Blythe Masters Appointed to Regulatory Affairs In Addition To Rolling the Dice at JPM

Can a pit boss also be a good casino host?

"Blythe Masters, a widely known figure in the securities industry who oversees JPMorgan's commodities businesses, has been given the additional assignment of running regulatory affairs for the corporate and investment bank under her boss James Staley.

"Having her in this role will be critical to helping us drive the business's strategy in light of changing regulations," Cavanagh and Pinto wrote in the memo.

In her regulatory role, Masters will report to Barry Zubrow, the former chief risk officer who came under the microscope after the bank in early summer reported an expected $6 billion trading loss. Zubrow has been head of the bank's corporate and regulatory affairs office since January."

It appears that Blythe Masters will be dual reporting to James Staley and Barry Zubrow.

Dual reporting is an interesting situation to be in.  It is generally a sign of an unresolved management conflict.

As you may recall, Mr. Zubrow was appointed the head of Regulatory Affairs in January 2012, after the London Whale breeched and then blew up on his watch as Chief Risk Officer, a position now held by a Mr. Hogan.

"John Hogan, who only became chief risk officer in JP Morgan Chase in January, will likely be facing some uncomfortable questions following the bank's revelation yesterday it had made $2bn in trading losses since the beginning of April. Hogan, 46, who previously been head of risk in the investment banking division, replaced Barry Zubrow as chief risk officer for the whole firm in January, when Zubrow took on the newly-created role of head of corporate and regulatory affairs."

Generally people appointed to Regulatory Affairs have some serious background as a regulator. I suspect that as one of the chief risk centers and derivatives jugglers at JPM, Blythe Masters role will be to assess and manage the impact of any government changes in her highly volatile domain. It smells like it could be one of those top down corporate inititatives, generated in response to a crisis and a slide presentation by McKinsey and Company, that look good on flip charts but are useless and awkward in implementation. A trip to Liaison Land.

Or it could be the precursor of a fall from grace.

More change is coming I am sure.

Jamie's Blues

Gold Chart: The 'Cup' Has Formed As Confidence Continues to Erode

"A moment guessed-- then back behind the Fold
Immersed in Darkness, round the Drama rolled
Which, for the pleasure of Eternity,
He doth Himself contrive, enact, behold.

But if in vain, down on the stubborn floor
Of Earth, and up to Heaven's unopening Door,
You gaze Today, while You are You-- what of
Tomorrow, when You will be You, no more?

Omar Khayyám, Rubaiyat

Today's Fed statement confirmed that QE3 is here.

After some initial hesitation the markets shot higher, believing that the Fed would do 'whatever it takes' to bring down real unemployment and to protect the financial markets.

Given that most if not all of the stimulus provided by the Fed has gone to the top percent of the economy's participants, I am struggling with what has changed that will suddenly spread the wealth to the 99 percent. The trickle down theory? Oh please.

He is monetizing the wrong debt for the wrong people in the wrong ways.

Without reform, Bernanke can print until the dollars come home to roost, before he will meet any broad employment targets in this economic structure. Unless the wealthy start hiring people to push their wheelbarrows of money to the stores.

The country needs to find a backbone and act on reform. But like Achilles, it dithers on the beach. For what reasons we may never know for certain, until history has its say.

Gold and silver took off higher like scalded cats. The charts had predicted it but I did not believe it, at least not so quickly. But there it is.

Gold has completed a 'cup' on the daily chart.

Now we would need to see a nice 'handle' to go with it.

There certainly remains the possibility that the 'cup' could fail, and gold could fall back into its broad trading range. That would be manipulation, and it could continue to work for the time being. Modern money is a funny little magician that way. I don't think we have seen anything quite like it, even in some of the more famous manias.

Bonds are the mother of bubbles. But momma swings a big stick.

Here is a look at my 'shadow' chart on gold, that I keep in background to watch developing scenarios without having to engage in unnecessarily tedious redrawing of the published chart.

The 'rim' looks to be around 1770 to 1790.

If this works, the target for this formation would be 2000+ in the next two months or so.

There are larger patterns forming on the chart that call out higher targets.  As to where this ends, it ends when the economy is reformed and the median wage is healthy.

The chart situation in silver is similar, but the percentages are greater. The targets there would be roughly 43, and then 60+. This is by no means a top target.

One step at a time.  In the event of a liquidity panic or exogenous event the charts may defer.

Federal Reserve Statement

Release Date: September 13, 2012

For immediate release

Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.

Statement Regarding Transactions in Agency Mortgage-Backed Securities and Treasury Securities
September 13, 2012


On September 13, 2012, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to begin purchasing additional agency mortgage-backed securities (MBS) at a pace of $40 billion per month. The FOMC also directed the Desk to continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities as announced in June and to maintain its existing policy of reinvesting principal payments from the Federal Reserve’s holdings of agency debt and agency MBS in agency MBS.

The FOMC noted that these actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

Purchases of Agency MBS

The purchases of additional agency MBS will begin tomorrow, and are expected to total approximately $23 billion over the remainder of September. Going forward, details associated with the additional amount of MBS to be purchased each month will be announced on or around the last business day of the prior month.

Consistent with current practice, the planned amount of purchases associated with reinvestments of principal payments on holdings of agency securities that are anticipated to take place over each monthly period will be announced on or around the eighth business day of the prior month. The next monthly reinvestment purchase amount was also published today, and can be found here: http://www.newyorkfed.org/markets/ambs/ambs_schedule.html.

The Desk anticipates that the agency MBS purchases associated with both the additional asset purchases and the principal reinvestments will likely be concentrated in newly-issued agency MBS in the To-Be-Announced (TBA) market, although the Desk may purchase other agency MBS if market conditions warrant.

Consistent with current practices, all purchases of agency MBS will be conducted with the Federal Reserve’s primary dealers through a competitive bidding process and results will be published on the Federal Reserve Bank of New York’s website. The Desk will also continue to publish transaction prices for individual operations on a monthly basis.