements. The so-called Basel III rules require JPMorgan to hold 45 percent more capital than it had stored away during the crisis, according to Mr. Zubrow.

“Considering a capital surcharge above Basel III levels that does not adequately account for the changes that have been made,” he said.

Banks also predict a grim future for their derivatives business, an industry at the center of the financial crisis.

Dodd-Frank requires many derivatives contracts to be traded on regulated exchanges and run through clearinghouses, which act as a backstop in case one party defaults. Dodd-Frank, banks say, could push derivatives business and profits overseas as the rules do not match up with foreign regulations.

“It could put U.S. markets at a serious competitive disadvantage,” Stephen O’Connor, a top Morgan Stanley derivatives official and chairman of the International Swaps and Derivatives Association, said in prepared testimony on behalf of the association.

The Commodity Futures Trading Commission and the Securities Exchange Commission, charged with writing the new rules, recently delayed their implementation plan. But they still plan to finalize the regulations later this year, while international regulators plan to wait until the end of 2012.

The European Commission, the European Union’s executive body, has discussed similar rules, but the regulators may take until 2012 or later to complete the overhaul.

Gary Gensler, chairman of the trading commission, said his agency was “actively coordinating with international regulators to promote robust and consistent standards.”

Until the European rules are completed, banks in the United States say they will have to collect margin from pension funds and other investors looking to enter a derivatives deal. But a European bank booking a deal out of, say, London or Frankfurt would not have to collect any upfront collateral payments, giving them a competitive edge.

The “draconian” margin requirements could “effectively end” Wall Street’s overseas derivatives business,” Mr. Zubrow said.

Mr. Gensler noted, however, that new regulations were needed to rein in the derivatives markets.

“Though two years have passed, we cannot forget that the 2008 financial crisis was very real,” he told the committee.

Article source: http://feeds.nytimes.com/click.phdo?i=aa6828ea3f39b3f80c1b98bc3a90cca8

Filed Under: Business News Tagged With: financial markets association, jpmorgan chase, united states economy

Deutsche Bank Star Fights to Take the Reins

June 14, 2011 by NewsMaker Leave a Comment

A banker with a pied-piper quality, Mr. Mitchell persuaded Mr. Jain and 500 others to leave secure jobs at Merrill Lynch in the mid-1990s to help him transform Deutsche Bank from a slumbering financial institution focused mostly on traditional lending to German companies and individuals into a global powerhouse that generated half its profit from trading and deal-making. At the peak of his success, in late 2000, Mr. Mitchell was killed in a plane crash.

In building Deutsche’s investment bank, Mr. Mitchell formed the template for the global universal bank that has since been emulated — for good and ill — by Citigroup, Royal Bank of Scotland, JPMorgan Chase, UBS and Barclays.

At the age of 48 — about the same age as Mr. Mitchell when he died — Mr. Jain controls all of his former mentor’s empire, and more. In a given quarter, those operations may produce as much as 90 percent of the banking giant’s profit. Now he is confronting the same obstacle that confounded Mr. Mitchell and prompted him to start looking for another job in the days before he was killed.

As a non-German speaker and Wall Street product, Mr. Jain is facing an uphill battle to succeed Deutsche Bank’s chief executive, Josef Ackermann.

More diplomat than banker, the Swiss-born, German-speaking Mr. Ackermann and the Deutsche board have resisted persistent shareholder demands that the bank put forward a succession plan before Mr. Ackermann’s contract expires in 2013.

All of which has enhanced the view that Mr. Ackermann sees it as his legacy to crown a successor in his own statesman-like mold — perhaps Axel A. Weber, the recently departed head of the German central bank. There has been much talk of Mr. Weber becoming chief executive or coming in to share the job in some way with Mr. Jain.

Ultimately it will be a board decision, and the bank may well decide to anoint Mr. Jain. But the delay, institutional shareholders say, runs the risk of alienating Mr. Jain and might cause him to jump to another investment bank.

“In Germany, no one can imagine an Indian working in London who does not speak German being the C.E.O. of Deutsche Bank,” said Lutz Roehmeyer, a portfolio manager at LBB Invest in Berlin and a large shareholder. “But Deutsche Bank is an investment bank now, and Mr. Jain deserves to run it.”

On a narrow profit and loss calculus, that may be so. But even though Deutsche’s risk taking was not as outlandish as that of others, the bank was an enthusiastic participant in the United States mortgage boom and is being sued for $1 billion by the United States government, which contends that its mortgage unit engaged in fraud and deceived regulators to have their loans guaranteed.

While the majority of the alleged fraud took place before Deutsche acquired the mortgage operation, Mr. Ackermann and the Deutsche board may well be wary of choosing a bond and derivatives technician at a time when the practices of all major banks are still being scrutinized.

People who have spoken to Mr. Jain say that he recognizes this is a board decision and that his priority is to keep the profits coming. But, these people say, the delay and the possibility that Mr. Ackermann may not support him for the job has had its effect.

During a brief interview Tuesday, Mr. Jain took issue with rumors in the market that his relationship with Mr. Ackermann — never close to begin with — had cooled and that he might leave the bank.

“I have been given a huge new opportunity to integrate the investment bank and I am very excited about that,” he said. “As for my relationship with Joe, it is as good as it ever was in almost 15 years of working together.”

Mr. Ackermann declined to comment on the question of his successor, but he has in the past made it clear that the decision to pick the bank’s next leader is the board’s responsibility — with his input of course — and that his contract runs until 2013.

Article source: http://feeds.nytimes.com/click.phdo?i=64def651a514a7f9678e93ac795be157

Filed Under: Business News Tagged With: jpmorgan chase, merrill lynch, mid 1990s

Practical Traveler: How to Avoid Credit Card Problems Abroad

June 12, 2011 by NewsMaker Leave a Comment

“This is a big deal when traveling,” said Mr. Porter, who trekked back to his hotel to get cash, which he then had to exchange for local currency before returning to the train station to wait in a long line to pay for his tickets. He encountered similar problems at train stations in Belgium and Britain. “It just got super frustrating,” he said.

There may be some good news on the horizon for Americans like Mr. Elliot. A few banks have begun testing cards with the newer chip technology, known as E.M.V. (for Europay, MasterCard and Visa) and are beginning to offer the cards to select customers. Wells Fargo has issued cards with the embedded chips to about 15,000 United States-based clients who travel internationally, in a trial program. JPMorgan Chase is offering the cards to some of its high-net-worth customers this month. Meanwhile, Travelex, a major currency exchange company, began selling a preloaded E.M.V.-enabled debit card last year. Some credit unions have also begun offering credit or debit cards with chips, including the State Employees’ Credit Union of Raleigh, N.C., and the United Nations Federal Credit Union in New York.

It’s about time. Over the last decade, such cards (commonly referred to as chip-and-PIN cards because users punch in a personal identification number instead of signing for the purchase) have been widely adopted in Europe as a means to reduce credit card fraud; the information stored in the magnetic strips used in traditional cards can be stolen fairly easily. E.M.V.-enabled chip cards, requiring a PIN for authentification, are harder to counterfeit and are becoming the standard in other regions, including Canada, Latin America and the Asia-Pacific region. More than a third of the world’s payments cards (approximately 1.2 billion) are E.M.V. capable, along with roughly two-thirds of cashier terminals (18.7 million), according to EMVCo, the standards body owned by American Express, JCB, MasterCard and Visa.

But the United States has been slow to adopt the technology, mainly because of the expense merchants and banks would have to take on to convert to E.M.V.-enabled cards and cash registers. American banks also point out that fraud involving credit cards with magnetic strips hasn’t been as prevalent in the United States as it has in other countries. (Chip-and-PIN cards are different from the radio frequency chip in some American credit cards, like the American Express Blue card, which allows customers to pay by waving their card at a check-out scanner, instead of swiping it.)

Until businesses change their minds, American travelers will continue to encounter payment issues abroad. The problem is two-fold. Even though most European cash registers are equipped to handle American cards, some cashiers simply don’t know how to process them. And many automated ticket kiosks like those commonly found at train stations, gas pumps and parking garages simply don’t accept cards without a chip and PIN. (A.T.M.’s typically recognize and accept many cards whether they have a chip or a magnetic strip.)

So what’s a traveler to do? Since the cards being tested by Chase and Wells Fargo are being offered only to a limited number of mostly high-end customers, the best option for the rest of us is to carry a couple of cards in our wallets and politely insist that the cashier keep trying to swipe each credit card, as the card reader may be able to recognize the magnetic strip and approve the purchase.

That’s what Richard Brill, a public relations executive from Wilmette, Ill., learned last month while on vacation in Portugal. “In some cases they’d redo it,” he said, referring to the merchants who were able to get their machines to accept his Visa card. When such attempts failed, he tried using his American Express card, which was accepted a number of times, even though it also lacked the special chip.

For backup, also consider carrying a preloaded debit MasterCard from Travelex called Chip and PIN Cash Passport, available in pounds or euros, which is equipped with the embedded chip. But use it only when you can’t use other cards. While it does not cost anything to use the card, the exchange rates you’ll get when loading it with cash aren’t great. For example, in late May, the exchange rate when putting funds into a Travelex Chip and PIN card online was about $1.50 to the euro. (It can be higher in actual Travelex stores.) By contrast, the spot exchange rate, charged by most banks, was roughly $1.42, according to Bankrate.com, a financial research site. Even after adding the 3 percent foreign exchange fee typically charged by major American card issuers, it was still more expensive to use a Travelex Chip and PIN card.

That said, there are some transactions — like buying train tickets at kiosks — for which you will need a Travelex card; remaining funds can be converted back to dollars after your trip.

Before you go, also consider buying tickets and other basic purchases online. For example, Vélib, the popular Paris bicycle rental system, whose rental kiosks have been known to reject cards without embedded chips, now accepts online payments for one- and seven-day tickets at velib.paris.fr. Rail Europe, which lets American tourists buy many European train tickets in advance, recently added local British train tickets to its online offerings at raileurope.com.

And when you return home, be sure to let your bank know about any payment problems. That just may be the best way to motivate them to issue chip-based cards to travelers.

Article source: http://feeds.nytimes.com/click.phdo?i=3160a21db28bd470a48e7f29451a7f86

Filed Under: Your Money Tagged With: asia pacific region, jpmorgan chase, mr porter

Stocks and Bonds: Bank and Energy Shares Reflect Wall Street’s Unease

June 7, 2011 by NewsMaker Leave a Comment

The Dow Jones industrial average fell 61.30 points, or 0.5 percent, to 12,089.96. The Standard Poor’s 500-stock index dropped 13.99 points, or 1.1 percent, to 1,286.17. It was the first closing below 1,300 for the S. P. index since March 23. The Nasdaq composite fell 30.22, or 1.1 percent, to 2,702.56.

All 10 industry groups in the S. P. index fell. Energy and financial companies each lost 2 percent.

The nation’s biggest banks declined 2 percent or more, after a speech by a Federal Reserve governor on Friday indicating that banks may be required to set aside more cash to cover potential losses. If the proposal were to take effect, banks would be left with less money to lend, which could hurt earnings. Citigroup and Bank of America each lost about 4 percent, and JPMorgan Chase shares dropped 2.5 percent.

Airline stocks fell after an industry group cut its profit estimates for this year by half. The group blamed disasters in Japan, unrest in the Middle East and higher fuel prices. Delta Air Lines and AMR, the parent company of American Airlines, each lost more than 3 percent.

Investors also remained focused on the grim unemployment report released last Friday, which sent stocks sharply lower that day.

“Wall Street came back, quickly and very strongly, at a time when the populace was still weak in terms of low job growth and low wage growth,” said Daniel Penrod, a senior industry analyst at California Credit Union League. “That appeared to be overly optimistic.”

The Labor Department reported that employers added only 54,000 new workers in May. The unemployment rate inched up to 9.1 percent from 9 percent.

Pending regulation and lawsuits also affected some individual companies. Lorillard, the tobacco company, fell 7 percent, the most of any company in the S. P. 500 index. Investors are concerned that the Food and Drug Administration could ban menthol cigarettes. The company makes the most popular menthol cigarette, Newport.

The oil field services company Halliburton fell 4.5 percent after the Supreme Court ruled that shareholders could pursue a class-action lawsuit that claimed the company had inflated its stock price.

Interest rates were steady. The Treasury’s benchmark 10-year note fell 3/32, to 101 3/32, and the yield was 3 percent, up from 2.99 percent late Friday.

Article source: http://feeds.nytimes.com/click.phdo?i=595baa2f38c0224e1f5a4708d505ac04

Filed Under: Economy News Tagged With: american airlines, jpmorgan chase, low job

Bucks: Person-to-Person Payments Get Easier at Big Banks

May 26, 2011 by NewsMaker Leave a Comment

Three of the nation’s biggest banks introduced a service that will enable their customers to move money from their checking accounts using only an e-mail address or a mobile phone number.

Bank of America, JPMorgan Chase and Wells Fargo already introduced the transfer service, called clearXchange, in Arizona, and it will roll out in more markets in coming months. It will be available nationwide within a year.

The new service will improve upon banks’ existing person-to-person payment services, and it will compete directly with PayPal, which has shuttled money between consumers for years.

But the banks claim that their new service will be more convenient because it cuts out the middle man: PayPal isn’t a bank, so you need to fund your account with money from a checking or other account. With the banks’ service, the money will be ferried directly from your checking account to the person you want to pay. And it doesn’t require you to dig around for a routing or other account number, as some services require.

“The key thing here is that you don’t have to set up any additional accounts,” said Mike Kennedy, head of payments strategy at Wells Fargo and chairman of clearXchange. “People have a primary savings and checking account with their institution and that is what they want to transact out of.”

The new service should save consumers time — though paper checks and cash still work just fine. But it’s unclear how much, if anything, it will cost. Pricing is up to each participating bank. If banks do charge for the service, you’ll have to figure out if the convenience factor makes it worthwhile.

So how will it work? Let’s say you want to pay your friend back for dinner. If you both bank at any of the institutions in the network, you can reimburse your friend in a couple of ways. You can do it on the spot with your cellphone by accessing your bank’s mobile application or mobile banking site. Or, you can do it from your bank’s Web site on your computer.

Either way, you would then enter their name, mobile phone number or e-mail address, and the amount you want to transfer. There’s also an optional “memo” field to note what the payment is for.

After you hit send, the recipient will then get an e-mail or text message that alerts them of your payment with instructions on how to make sure it lands in the correct account. The first time they use the service, they will need to register their e-mail or phone number so it’s associated with their account.

That raised several concerns in my mind: What happens if you mistype your buddy’s e-mail address or mobile phone number and the wrong person gets the message – will they be able to retrieve your money instead? Or what if someone hacks into your e-mail account and finds the note that someone wants to send you $200?

In all of those scenarios, bank executives said the potential thief would need to have your online banking user name and password. If someone did manage to break into your online banking account, they could conceivably send your money to their own account. That’s not a new threat though. If a fraud were to occur, the banks said they would refund the person sending the money as soon as possible.

Many banks already offer person-to-person payment services. At ING Direct, for instance, you can send money from your phone or your computer using the person’s name, e-mail address and the last four digits of their bank account number; you can save their information on a drop down menu for future payments. (ING customers with iPhones can also transfer money to one another by entering the amount in the bank’s mobile app and “bumping” their phones).

But the banks that are part of the new exchange argue that their service makes the process even easier, for both senders and recipients. For instance, recipients in many existing services would need to enter their routing number on the bank site of the person sending them money. In the clearXchange system, they can retrieve their money using their own bank.

The exchange hopes to lure more institutions to its service – it’s already discussing those possibilities with other big banks – which would increase the population of people who can transfer money this way. And eventually, the banks said they plan to offer the same service to customers who want to send money outside of the network.

Would you use the new service? And would you pay for it?

Article source: http://feeds.nytimes.com/click.phdo?i=3f6f0c70389033306e4488e63a9b6243

Filed Under: Your Money Tagged With: e mail address, jpmorgan chase, paypal

Stocks and Bonds: U.S. Stocks Tumble as Concern Over Europe’s Debt Crisis Heightens

May 24, 2011 by NewsMaker Leave a Comment

Treasury prices and the dollar rose. Asian and European shares were lower after developments in Greece, Spain and Italy refocused attention on the euro zone’s fiscal uncertainty. Manufacturing statistics released by Germany and China were softer than forecast, raising the prospect of slower growth in Europe and in China, which has the world’s second-largest economy, and unsettling investors.

“It is a bit of a risk-off environment right now,” said Eric Viloria, senior technical strategist for Forex.com. “Markets are risk-averse, and the U.S. dollar is benefiting.”

The Dow Jones industrial average fell 130.78 points, or 1.05 percent, to 12,381.26, its lowest close since April 19. The Standard Poor’s 500-stock index was down 15.90 points, or 1.19 percent, at 1,317.37. The Nasdaq was down 44.42 points, or 1.58 percent, at 2,758.90

Materials, energy, industrials, utilities, financials and information technology tumbled by about 1 percent.

Caterpillar fell about 2.34 percent, to $101.89, and General Electric was 1.17 percent lower at $19.39. Energy stocks tumbled, with Halliburton falling 2.16 percent, to $46.16, Exxon Mobil down 1.1 percent at $80.67, and Schlumberger down 1.7 percent at $82.08.

Citigroup was more than 2 percent lower at $40.16, while Bank of America was lower by 1.38 percent at $11.42. JPMorgan Chase fell more than 1.3 percent to $42.55.

In Asia, the Nikkei index fell by more than 1.5 percent and the Hang Seng was down by just over 2 percent. The Shanghai index was lower by 2.9 percent.

In Europe, the CAC 40 closed down by 2.1 percent, the DAX in Germany was 2 percent lower, and the FTSE ended the day down by 1.9 percent.

Analysts said recent news from Europe had not instilled confidence in the Continent’s ability to handle its fiscal challenges. Last week, Fitch Ratings downgraded Greece’s credit ratings by three levels to B+, a rating that is below investment grade. Standard Poor’s lowered its outlook on Italy’s debt to negative from stable over the weekend, citing a weaker outlook for growth and lower prospects for the country’s ability to trim its debt.

And Spain made headlines after its Socialist Party lost on Sunday in regional and municipal elections as tens of thousands of Spanish protesters, their anger partly fueled by the debt crisis and joblessness, are trying to force an overhaul of the political system.

Declines in Asia’s markets followed the HSBC preliminary purchasing managers’ index reading, a gauge of the manufacturing sector activity, for China, which fell to a 10-month low of 51.1 in May, according to news agencies, signaling a slowdown in expansion. Still, the Chinese government is poised to continue fiscal tightening. A similar gauge for Germany dropped to 54.9 in May, below forecasts.

The financial services and valuations company, Markit, said on Monday that its manufacturing P.M.I. for the euro zone was at a seven-month low at 54.8 in May, the sharpest slowdown since just after the collapse of Lehman Brothers in 2008, according to Chris Williamson, the chief economist.

While the numbers could have been affected by seasonal factors like the timing of Easter this year or by supply chain disruptions from the disasters in Japan, they show a “more fundamental slowing in the pace of economic growth,” he said in a statement.

Bruce McCain, the chief investment strategist of Key Private Bank, said the signs of weaker economic activity in China were counterbalanced by high inflation, with the possibility that they would have to continue to raise rates.

In Europe, he added, “not only are they again grappling with the sovereign debt issue, but inflation remains uncomfortably high and they seem determined to raise rates again.”

Treasury prices rose on Monday. The Treasury’s benchmark 10-year note rose 5/32, to 99 31/32 , and the yield fell to 3.13 percent from 3.15 percent late Friday. The yield has fallen by more than 40 basis points in a little more than a month.

Concerns over Europe reawakened the potential for oil demand to decline, causing crude prices on Monday to slip.

The dollar was higher against a range of currencies, with the euro falling below $1.40.

“Certainly while there is concern about the dollar’s secular decline we have to be encouraged that it is still seen as a strong currency,” said Colleen Supran, a portfolio manager with Bingham, Osborn Scarborough, which is based in San Francisco.

Article source: http://feeds.nytimes.com/click.phdo?i=527f473dde60be9d1aa82c6940a63b01

Filed Under: Economy News Tagged With: bank of america, jpmorgan chase, stocks and bonds

DealBook: JPMorgan Profit Rises 67%, but Bad Loans Persist

April 14, 2011 by NewsMaker Leave a Comment

Saul Loeb/Agence France-Presse — Getty Images Jamie Dimon, JPMorgan Chase’s chief.

8:18 p.m. | Updated

Even as JPMorgan Chase reported a 67 percent increase in first-quarter earnings on Wednesday, the problems in its troubled home lending unit kept piling up.

Bad mortgages and home equity loans cost the bank $1 billion in the first quarter, bringing total residential real estate losses since the financial crisis began to more than $20 billion.

To make matters worse, bank officials said they expected these high loss levels to persist, and acknowledged that new mortgage lending had stalled. Mortgage originations fell 29 percent from the fourth quarter, as higher rates deflated the refinancing boom that propped up the business for much of 2010.

Still, strong results from JPMorgan’s investment bank as well as the release of $2 billion that had been set aside earlier to cover credit card losses offset the mortgage mess and contributed to a record $5.6 billion quarterly profit.

As the first of the major banks to report their first quarter results, JPMorgan is closely watched as a bellwether for both Wall Street and the broader banking industry. Analysts suggested there was an increasing divergence in performance between Wall Street activities like trading and investment banking and more traditional retail lending. Bank of America, Wells Fargo, Citigroup and other big financial institutions face a similar challenge as they report earnings this month.

“There just is not enough economic strength to fuel loan growth,” David Trone, a banking analyst at JMP Securities, said. “That traditional part of banking is just very stagnant.”

Revenue fell 8 percent to $25.8 billion, underscoring the challenge banks face as they try to expand their underlying businesses amid a still-sluggish economy and new government rules that restrict lucrative sources of income like overdraft fees.

Then there is the cleanup bill for the foreclosure crisis. On Wednesday afternoon, JPMorgan’s mortgage unit, Chase Home Lending, and 13 other servicers took a major step in putting their troubles behind them when they struck a deal with federal regulators to make sweeping changes to their loan servicing operations.

Chase Home Lending plans to add 2,000 to 3,000 employees, create a separate unit to handle troubled mortgages and strengthen its internal controls. These moves forced the bank to take a one-time $1.1 billion charge in the first quarter to reflect the higher operating costs resulting from the new mortgage practices.

The company also recently announced several prominent management changes at Chase Home Lending.

“We are adding a lot of intensive manpower and talent to fix the problems of the past,” Jamie Dimon, JPMorgan’s chairman and chief executive, said on a conference call with reporters.

The moves are aimed at addressing the problems flagged by regulators after a public uproar over foreclosure practices last fall. JPMorgan, Bank of America, GMAC, Wells Fargo and other big lenders were forced to review tens of thousands of mortgage files after revelations of paperwork mistakes and other errors. In some cases, those institutions were also forced to temporarily halt foreclosures across the country.

The settlement with federal regulators still leaves open the possibility of fines and other legal actions. But it does not end separate settlement talks with state attorneys general, who have been pressing the banks to expand their mortgage modification programs and to pay at least $20 billion in penalties.

Nor does Wednesday’s agreement with federal regulators address a flurry of lawsuits from private investors seeking to recover losses on troubled loans and securities the bank sold.

Although there has been little progress in the negotiations with either the attorneys general or investors, the bank has been setting aside money for any eventual deals. JPMorgan put aside an additional $650 million in the first quarter to cover these potential legal claims and other foreclosure-related costs, after increasing its litigation reserves by more than $6.7 billion in 2010.

The bank also added $420 million to a separate reserve to cover expected losses stemming from the repurchase of faulty loans that it had sold to Fannie Mae and Freddie Mac, the government-controlled housing finance companies. Previously, it had set aside more than $5.6 billion for these claims.

“I think a good global settlement will be good for everybody,” Mr. Dimon said. “Keeping this mess going on is not good for anybody.”

The number of mortgage troubles overshadowed an otherwise solid quarter for most of the bank’s other businesses. JPMorgan’s quarterly profit of $5.6 billion, or $1.28 a share, exceeded analysts’ estimates and was a sharp increase over the $3.3 billion, or 74 cents a share, that the company earned a year earlier.

Indeed, JPMorgan’s investment bank posted a $2.4 billion profit, down 4 percent from a year ago, when unusually strong trading results helped fuel a record profit.

Investment banking fees were up 23 percent, as JPMorgan benefited from dozens of new deals, including ATT’s $39 billion planned acquisition of T-Mobile USA. Fixed income trading revenue was up 33 percent from the prior year, while revenue from its equities group fell 8 percent on lower trading volumes.

The corporate bank, which provides loans to mid-size companies, reported earnings of $546 million, up 3 percent from the period a year earlier. Bank officials pointed to a marked improvement in the number of mid-size businesses seeking credit.

The credit card division reported a $1.3 billion profit, up 3 percent from the period a year earlier. But much of that gain was a result of the bank’s decision to release about $2 billion it had previously set aside to cover losses.

This post has been revised to reflect the following correction:

Correction: April 13, 2011

A previous version of the story had an incorrect share price.

Article source: http://feeds.nytimes.com/click.phdo?i=0b8277959083ed1d1b2c29479d471f63

Filed Under: Business News Tagged With: getty images, jmp securities, jpmorgan chase