Happy Thursday afternoon, dear readers. More fun with links. Onward.
How rising rates crimp big banks' earnings
Nice explainer by Dakin Campbell of Bloomberg News about how "the revenue engine that generated $42 billion for three of the biggest U.S. banks in less than five years is beginning to sputter as some borrowing costs rise." It's a story about interest-rate swaps, and how banks make money from them. Except there's not as much money to be made this way now. Plus, "the amount of interest-rate risk banks have remains locked inside a black box," says Frank Partnoy, a University of San Diego law professor who used to structure derivatives at Morgan Stanley. So, as usual, we have no idea what goes on inside these too-big-to-fail enterprises, which is worth keeping in mind.
The Financial Times has a fine Lex column flagging a serious shortcoming in JPMorgan Chase & Co.'s financial disclosures. The bank doesn't report total litigation reserves, which is an important piece of information for a bank with as many legal problems as JPMorgan has. On the other hand, "releasing a total reserves number telegraphs to plaintiffs what one is willing to pay. The lawyers would presumably swarm. So JPMorgan investors are not going to be released from this conundrum anytime soon." Since investors can't understand JPMorgan's financial statements anyway, they might as well entertain themselves by clicking the second link in the above headline to see Jamie Dimon showing his ID to get through security at the Justice Department today. "You see? He's not a machine, he's a man!" (OK, that quote came from Rocky IV. Rocky's trainer said it about the huge Russian boxer Ivan Drago after Rocky cut him. But it works here, too.)
Mirrors on the ceiling, the pink champagne on ice
Matthew Lynn of Market Watch says "central banks have checked into Hotel California." In other words, they're stuck because they don't know how to get out of quantitative easing. Or, as the Eagles sang, you can check out anytime you like, but you can never leave. Cue double-neck guitar solo.
I guess it isn't evidence tampering if a judge is the one who orders the tampering?
In case you didn't know this, Bernie Madoff used to keep a 4-foot sculpture of a screw on his desk. So the judge overseeing the trial of five former Madoff employees told prosecutors not to show the sculpture to jurors in photographs, after defense lawyers complained it would be too crude. "Photoshop it out," U.S. District Judge Laura Taylor Swain said.
Mary Jo White said what about the SEC?
From a speech today by Mary Jo White, the Securities and Exchange Commission's new chairman: "Any objective and informed observer agrees that the SEC has an exceptional enforcement record. Its performance in the aftermath of the financial crisis was particularly impressive." And if you believe that, I have a bridge in the Southern District of New York to sell you.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)