JPMorgan Chase & Co. (JPM): New MBSs and Dimon Targeted

JPMorgan Chase & Co. (NYSE:JPM) is making its share of headlines this week. And the news involves some controversy, both on the trading floor and in the board room. First of all, the bank is looking to be the first large bank to get back into a trading market that contributed to the 2008 financial meltdown, and CEO Jamie Dimon is being targeted by some stockholders about his role as chairman of the board of directors.

MORTGAGE IN-SECURITIES?

JPMorgan Chase & Co. (NYSE:JPM) is finalizing a request to begin selling some new mortgage-backed securities to get back into the market in hopes of increasing returns on its money thanks to loose money policy by the central bank which is encouraging more risks. The deal is due to close by the end of the month, though there has been some lively debate over contracts designed to protect investors should the securities not live up to promised quality – which was a a factor in the prior market collapse. Redwood Trust and Credit Suisse have been the only non-agency BMS issuers since the crash in 2008, with Redwood posting $3.5 billion of these securities in 2012 and launching a new $1 billion batch in January.

“There’s a pretty heavy dialogue going on right now between all participants in the market about what makes sense,” said Glenn Costello, an analyst at Kroll Bond Rating Agency. There are discussions about the length of guarantees and warranties about the quality of the loans – JPMorgan Chase & Co. (NYSE:JPM) is boasting its terms would range from 36 to 60 months.

Does 36 to 60 months represent not just the term of the warranties on the securities, but could it also be an over-under on CEO Jami Dimon’s tenure on the board? There are some pension funds who don’t think the bank can wait anywhere near that long.