The Recap: JPMorgan Chase takes a record $13 billion hit

November 23, 2013

After months of tense negotiations, the Justice Department finalized a record $13 billion settlement with JPMorgan Chase to resolve allegations that the bank knowingly sold faulty mortgage securities that contributed to the financial crisis. ¶ This marks the largest penalty ever levied against a single company and represents a colossal win for the government after years of public criticism over its struggle to hold Wall Street accountable for crisis-era sins. It is also a tremendous black eye for a bank once lauded as the nation’s strongest financial institution to emerge from the crisis. ¶ The agreement puts to rest multiple state and federal probes into the JPMorgan’s sale of mortgage securities to investors. But it leaves the bank and its executives at risk of criminal prosecution for fraud.

Business

General Motors is poised to shake off a half-decade of U.S. government oversight next month, underscoring the comeback of a once-moribund industry and gaining leeway over a $26.8 billion cash pile. The Treasury plans to sell its last 31.1 million GM common shares by year’s end, depending on market conditions.

Ally Financial repaid the Treasury $5.9 billion in its latest installment as it moves to get out from government ownership.

Investor Bill Ackman said he will take his Herbalife bet “to the end of the earth,” even if it means losing as much as $500 million on the investment. Herbalife is taking too long to produce reaudits of its books, Ackman said, maintaining his allegation that Herbalife operates an illegal pyramid scheme. Herbalife has denied Ackman’s claims.

Cash America, a major payday lender, reached a $19 million settlement with the government over claims of robo-signing.

MF Global must pay back $1.21 billion to ensure customers recover the losses sustained when the brokerage firm imploded in 2011. The restitution follows a complaint filed by the Commodity Futures Trading Commission alleging that the firm unlawfully used customer funds for its needs. With $41 billion in assets, MF Global was the eighth-largest corporate bankruptcy in U.S. history.

The National Labor Relations Board said it authorized legal action against Wal-Mart Stores for allegedly retaliating against workers who participated in strikes against the company over low pay. At a Wal-Mart store in Ohio, needy employees received Thanksgiving food donations from fellow workers.

Tribune Co. is cutting about 700 jobs as part of a restructuring of its newspaper business. In addition to the Chicago Tribune, the company owns the Baltimore Sun, Los Angeles Times and other daily newspapers.

Shareholders of AT&T and Verizon are seeking more details related to the telecom giants’ sharing of customer information with governments, showing that investors are starting to push back over the role of communications companies in spying operations. Activists include Trillium Asset Management of Boston and the $161 billion New York State Common Retirement Fund.

North American and European retailers said that they agreed on fire and safety inspection standards for up to 2,000 factories in Bangladesh that supply such retailers as Gap, Wal-Mart and H&M.

A Johnson & Johnson unit has agreed to pay an estimated $2.5 billion to settle thousands of lawsuits from individuals allegedly injured by the company’s artificial hip implants.

Yahoo boosted its stock-buyback plan by $5 billion, returning more cash to shareholders as chief executive Marissa Mayer seeks to revive growth at the largest U.S. Internet portal.

Google Chairman Eric Schmidt said encrypting Internet traffic may prevent governments from censoring their populations’ communications within a decade. He described the coming of a “network age” in which Internet users communicate and organize socially through private channels shielded by encryption, which scrambles data with a mathematical formula that can be decoded only with a special digital key.

Apple can seek a ban on sales of some Samsung Electronics products found to infringe its patents on smartphone features after winning a U.S. appeals court ruling. The patents cover features that Apple says make its iPhone unique, such as multitouch technology. The ruling gives Apple another chance to curb sales of its top competitor in the $279.9 billion market for smartphones.

Best Buy is cutting prices for the holiday season to thwart fierce competition from Wal-Mart and other discount and online rivals, a move that it warns will hurt margins for the current quarter.

Deals

Nokia shareholders overwhelmingly approved the sale of the ailing cellphone division and a portfolio of patents and services to Microsoft for $7.2 billion. The vote came at the end of an extraordinary five-hour meeting of shareholders called by the Finnish phone maker. The approval represented 99.5 percent of shares owned by 3,900 voters at the meeting.

Earnings

Home Depot’s third-quarter profit climbed 43 percent, to $1.35 billion, as sales at its U.S. stores strengthened amid improvement in the housing market.

J.C. Penney ’s quarterly loss widened to $489 million, from $123 million a year ago. Even so, the retailer showed progress in its attempted turnaround as revenue declines slowed in the quarter and the department store said sales and profit margins would improve during the holiday shopping season.

Lowe’s profit increased 26 percent to $499 million, and the home-improvement retailer raised its outlook for the year.

Target’s third-quarter profit dropped 47 percent, to $341 million, stung by a pullback from U.S. shoppers and costs related to its expansion into Canada, where it is adding more than 100 stores.

Economy

Fed chief Ben S. Bernanke reaffirmed his view that the central bank’s stimulus program is working. He also outlined what U.S. economic policy might look like when he leaves office next year.

The Senate banking committee advanced Janet Yellen’s nomination to lead the Federal Reserve, setting up a final vote in the full Senate after lawmakers return from a two-week Thanksgiving break.

Yellen defended the central bank’s bond purchases in a letter to a U.S. senator, saying they boost economic growth and provide benefits that exceed the risks.

Sales of existing homes fell 3.2 percent last month from September to a seasonally adjusted annual pace of 5.12 million, the slowest since June. Higher mortgage rates and a shortage of homes on the market contributed to the drop-off.

Retail sales increased 0.4 percent in October after being flat the previous month.

Washington

Senate Democrats, led by Harry M. Reid (D-Nev.), eliminated filibusters for most nominations by presidents, a power play they said was necessary to fix a broken system but one that Republicans said will only rupture it further.

The FCC said it will consider rules that would allow air travelers to make calls and use their cellular data plans once a plane reaches 10,000 feet. Restrictions would remain for takeoffs and landings.

Health policy researchers are describing something that they call a “November surge” in private coverage through the new health insurance marketplaces mandated by the Affordable Care Act: After anemic enrollment in October, states have seen a much faster pace of sign-ups in November, with 200,000 enrolled by midmonth.

Transitions

The Dow Jones industrial average closed above 16,000 for the first time Thursday as encouraging news on the job market pushed stocks higher. The Dow has been propelled higher by a combination of solid corporate earnings, a steadily strengthening economy and easy-money policies from the Federal Reserve.

Jordan is the most expensive place in the world to buy an iPhone; a phone goes for $940 before taxes. Income levels in Jordan help ease the pain, though.The place where iPhones are most expensive relative to incomes? India, where it retails for $759 before taxes and accounts for more than 22 percent of per-capita GDP.

Also in India, the cost of onions has soared, sparking anger and forcing people to change their eating habits.

— From news services and staff reports

$49.04
Turkey dinner for 10

The average Thanksgiving feast is 44 cents less than a year ago, according to the American Farm Bureau Federation, a trade group. Last year’s tally of $49.48 was the highest in the 28 years. Cheaper turkeys pulled down most of the cost — a 16-pound bird costs $21.76, about 50 cents lower than last year. But sweet potatoes, whipping cream and pumpkin-pie mix are a bit more.

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