Money Minute: Big Banks Ring Up Big Profits; Mortgage Rules Get Stricter

Too big to fail and getting bigger.

The nation's big banks had their best year in 2013 since before the financial crisis. Thomson Reuters estimates the six biggest banks will report a combined profit of $73 billion. That's up 22 percent from the year before. JPMorgan Chase (JPM) and Wells Fargo (WFC) report earnings next Tuesday. Citigroup (C), Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) all report later in the week.

bank profits
Sue Ogrocki/AP
The New York Times says the huge profits could allow those and other big banks pay up to $50 billion to settle charges arising from their role in the mortgage crisis. If that happens, it could benefit some homeowners by reducing the size of their monthly loan payments.

Meanwhile, new rules take effect today designed to protect consumers against the risky lending practices that led to the housing crisis. The intent is to make sure borrowers can afford to make the payments on the mortgages they take out.

The Dow Jones industrial average (^DJI) fell 18 points Thursday, and even though it may seem that the market has had a rough ride so far this year, the Dow is down less than 1 percent. The Nasdaq composite (^IXIC) fell 9 points and the Standard & Poor's 500 index (^GPSC) was virtually flat for the second day in a row.

A generation ago, Sears and J.C. Penney were two of the most popular retailers around. But they've both fallen on hard times -- with consumers and with investors. Sears (SHLD) reports a key measure of sales over the holidays tumbled by 7 percent from a year ago, and it now expects a big loss. As for J.C. Penney (JCP), it barely avoided bankruptcy last year, but hasn't been able to reestablish a positive identify with shoppers. Over the past year, Penney's stock has fallen nearly 60 percent, and Sears is likely to take a big hit Friday.

Analysts say many retailers marked down prices so much during the holiday season that they cut deeply into potential profits.

-Produced by Drew Trachtenberg.

Bank Scandals
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Money Minute: Big Banks Ring Up Big Profits; Mortgage Rules Get Stricter

Swiss bank UBS blames a rogue trader at its London office for a $2.3 billion loss that is Britain's biggest-ever fraud at a bank. Kweku Adoboli, the 32 year old trader, is sentenced to seven years in prison. Britain's financial regulator fines UBS after finding its internal controls were inadequate and allowed Adoboli, a relatively inexperienced trader, to make vast and risky bets.

The case has echoes of Societe Generale trader Jerome Kerviel, who hid €5 billion in losses. Kerviel said SocGen turned a blind eye to his colossal positions in late 2007 and early 2008 as long as they made money for the bank.

Wells Fargo Bank agrees to pay at least $175 million to settle U.S. Department of Justice accusations that it discriminated against qualified African-American and Hispanic borrowers from 2004 through 2009. The department said the bank's discriminatory lending practices resulted in more than 34,000 African-American and Hispanic borrowers in 36 states and the District of Columbia paying higher rates for loans solely because of the color of their skin.

JPMorgan Chase announces a loss of $2 billion from a trade that was meant to protect the bank if the global economy sharply deteriorated. Later, losses from the bad trade swell to nearly $6 billion and shave much more from the company's stock market value. The episode heightens concerns that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis.

Barclays agrees to pay more than $450 million to U.S. and British regulators to settle charges that it attempted to manipulate a global benchmark interest rate known as LIBOR. The rate indirectly affect the costs of hundreds of trillions of dollars in loans that people pay when they get loans to go to college, purchase a car or buy a house. Numerous other banks are under investigation for similar violations.

UBS pays $1.5 billion to settle LIBOR manipulation charges with regulators in the U.S., Britain and Switzerland. The bank says some of its employees tried to rig LIBOR in several currencies.

An independent review finds Kabul Bank spirited some $861 million out of war-torn Afghanistan in a massive fraud based on fake loans to 19 individuals and companies. A bailout of the bank costs the equivalent of 5 percent of Afghanistan's gross domestic product, making it one of world's largest banking failures ever.

HSBC, Europe's largest bank, says it's paying $1.9 billion in penalties to settle a U.S. money laundering probe. The investigation into HSBC focused on the transfer of billions of dollars on behalf of nations such as Iran and the transfer of money from Mexican drug cartels. The bank said its anti-laundering measures were inadequate and said it was "profoundly sorry."

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