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Yes, a single day can make a big difference, particularly in the world of banking. Yesterday, the broader market was pumped by news that the Fed would not, in contrast to broad expectations, trim quantitative easing, (At least, not yet.) That was happy news for the many financials benefiting from the lift that the program has given to certain types of debt securities. Consequently, the stocks of most of those players rose strongly, in concert with the Dow.
But then a bomb hit the banking sector. The explosive in question was the announcement of JPMorgan Chase's (NYSE: JPM ) settlement with a gang of financial regulators over the London Whale scandal that rocked the financial world last year. The bank will have to cough up roughly $920 million for causing the ruckus, and it's suffered a blow to its pride by having to publicly swallow responsibility for it as part of the settlement.
CEO Jamie Dimon, a man not particularly renowned for modesty and humility, was quoted in the bank's press release on the matter as saying that, "We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them."
As if to further emphasize that point, Morgan shut the door on a different problem by agreeing to a consent order with another two regulators (Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, for those who are losing track of the many oversight bodies unhappy with the firm). The pair had accused the bank of engaging in chicanery by enrolling credit card customers in additional paid services without their consent.
The company will pay $80 million to the regulatory tag team in order to settle the matter, on top of the $309 million it's already refunded to 2.1 million affected customers. And the bank has pledged to fully exit the services in question by the end of this year. To no one's shock or surprise, Morgan is the big bank laggard of the day. Its stock is trailing the Dow substantially at the moment.
At least it's got company in the bad-news department. Wells Fargo (NYSE: WFC ) is going to line up a new round of job cuts in its mortgage division, to the tune of 1,800 employees. That's in addition to the 3,000 in total announced earlier this quarter. Since the company is far and away the nation's top housing lender, and derives much of its revenue from the activity, that news isn't sitting well with investors.
Witness what happened last week to Citigroup (NYSE: C ) stock following its news that it would let go of a mere 120 workers in its residential real estate division. Every major bank -- and many a minor player -- is well involved in the mortgage space. This is true for Citi and even Bank of America, two institutions far more identified with other aspects of finance. Like Wells, both look set to lose today's race against the Dow.
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