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Financial Stocks Roundup: JPMorgan's London Whale Gets Beached, Shareholders Sue


Legg will buy back $155 million in shares and $1.25 billion in debt.

MINYANVILLE ORIGINAL Financial stocks are underperforming the market today. The Financial Select Sector SPDR ETF (XLF), which tracks selected bank stocks, declined by 1.39% while the Dow (^DJI) fell by 0.26%. The heaviest losses among the big banks were at Bank of America (BAC) and Citigroup (C), which fell 2.33% and 2.73%, respectively.

In the Federal Reserve's Open Markets Committee's April 24-25 minutes, which were released earlier today, "several" members of the committee favor additional easing if the economic recovery continues to falter. This is a semantic improvement over the "couple" of members that shared that view in the last minutes release, but still, the FOMC is not pursuing further easing policies, and overall there were very little changes in today's minutes release.

Legg Mason (LM) rose 8.4% today after announcing that it will buy back $155 million in shares, saying that it will buy back $1.25 billion in debt from KKR. The buyback will add to earnings starting next year, but Legg Mason will take a one-time charge between $70 million and $80 million in the first fiscal quarter to retire the notes early. Legg Mason's board also approved an additional $1 billion share repurchasing program.

Bruno Iksil, the London trader responsible for the $2 billion trading loss at JPMorgan Chase (JPM), was fired today. Ina Drew, the bank's Chief Investment Officer, had already resigned earlier this week. JPMorgan's shareholders voted to keep Jamie Dimon on in a dual role as chairman and CEO yesterday. Today, institutional shareholder Saratoga Advantage Trust is suing Dimon over the massive trading loss.

Dimon was an outspoken opponent of financial regulation who claimed that he and his team could manage risk on their own. The complaint cited his stance:

"The defendant Dimon went so far as to publicly and vigorously dispute that any investment safety regulation was necessary for financial institutions such as JPMorgan, because the company was purportedly so careful with its investments that no such regulations would be necessary," the complaint read. "All of the individual defendants knew this was simply not the case."

Twitter: @vincent_trivett
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