A report in The New York Post suggests that Jamie Dimon, CEO of JPMorgan Chase (JPM), could be the logical replacement for current U.S. Treasury Secretary Timothy Geithner. The paper's sources indicate that "a number of policy makers have begun mentioning Dimon as a successor to Geithner, whose standing in Washington has suffered because of the country's high unemployment rate, the weakness of the dollar, the slow pace of the recovery and the government's mounting deficit."

Meanwhile, reports the Post, Dimon has emerged as one of the heroes of the financial crisis, "having navigated JPMorgan through the recession and being a go-to guy when Uncle Sam last year needed Wall Street's help during the collapses of Bear Stearns and Washington Mutual."

I don't think anyone could have had a positive reaction to Bank of America's (NYSE: BAC) third-quarter report, which was released on Friday. According to Bloomberg, management lost $1 billion in the past three months. Big ouch on that one. The financial institution bled 26 cents per diluted share. No earnings beat here, either. Wall Street sent shares down 4.6% by the end of yesterday's trading session.

The year-ago period was a happier time. Back then, Bank of America was rolling in the dough, posting a profit of 15 cents per share. What a difference 12 months makes. Looking at the nine-month record perhaps gives a small amount of comfort to shareholders. The company made 39 cents per diluted share. Of course, that doesn't sit too well next to the $1.09 per diluted share booked in the comparable period. But at least it's not a loss, know what I mean?

Tuesday morning greeted us with earnings from banking behemoth JPMorgan Chase (NYSE: JPM). The company said it earned $3.59 billion and that it nearly doubled the amount of money it saved for loan losses in the third quarter.

Breaking the results down into per-share earnings, JPM trounced the consensus estimate. The bank earned 82 cents per share, nearly double the expected 49 cents per share. Quarterly revenue increased to $26.62 billion from last year's same-quarter revenue of $14.74 billion.

When, for whatever reason, the Federal Reserve allowed banks to hold trillions of dollars in derivatives trades "off the books," they created the monster that took our financial system down.

Banks still hold trillions of dollars in derivatives off the books and the Fed is doing nothing about it. All the Fed wants to do is to demand that banks trade derivatives though a clearinghouse. That's a first step, but it doesn't remove the bag of losses that banks are still holding.

Investment bank JPMorgan Chase (NYSE: JPM) announced that second-quarter earnings checked in at 28 cents per share -- or $2.72 billion. A year ago, the financial giant reported earnings of $2 billion, or 53 cents per share. This year's quarterly earnings included a charge of 27 cents per share after JPM repaid the $25 billion invested by the government in the Troubled Asset Relief Program (TARP). There was also a 10-cent-per-share penalty thanks to a special assessment from the FDIC. Expectations called for earnings of four cents per share.

JPM also reported record first-half revenue, stemming from "solid" performances in its commercial banking, asset management, treasury and security services, and its retail banking. That said, JPM expects credit costs to remain elevated in the "foreseeable future." No doubt that these results will lend some bullish momentum to Wall Street today, as JPM's earnings reinforce the quarterly results from Goldman Sachs (NYSE: GS).

JPMorgan Chase & Co. (NYSE: JPM) and the U.S. government can't seem to agree what the bank's stock warrants are worth. As a result, JPM has asked the Treasury Department to auction off the warrants publicly in order to determine a fair market price.

The JPM warrants were issued to the government under the terms of its TARP loan. Bailed-out banks have the option to repurchase their own warrants, but only if they can strike a deal with the feds regarding a reasonable price. However, many firms have complained that the Treasury is seeking too high a price for the assets -- putting executives in the awkward position of claiming that their stock just isn't worth that much.

In choosing the auction alternative, JPMorgan is waiving its right to repurchase its own warrants (it could potentially bid through the public auction process, but company executives have decided not to do so). If the stock warrants are successfully auctioned off to a third party, their exercise would be dilutive to existing shareholders.

Moody's cut Sony Corp.'s (NYSE: SNE) long-term ratings from A2 to A3 today. Slowing growth, price declines, and a strong yen were given as the reasons.

The company expects a second consecutive year of losses and is getting ready to kick off a restructuring plan. Nonetheless, the credit rating agency doesn't expect the Japanese electronics firm to overcome the effects of the global financial crisis -- especially for high-end, high-margin products.

It is being reported today in the Business Journal that the safest bank in the United States is Wells Fargo & Company (NYSE: WFC).

According to Global Finance, which will publish its analysis, "World's 50 Safest Banks" in its April issue, international banks dominate the rankings, which show the effects of the sub-prime mortgage meltdown and credit crisis brought on by large Wall Street players. San Francisco-based Wells Fargo is the top-rated U.S. bank at No. 21. European banks now dominate the rankings, with only four U.S. banks among the listing.

The alarming rate at which foreclosures have been rising over the past year is definitely something to be concerned about. Today, some homeowners are getting a little breathing room as a couple of the biggest banks are granting a moratorium on foreclosures.

As Lita Epstein pointed out yesterday, last month was the tenth month in a row where foreclosures were in excess of 250,000 as 274,399 foreclosures were filed in January. The foreclosure epidemic has been a serious drain on the overall economy, and it is hoped that the Obama administration is going to be able to develop a plan to help keep homeowners in their homes.

In an era when banks can lose $10 billion in a single quarter, it is actually amazing that any financial institution can earn a profit. When we look forward to fixing the economic disaster left for the next president to fix, we may wonder why we give so much control of the world economy to people who take such enormous risks while earning more money than anyone else on the planet -- even as they leave the rest of us to pay for their mistakes. That situation must change.

It looks, though, like JPMorgan Chase & Co. (NYSE: JPM) will not be the guiltiest of the parties in this respect. Granted, JPMorgan did get $30 billion in protection from the U.S. to bail out Bear Stearns and it took $25 billion from the TARP. But at least it is still making a profit -- albeit a much smaller one than it did in the fourth quarter of 2007. Specifically, JPMorgan made $702 million in the fourth quarter or 7 cents a share -- down 76% from the $3 billion it earned in the same period last year. (However, without a $1.3 billion gain from closing a joint venture and "risk- management results," JPMorgan would have lost 28 cents a share.)

All is not well in Seattle for executives at Washington Mutual. The Seattle Times has reported that some 3,400 WaMu employees, mostly from the company's headquarters, are to be let go by JPMorgan Chase & Co. (NYSE: JPM). The good news for workers is, it appears that employees at WaMu's branch operations will, for the most part, be spared the ax.

These types of staff dismissals should come as no surprise in an era when companies are quickly consolidating just to survive. I suppose that it's fairly standard practice for an acquiring company to thin out the executive herd of any distressed company which it has recently purchased. In regard to this particular instance, The Seattle Times quotes JPMorgan CEO Jamie Dimon as stating: "We are going to build a great company for the long run. Unfortunately, that entails tough decisions in the short run." Tough decisions always tend to ooze downward.

To the credit of JP Morgan & Chase, the executives who are to receive their walking papers at WaMu, will apparently be sent off with moderate severance packages. However, this does little to lessen the pain of good jobs lost. Additionally, The Seattle Times article opens a discussion about the ramifications of this deep payroll cut and operations consolidation upon the local commercial lease space market in a city with an impending surplus of commercial office space.

Preliminary indications are that JPMorgan's consolidation of WaMu in to the 42-story WaMu Center will put approximately 500,000 square feet of commercial lease space back into the hands of Seattle landlords. At least one commercial real estate broker in Seattle indicated that WaMu's withdrawal from commercial space there could lead to slight downward pressure on rents. However, citing a rental office inventory of approximately 37 million square feet, Oscar Oliveira, a senior vice president with brokerage Colliers International, is quoted by The Seattle Times as stating: "It adds a couple percentage points to the vacancy rate... The bank's moves alone won't push lease rates down..."

It's been said that the grace that Joe DiMaggio, The Yankee Clipper, exhibited was so encompassing that he seemed to move before the crack of the bat, to be perfectly positioned for an outfield catch. And of course hockey's Wayne Gretzky's greatness stemmed in large part from his uncanny ability to always skate to where the puck would be, not to where it was. There are advantages to being one step ahead of the game.

JP Morgan Chase's decision to modify the terms of $70 billion in mortgages, represents as much a political calculation as an economic one, so says economist Richard Felson.

"One can interpret the action as JP Morgan thinking two steps ahead," Felson said. "From a strictly economic standpoint, it looks premature and costly. From a political standpoint, however, it looks quite prudent." JP Morgan's (NYSE: JPM) shares fell 97 cents to $40.85 in Monday morning trading.

That's because Democrats in Tuesday's U.S. election are likely to rack-up seat gains in the House and Senate. U.S. Sen. Barack Obama, D-Illinois, also leads U.S. Sen. John McCain, R-Arizona, in the U.S. Presidential race. Felson said the small chance that Democrats could achieve large majorities in the House and Senate may have prompted JP Morgan "to leave before the crack of bat," from a mortgage issue standpoint.

In what I feared might become a regular feature here, the Federal Deposit Insurance Corporation (FDIC) arranged for the takeover of the 13th failed bank of 2008 Thursday. As I posted, the FDIC likes to close banks on Friday after hours so it can reopen as branches of the acquiring bank on the following Monday morning. But since this is history's biggest bank failure, the FDIC couldn't wait for the weekend. The bank in question is the $310 billion (assets) Washington Mutual (NYSE: WM).

This is history's biggest bank failure -- it's almost eight times bigger than the previous record holder, Continental Illinois. In this case, JPMorgan Chase (NYSE: JPM) was the rescuer, buying WaMu from the FDIC. This follows JPMorgan's purchase of Bear Stearns back in March in which the Federal Reserve provided a $29 billion loan. But this deal will cost JPMorgan far less -- a mere $1.9 billion, and it will write down WaMu's loan portfolio by 10% in the process. To further bolster its position, JPMorgan will raise $8 billion in capital.

What does JPMorgan get for all this? Branches for one thing -- 5,400 in 23 states -- and it will shutter 10% of the combined branches. What JPMorgan does not get is much of the junk that WaMu carried and by that I refer to "senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, any assets or liabilities of the holding company, Washington Mutual Inc.; or [WaMu's] lawsuits."

Late Sunday night it was reported by the Associated Press that the Federal Reserve announced it had approved the request of the two investment banks, Goldman Sachs Group (NYSE: GS) and Morgan Stanley (NYSE: MS), to become commercial banks and to take deposits, bolstering the resources of both institutions.

Since Bear Stearns was acquired in a fire sale by J P.Morgan Chase (NYSE: JPM) in March both firms have been under increased pressure to show their financial strength, but the bankruptcy of Lehman Brothers Holdings (NYSE: LEH) and the buyout of Merrill Lynch (NYSE: MER) by Bank of America (NYSE: BAC) last weekend have changed the playing field too much.

So what does this mean in short? It means the investment banks wanted the comfort and security of mama bear. They wanted the protection of the Federal Reserve, along with the ability to borrow from it at the discount window, and in a worst case scenario, to be bailed out like everyone else.

The Fed, from its perspective, knows this to be true and understands that if the investment banks -- now commercial banks -- can increase their reserves, then maybe a bailout will not be required, which is better for everyone. Along with this change will come additional requirements and regulation.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I owned BSC and now own shares in its acquirer JPM.

This morning, I speculated that Morgan Stanley (NYSE: MS) might reunite with its former parent -- JPMorgan Chase (NYSE: JPM). It looks like I was wrong about that. But the basic idea of finding a merger partner for Morgan Stanley is still alive. The New York Times reports that Wachovia (NYSE: WB) has been in talks with Morgan Stanley about a possible combination.

Morgan Stanley's stock fell another 24% today and Washington Mutual (NYSE: WM), about which I posted this morning, hired Goldman Sachs (NYSE: GS) to find a buyer. So it could be that less than a decade after Congress repealed the Glass-Steagall act -- which prohibited investment and commercial banks from combining -- we will solve our current catastrophic financial problems by reconstituting the very thing that contributed so heavily to the Great Depression.

This looks to me like a desperate move that is only possible because commercial banks were required -- due to their regulations -- to hold more capital than investment banks. The investment banks were vulnerable because they bought such a huge volume of complex securities that nobody now wants to buy. And the decline in the value of these securities is wiping out the slim sliver of capital that they held.