Why the Big Four Banks Are Big-Time Fence Sitting Today

With second-quarter earnings starting to fade into a distant but generally pleasant memory for bank investors, and with no big market news or developments breaking on either a national or global scale, Big Four bank stocks are lackadaisical and meandering this morning. There are a few stories of note worth relating, though.

More than a month after the start of what was to be the final courtroom showdown between Bank of America (NYSE: BAC  ) and American International Group (NYSE: AIG  ) over $8.5 billion in soured mortgage-backed securities, very little has happened. The trial was put on temporary hold due to scheduling conflicts on the part of presiding judge Barbara Kapnick, and has recently resumed.

Since then, AIG tried to get B of A to settle out of court -- at the suggestion of Kapnick herself -- but B of A refused. There's obviously more to come on this, but this shutdown of AIG's offer to settle out of court potentially signals confidence in the superbank's case that the original settlement should hold. Who knows, maybe Kapnick herself was trying to send AIG a message to take the money and run.

With tens of billions of dollars possibly at stake for B of A, this is some glimmer of hope that the already accounted for $8.5 billion is all the bank will be required to cough up in this leftover scuffle from the financial crisis.

JPMorgan Chase (NYSE: JPM  ) is reportedly near a settlement for charges that it manipulated energy markets in California and the Midwest. It's estimated that the payout will be $410 million. While an almost half a billion dollar fine for the nation's biggest bank can hardly be called a win, it is significant that the bank's commodities chief, Blythe Masters, probably won't be officially sanctioned as part of the agreement with the Federal Energy Regulatory Commission.  

Overall, after opening initially up, shares in B of A, JPMorgan, Citigroup (NYSE: C  ) , and Wells Fargo (NYSE: WFC  ) moved quickly lower. And three hours into trading, each seems to be having a hard time making up its mind whether to stay up, stay down, or just stay put: roughly paralleling the movements of the market's three major indices today. Call it the post-earnings, no-news blues. 

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Editor's note: A previous version of this article noted the trail between AIG and Bank of America had not yet resumed, when in fact it has.

 


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  • Report this Comment On July 23, 2013, at 2:07 PM, siferdst wrote:

    On the contrary, the case that you mention resumed about 2 weeks ago, with a significant amount testimony taking place. The hearing is scheduled to go through the end of this month.

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