Business and Finance

Three high-ranking executives at JPMorgan Chase are expected to leave their jobs this week after a trading blunder cost the bank $2 billion, The Wall Street Journal reported Sunday.

The Journal, citing people familiar with the situation, reported that one of the executives is Ina Drew, who for seven years has run the risk-management division at the bank responsible for the loss.

The other two identified by the newspaper are an executive in charge of the London desk that placed the trades and a managing director on that team. The bank did not immediately return a message from The Associated Press.

The $2 billion loss, disclosed on Thursday by CEO Jamie Dimon, has been an embarrassment for the bank and led lawmakers and critics of the banking industry to call for tougher regulation of Wall Street.

Drew, one of the highest-ranking women on Wall Street, is the bank’s chief investment officer. She was paid $15.5 million last year and almost $16 million the year before, according to a regulatory filing.

The Journal reported that Bruno Iksil, the JPMorgan trader identified as the “London whale” because of the giant bets he placed, was also likely to leave, but the paper reported that it was not clear when that would happen.

On Friday, investors shaved almost 10 percent off JPMorgan’s stock price. Dimon said in a TV interview aired Sunday that he was “dead wrong” when he dismissed concerns about the bank’s trading last month.

“We made a terrible, egregious mistake,” Dimon said in an interview that was taped Friday and aired on NBC’s “Meet the Press.” “There’s almost no excuse for it.”

Dimon said he did not know the extent of the problem when he said in April that the concerns were a “tempest in a teapot.”

The loss came in the past six weeks. Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.

Dimon said the bank is open to inquiries from regulators. He has also promised, in an email to the bank’s employees and in a conference call with stock analysts, to get to the bottom of what happened and learn from the mistake.

Dimon told NBC that he supported giving the government the authority to dismantle a failing big bank and wipe out shareholder equity. But he stressed that JPMorgan, the largest bank in the United States, is “very strong.”

A piece of financial regulation known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Dimon has said the trading involved in the $2 billion loss would not have fallen under the rule.

Rep. Barney Frank, D-Mass., told ABC’s “This Week” that he hopes the final version of the Volcker rule will prevent the type of trading that led to the massive loss at JPMorgan.

Dimon conceded to NBC that the bank “hurt ourselves and our credibility” and expects to “pay the price for that.” Asked what the price should be, Sen. Carl Levin, D-Mich., said that banks will lose their fight to weaken the rule.

“This was not a risk-reducing activity that they engaged in. This increased their risk,” Levin told NBC.

“So we’ve got to be very, very careful that the regulators here are not undermined by this huge effort to weaken the rule by putting in a huge loophole” that includes the trading involved in the JPMorgan loss, he said.

Addressing public anger toward Wall Street, Dimon said he wants a more equitable society and does not mind paying higher taxes. But he said attacking all of business is “very counterproductive.”

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Billionaire Warren Buffett says his company’s purchase of his hometown newspaper last year may not be the last one even though newspapers face significant challenges.

A Berkshire Hathaway shareholder questioned whether last year’s purchase of the Omaha World-Herald in Buffett’s hometown was a personal indulgence.

Buffett defends the deal and says he believes Berkshire will profit from its ownership of the Omaha World-Herald company and the Buffalo News. It’s just that the profits won’t be as good as they used to be guaranteed payday loan.

Buffett says newspapers are usually still the primary source of local information, and that’s an advantage in places where community is important.

Buffett acknowledges that newspapers face difficult competition from online news sources and have high costs, but says Berkshire’s newspaper deals should work out OK.

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The Obama administration’s top environmental official in the oil-rich South and Southwest region has resigned after Republicans targeted him over remarks made two years ago when he used the word “crucify” to describe how he would go after companies violating environmental laws.

In a letter to Environmental Protection Agency Administrator Lisa Jackson sent Sunday, Al Armendariz says he regrets his words and stresses that they do not reflect his work as administrator of the five-state region including Texas, New Mexico, Oklahoma, Arkansas and Louisiana. Armendariz, who holds a doctorate in environmental engineering, apologized last week for his remarks. A senior administration official, speaking on condition of anonymity because of the sensitivity of the subject, told The Associated Press that Armendariz has since received death threats. His resignation was effective Monday, when he informed his senior staff. Sam Coleman, a career official who led the agency’s response to Hurricane Katrina and served as Armendariz’ deputy, took over as acting regional administrator.

“I have come to the conclusion that my continued service will distract you and the agency from its important work,” Armendariz wrote in the letter, which was obtained by the AP.

Republicans in Congress had called for Armendariz’ firing, after Oklahoma Sen. James Inhofe highlighted the May 2010 speech last week as proof of what he refers to as EPA’s assault on energy, particularly the technique of hydraulic fracturing, or fracking.

At a town hall meeting in Washington on Friday, Jackson had said only that she would continue to review the case, calling Armendariz’ words “inflammatory” and “wrong”. President Barack Obama appointed Armendariz in November 2009, at the urging of Texas-based environmental groups. He is one of the few Latinos in senior leadership at the EPA.

The regional administrator’s words “don’t comport with either this administration’s policy on energy, our policy at EPA on environmental enforcement, nor do they comport with our record as well,” Jackson said.

The EPA, perhaps more than any other agency, has found itself in the GOP’s crosshairs over its regulation of the gases blamed for global warming, steps it has taken to limit air pollution from coal-fired power plants, and its increased regulation of fracking, which is responsible for a gas drilling boom. Republicans, including presidential contender Mitt Romney _ who has called for Jackson herself to be fired _ have blamed the agency for high gasoline prices and clamping down on American energy.

Armendariz, who was based in Texas, frequently found himself at odds with the state government and the oil and gas industry, which are often aligned.

The scientist and environmental activist had long been frustrated by the government’s inability to clean up Texas’ notoriously polluted air, and he had called the EPA broken and testified on behalf of activist groups about just how badly the federal and state environmental agencies had botched things guaranteed fast personal loans.

Environmentalists said Monday that it was Armendariz getting crucified for doing his job _ enforcing the law.

“He took bold steps that have been needed for decades to move our state forward,” said Ken Kramer, director of the Lone Star Chapter of the Sierra Club. “The only people who will celebrate his resignation are the polluters who continue to foul Texas air and the politicians who serve those special interests.”

Several disputed contamination cases in Texas in which Armendariz was involved have helped stoke environmental concerns over fracking, a technique in which oil and gas producers inject water, chemicals and sand underground at high pressures to fracture rock so gas can come out.

In one case cited by Republicans, the EPA issued an emergency order in 2010 _ an unprecedented action in Texas _ accusing Range Resources of contaminating an aquifer and giving it 48 hours to provide clean drinking water to residents. Armendariz said he went around the state agency that oversees drilling because it wasn’t responding quickly enough. The order later was withdrawn after a state court ruled evidence that fracking had caused the contamination had been falsified.

“He was flat wrong,” wrote more than two dozen lawmakers in a letter to Jackson sent Friday, calling for Armendariz’ firing. “There was no contamination and his office failed to conduct appropriate or adequate science to support his claims.” The EPA has faced similar criticism for its analysis of potential drinking water contamination from fracking in Pennsylvania and Wyoming.

Armendariz’ speech was made in Dish, a small town northwest of Dallas, where residents’ concerns over the environmental impacts of hydraulic fracturing helped put the issue on the national stage.

Testing, which was urged by the EPA, showed some groundwater contamination and elevated toxic air pollution after operators began using a new method _ a combination of hydraulic fracturing, or fracking, and horizontal drilling _ to extract once out-of-reach gas.

Referring to how the Romans once conquered villages in the Mediterranean, Armendariz said, “They’d go into a little Turkish town somewhere, they’d find the first five guys they saw and they’d crucify them.”

“And so you make examples out of people who are in this case not complying with the law,” he said.” Find people who are not complying with the law and you hit them as hard as you can and make examples of them.”

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Associated Press correspondent Angela K. Brown contributed reporting from Fort Worth, Texas.

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U.S. investors thought they were buying access to a stock-picking robot named “Marl.” Instead, they paid millions to teenage twin brothers in England who now face civil fraud charges for an alleged penny-stock swindle.

The robot didn’t exist.

The stocks picked were companies that paid hefty fees to Alexander and Thomas Hunter, just 16 when the alleged scheme began in 2007, the Securities and Exchange Commission said Friday. As stock prices jumped, the Hunters’ clients dumped their shares for a profit.

“While touting their supposed breakthrough investment technology on two websites, the Hunters were racking up fees as stock promoters through a third,” said Thomas Sporkin, chief of the SEC’s office of market intelligence, in a statement.

The SEC filed a civil suit against the Hunters, who are now 20, in U.S. District Court in Manhattan Friday.

Officials are asking the court to block the twins from the securities industry and order them to return the money they collected from investors. They are also seeking additional financial penalties.

It all began with a website called daytradingrobot.com, according to a narrative sketched out by the SEC.

The Hunters drew roughly 75,000 investors, who were promised stock tips generated by a sophisticated program. The investors, most of them in the United States, paid at least $1.2 million for newsletters revealing the robot’s insights and a “home version” of the robot software.

“The longer Marl is allowed to run on a computer … The More Advanced He Becomes!” one of the Hunters’ websites crowed, according to the SEC complaint. The Marl “home version” cost an additional $97. For that, investors got a program that grabbed ticker symbols fed in by the Hunters.

The twins collected an additional $1.9 million from companies seeking Marl’s endorsement, the SEC said. On the site equitypromoter.com, Thomas Hunter wrote that his websites attracted thousands of visitors each day, many of whom followed his investing recommendations.

“One email to this list of people rockets a stock price,” the website said, according to the SEC complaint.

In 2008, after they promoted a music publishing company called UOMO Media Inc., its share price doubled to 69 cents. Another round of promotion in 2009 lifted UOMO’s stock to $1.06. UOMO has not traded above a penny since September 2010.

For another promotion, Alexander Hunter purchased 21,000 shares for 16 cents, pumped the price up to 51 cents and sold the shares for a profit of less than $6,000. He videotaped the trading and used the footage to promote the newsletter, the SEC said.

Marl, the fictional robot’s name, was a combination of the names of its supposed creators: Michael Cohen and Carl Williamson. The Hunters claimed that Cohen had developed a Goldman Sachs trading model that generated more than $4 billion in annual trading profits.

Goldman never employed a Michael Cohen for that kind of work, the SEC said.

The Hunters’ skills apparently did not include computer programming. In 2007, they advertised for programmers who could make “a small software program which will appear to the user that once running it is analyzing thousands of penny stocks,” according to the SEC’s complaint.

In a note marked “IMPORTANT,” they added: “This software does not actually find stocks at all. . . . Basically this is almost a `fake’ piece of software and needs to simply appear advanced.”

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Stocks stormed higher this afternoon after promising signals about the profitability of U.S. companies and a strong debt auction by Spain. The Dow Jones industrial average headed for its biggest gain in a month.

European stocks had their best day in four months after Spain, the latest flashpoint in the European debt crisis, attracted strong investor interest at an auction of two-year debt.

Spain’s borrowing costs fell, as measured by the yields on Spanish bonds being traded in the market. Those yields had risen in recent days closer to levels that might force Spain to seek an international bailout.

“There’s no doubt that gave the market a second wind,” Anthony Chan, chief economist with J.P. Morgan Private Wealth management, said of the debt auction. “The market is reassessing and feeling a little better.”

The Dow Jones industrial average climbed more than 200 points and was up 204 at 13,125 just after 2:30 p.m. EDT. The Dow has had only one 200-point rise this year, a gain of 218 points on March 13.

Doreen Mogavero, a floor broker at the New York Stock Exchange, said people are eager for good news to trade on, and that can lead to sharp reactions in the indexes.

“This earnings season, expectations were low, and it’s going to be easy to beat that,” said Mogavero, the founder and CEO of Mogavero Lee & Co. Inc., a small brokerage of stocks for institutional clients.

They got that good news Tuesday: Coca-Cola said its first-quarter profit was better than Wall Street analysts had forecast. Goldman Sachs and Johnson & Johnson also posted strong results.

After nine straight quarters of growth, earnings for companies in the S&P 500 index were expected to be roughly flat for the first quarter. The slowdown was expected because of global threats from Europe and China and the difficulty of beating double-digit gains in recent quarters.

Markets have been encouraged so far by companies that beat analyst expectations, Chan said. But he warned against judging the quarter based on the small number of companies that have reported at this early stage.

Coke stock leapt 2.6 percent. Traders did not appear as impressed by Goldman Sachs and Johnson & Johnson. J&J was flat, while Goldman fell nearly a percent.

The Standard & Poor’s 500 index added 23 points to 1,392. All 10 of its industry groups were higher, led by information technology stocks.

The Nasdaq composite index soared 63 to 3,051, its best day in three weeks. Apple, the most valuable company in the world, rose 4.4 percent after five straight days of losses that wiped out about $60 billion in market value.

In Spain early Tuesday, the government sold more than €3.2 billion ($4.2 billion) in short-term debt, more than had been expected. The yield on Spain’s 10-year government bond fell to 5.86 percent from 6.10 percent early Monday, a sign of improving confidence in the country’s finances.

The cost of insuring Spanish debt against default pulled back from a record high, another sign that the auction reassured bond investors. The cost of insuring €10 million in Spanish debt for five years had soared to €522,000 per year on Monday. After Tuesday’s auction, it fell to €489,000.

Italy’s benchmark stock index rose 3.7 percent. France’s and Germany’s gained 2.7 percent. The broad STOXX 50 index of European shares rose 2 percent, the most since November.

In the United States, the rally followed a batch of mixed economic news. The number of permits requested by homebuilders for future projects reached a 3½-year high, an indication that the housing market might stop weighing down the economy. But builders broke ground on homes at a slower pace in March.

Factory output fell after four strong months of gains.

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Chinese state television has accused McDonald’s and French retrailer Carrefour of selling expired chicken products in separate incidents amid public anxiety in China over food safety.

McDonald’s Corp. and Carrefour Inc. issued public apologies Friday and said they were investigating the report by China Central Television.

The report Thursday said a McDonald’s restaurant in Beijing sold chicken wings 90 minutes after they were cooked while the company’s rules set a 30-minute limit. It said employees at a Carrefour store in the central city of Zhengzhou changed expiration dates on some chicken and sold regular chickens as more expensive free-range birds.

Food safety is a sensitive issue in China, which has been rocked by scandals ranging from deadly infant formula to chemical-laced pork and recycled restaurant oil.

“McDonald’s China attaches great importance to this. We will immediately investigate this isolated incident, resolutely deal with it earnestly and take concrete actions to apologize to consumers,” said a statement by the U low fee payday advance.S.-based restaurant chain on its website.

Employees who answered the phone at McDonald’s China headquarters in Shanghai said a spokeswoman was not available and declined to give any other details.

Carrefour, based in Paris, said it was setting up a team to investigate and would cooperate with Chinese authorities.

“We will further enhance the training and take measures to ensure to earnestly implement the relevant provisions to safeguard the interests of consumers,” said a statement on the website of Carrefour’s China unit.

Last year, U.S. retailer Walmart Stores Inc. was fined by authorities in the southwestern city and 13 stores were ordered to close for two weeks on charges of passing off regular pork as higher-priced organic meat.

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International demand for U.S. financial assets cooled in December as optimism Europe would resolve its debt crisis reduced the appeal of Treasuries as a safe haven.

Net buying of long-term equities, notes and bonds totaled $17.9 billion during the month, compared with net purchases of $61.3 billion the previous month, the Treasury Department said today in Washington. Including short-term securities such as stock swaps, foreigners bought a net $87.1 billion in December, compared with net buying of $42.9 billion the previous month.

The frightful images of a sinking Italian cruise ship have scared off some cruise passengers, at least temporarily, during the industry’s peak booking season.

Travel agents — who book more than two-thirds of cruise passengers worldwide — have been nervously watching bookings since the Costa Concordia, which is owned by Carnival Corp, ran aground on Jan. 13.

On Monday, they got a new reason to be nervous: bookings fell significantly for Miami-based Carnival Corp. following the Costa accident. Attention is now focused on Royal Caribbean Cruises Ltd., which reports earnings Thursday. An increase there could show that passengers are fleeing Carnival over safety fears. A decrease could indicate an overall distrust of all cruise lines.

Nearly 11 million Americans took a cruise last year, generating an estimated $14.5 billion in revenue for the industry, according to PhoCusWright, a travel research firm. Like the rest of the travel industry, cruise lines are still recovering from the recession. Several new megaships started sailing just as passengers struggling with finances decided to stay home. But 2012 was supposed to be a year of moderate growth.

Carnival won’t say exactly how much bookings have dropped, but it disclosed Monday that in the 12 days following the Concordia capsizing, there was a percent decline “in the midteens compared to the prior year.” Reservations hit a low on Jan. 16, the company said in its annual report filed with the SEC.

Carnival operates 101 ships under several brands including Costa, Carnival, Cunard, Holland America, Princess and Seabourn. It said reservations with the Costa line are “down significantly” but difficult to interpret because many Costa customers were rebooked on other ships because of the loss of the Concordia ship.

Unlike plane tickets or hotel rooms, which are mostly booked directly through the Internet, most cruises are sold by travel agents. That scattered sales approach makes it harder to gauge the impact of an accident like the Concordia.

“Who knows how many people … (were) on the fence and decided not to book?” said Michael Driscoll, editor of Cruise Week.

Barclay’s Capital noted that on Thursday, the Carnival line began offering promotional onboard credits of up to $200 for things like drinks and spa treatments.

“Despite this ad, which in normal circumstances would have stimulated strong call volume, calls remain down 10 (percent),” Barclay’s analyst Felicia R. Hendrix wrote in a note to investors.

A major unnamed online travel agent has also seen cruise call volume fall 30 percent, Hendrix said.

Hendrix also noted that cancellations in the U.S. are up 10 to 15 percent. That’s because savvy travelers are backing out of trips now in anticipation of getting the same cruise later for less.

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The number of Americans signing contracts to buy previously owned homes in December held near a 19-month high, showing the stabilization in the market that began in late 2011 will extend into the new year.

The index of pending home sales decreased 3.5 percent last month after jumping a combined 18 percent in October and November, figures from the National Association of Realtors showed today in Washington. It was the best back-to-back reading since a buyer tax credit boosted demand in early 2010.

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