Bernanke To Tell Congress Budget Needs Balancing

Today will be a day for sound bites. Ben Bernanke will be testifying before Congress on the budget. This will be the first time he goes before the new GOP-led Congress and he’s not terribly popular among many Republicans.

Of course, I don’t know exactly what Bernanke has to tell Congress about the budget that a simple calculator couldn’t tell. We’re spending a great deal more than what we take in. When we do that, the debt goes up. When we stop doing that, the debt also stops growing. Magic!

There’s been a lot of media coverage of the lawsuit brought by the Madoff trustees against JPMorgan Chase (JPM) for being complicit in the Ponzi scheme. I haven’t commented on it yet for two reasons. One is that the media coverage has been all one-way, focusing on the trustees’ complaint. The second is that this strongly sounds like a case of shifting the blame.

Trustees are people whom you trust. With Madoff, they failed miserably. I don’t see how that’s JPM’s fault. I’m not a lawyer so I don’t know exactly what fiduciary responsibilities a bank has, but Madoff’s aim was to mislead people. I don’t see how it’s JPM’s duty to sleuth him out.

The second-largest U.S. bank said court-appointed trustee Irving Picard is exceeding his power by suing in bankruptcy court, where a judge rather than a jury would decide the case.

“The trustee’s massive damages action against JPMorgan bears no resemblance to a typical lawsuit commenced by a bankruptcy trustee,” JPMorgan’s lawyers said in a court filing late Tuesday.

“In substance,” the bank said, “the trustee is trying to pursue an enormous back-door class action.”

A spokesman for Picard did not immediately respond to a request for a comment.

JPMorgan asked U.S. Bankruptcy Judge Burton Lifland, who oversees the Madoff proceedings, to move Picard’s lawsuit to federal district court, where it can demand a jury trial.

In court papers unsealed on February 3, Picard accused JPMorgan of having significant doubts about Madoff but silently acquiescing in his fraud, hoping to preserve its own investments and a more than 20-year business relationship.

JPMorgan has said it did not know about or assist in the estimated $65 billion Ponzi scheme.

The yield on the 10-year bond has risen in six of the last seven trading sessions. During that time, the yield has climbed from 3.33% on January 28 to 3.72% yesterday. Mirroring that move, the S&P 500 has rallied for six of the last seven days. The only decline was a slight one on February 2nd.

The trend continues to be out of bonds and into stocks.

Posted by on February 9th, 2011 at 10:52 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.