Thanks to strong results from its investment banking unit, JPMorgan Chase (JPM) was able to turn in a fourth quarter profit of $3.3 billion. This is a profound increase from the Q4 profit of $702 million posted in 2008.

JPM, which is the second largest bank in the U.S. in terms of assets, has performed best throughout the financial crisis, as evidenced by its substantial year-over-year increase in Q4 profit. For the last quarter of last year, JPM generated $25.2 billion in revenue.

Brokerage firm Goldman Sachs (GS) has started meeting its major investors in an attempt to stop criticism over its record compensation, the Wall Street Journal reported. Think this is a bit of overkill? Not when the average GS employee is set to earn $700,000 this year (how do I sign up for that gig?). These meetings are the first of their kind and are expected to continue for several more weeks. The Wall Street firm is defending its pay, especially in the wake of the economic crisis that some contend it partially behind.

GS is trying to win support for its compensation packages, which is why the company is going to the shareholders. These investors are the actual owners of the firm and hold the power to change the company's compensation structure. Of course, employees and executives are hoping there would be no change, and the campaigning is heavy.

Since early 2007, it's been rough for the shareholders of Cowen Group Inc (NASDAQ: COWN), a mid-tier investment bank. The company's stock price has gone from $20 to low of $3.54.

But lately, Cowen's stock price has perked up, primarily because of takeover overtures. For example, there was an offer from Rodman & Renshaw at $7 per share.

However, this was rebuffed. Instead, yesterday Cowen agreed to a so-called "reverse merger" with hedge fund Ramius LLC, which will own 71% of the new entity. On the news, Cowen's shares increased 37%.

Earlier this morning, Goldman Sachs (NYSE: GS) announced that it raised its fifth dedicated private equity secondaries fund -- GS Vintage Fund V -- with roughly $5.5 billion in capital commitments. This news was hinted at on Friday in The Wall Street Journal and was confirmed by the investment bank. The fund will focus on acquiring portfolios of private equity assets and includes private investors throughout America, Europe, Asia, and Australia.

This isn't the only news GS will make this week, as the firm is slated to step into the earnings spotlight. The current quarterly earnings estimate stands at $1.59 per share. Let's take a quick technical look at the investment bank and see what could happen if earnings miss or beat expectations.

Morgan Stanley (NYSE: MS) may cut 5% of its workforce. Given the drop-off in investment banking activity and asset management, the number may not be high enough, but it is a start. Wall Street is still worried about the bank's future, as its stock price shows. Shares change hands at $21, down more than 50% during that last year. Morgan is doing better than some other companies in its sector, but the deepening recession could hurt earnings more than last year.

According to The Wall Street Journal (subscription requited), "The New York firm, which let go of about 7,000 employees last year, may decide on another round of staffing cuts in the next two weeks."

Just when you think you've heard it all, you hear more. In the last year, Wall Street -- or more specifically, the brokerage units of New York financial companies -- lost $35 billion. (Worldwide, financial institutions have taken $1 trillion in write-offs of bad assets). Those firms received a large proportion of the $350 billion TARP and persuaded the Treasury to guarantee losses from hundreds of billions worth of their financial toxic waste. Their reward? $18.4 billion in bonuses.

How much of the TARP went to paying for those bonuses? The banks have cleverly neglected to report that. But let's face it -- money is fungible. So if they did not use the money from the deposits they received from the Treasury to pay bonuses, our tax dollars freed up cash they may have had from other sources that did go to paying those $18.4 billion in bonuses.

JPMorgan Chase (NYSE: JPM) posted earnings Thursday. In a surprise to analysts, who had been expecting a break-even quarter, JPM reported earning 7 cents for the fourth quarter.

While the report showed a 76% decline from the previous year, the news pushed the stock to early gains in the face of a drop in the Dow.

Typical of the lack of conviction in the markets, JPM gave up early gains. Subsequent trading restored the stock to the positive column before it succumbed to a late-day sell-off that shaved more than 6% from its market value.

The mid-morning decline in JPM occurred as Bank of America (NYSE: BAC) plummeted to a new low at $7.50. BAC is sagging under the weight of absorbing Countrywide and Merrill Lynch, both of which have proven more difficult to digest than earlier thought.

Bank stocks in general are under heavy selling pressure after Federal Reserve Chairman Ben Bernanke declared Wednesday that billions more will be required to restore stability to the nation's (and the world's) banking system.

Bad news for money-hungry college grads looking to cash in as investment bankers: New disclosure rules could change the way you're paid.

The Wall Street Journal reports (subscription required) that "New accounting rules are taking hold for mergers and acquisitions that will shine a perhaps scary light on just how much corporations pay the investment banks and bankers that advise them on deals."

Here's how it currently works: Companies that make acquisitions are now able to lump the "advisory fees" in with the price of the target company as part of the "goodwill" that is mainly used to cover the cost paid for the company above and beyond its book value. But new rules would require companies to disclose investment banking fees as a separate expense.

According to Dealogic, investment banking revenue fell 35% in 2008. New rules that require companies to show how much they're paying for advice on deals that generally end up destroying value could set the industry up for further declines.

If this keeps up, top business school graduates might have no choice but to take jobs that actually create something.

With bonuses down big across Wall Street as the market meltdown send income statements deep into the red, a lot of investment bankers aren't going to be too pleased with their bonuses this year.

Credit Suisse is trying something a little bit different. Credit Suisse will be paying it bankers their bonuses with a combination of the usual cash and nearly impossible to trade junk bonds: the kind of garbage that banks have been trying to sell to the Treasury Department to dump the liquidity problem onto taxpayers.

I like this plan: If the bonds really are just illiquid -- and not total crap, as I'm inclined to suspect -- then the bankers will make out like bandits in a few years when credit markets stabilize and liquidity returns.

Another part of Credit Suisse's bonus program is generating some controversy: a portfolio of the cash bonuses paid out will have a "clawback" provision requiring that they be repaid if the employee leaves within two years. According (subscription required) to The Wall Street Journal, this could lead to some lawsuits

I'm not exactly sure what the problem is: As long as employees are notified of the terms of their pay package before they do the work, the banks can pay them whatever/however they want.

They should be happy to be receiving bonuses at all.

It would be pretty nifty to bank online with Goldman Sachs (NYSE: GS). It is the world's premier investment bank, although it has converted itself to a commercial bank to get government funding.

Still, saying I bank online with Goldman sounds better than saying I bank online with the First National Bank of Akron Ohio.

According to The Wall Street Journal, "If Goldman goes ahead, the new unit will seek deposits that can be used to fund various businesses now that Goldman is a bank-holding company." In other words, now that Goldman is a bank, it wants to drive up deposits. Starting an online bank is cheaper than going out and buying a number of regional banks to pick up their depositor bases.

All kidding aside, the chance to have an account at such a prestigious financial institution could draw a great deal of money, especially from the well-to-do. A marquis name should make for marquis customers. And, that should bring Goldman a lot of the assets it needs to fund its more profitable businesses.

Douglas A. McIntyre is an editor at 247wallst.com.

Bloomberg is reporting that the global banking industry could lose 350,000 jobs by the middle of next year. That would be about 20% of the employees in the sector.

That level of unemployment represents an almost unimaginable human tragedy and one that might have been avoided in part if management at large financial house had not bet the bank on mortgage derivatives. But, that is water under the bridge.

The question which gets begged is where all of those people will go. Many bankers are not qualified for other high-paying jobs, which means they will stay unemployed for long periods or will face having to take significant cuts in their incomes. Either way, the shift will take a large toll on government services such as unemployment benefits. Let's not forget the lost taxes.

The destruction of the banking industry is a microcosm of what many happen across sector after sector if the recession bites hard. Autos may be the next domino to fall, but retail and hospitality won't be far behind it. Suddenly hundreds of thousands of jobs become millions, and, if things get especially bad, tens of millions.

Financial services is the canary in the coal mine. If the industry cannot fine some employment equilibrium it is bad for everyone.

Douglas A. McIntyre is an editor at 24/7 Wall St.

This morning, investors were stunned to learn that Deutsche Bank analysts put out a note arguing that shares of General Motors Corp. (NYSE: GM) may be worthless in a year. Though the shares of the automaker are tumbling, this call shows once again that most analysts are a day late and a dollar short. Unfortunately, that's pretty typical.

Seriously, the troubles of GM and the rest of auto industry are well-known to anyone with a pulse. Auto sales are horrid. Democrats are pushing for a government bailout, which GM does not deserve. Retirees are getting squeezed. Yet to many analysts, this is a stock worth holding. According to Thomson/First Call, five rate GM's stock a Hold and one a Buy. There are four Underperforms and two Sells. That's shocking. If these analysts had any guts, they would all rate GM a Sell before it runs out of money.

The case at Ford Motor Co. (NYSE: F) is similar. Only two analysts rate the struggling automaker a Sell. Seven rate it a Buy and one an Underperform. Maybe these geniuses don't read a newspaper or a website. Perhaps they are betting on a massive government bailout to help Detroit. Either way, they show that investors certainly aren't being helped by Wall Street's wisemen.

Obviously, things are getting worse in the financial world and not better. Most Wall Street firms have laid off workers on mortgage trading desks and fired overlapping workers due to "mergers" like the one between Bear Stearns and JP Morgan (NYSE:JPM). But, the evaluations by management at banks and investment houses is moving to other areas which are no longer making money like M&A and corporate finance. That could lead to more firings before the end of the year, in some cases to avoid paying bonuses to those who will get throw over the side.

According to the FT, "Executives and analysts say the redundancies – to be finalised this month as banks prepare next year's budgets – could top 70,000 among US groups alone and add to the estimated 150,000 jobs already lost by the financial sector worldwide."

Many Americans have little sympathy for New York City. Manhattan is often viewed as a center for rich people with multi-million dollar apartments, limousines, and private jets. But, a significant loss of jobs in the largest city in the US will do more than erode the tax base there.

Because of the concentration of wealth in NYC, there is also a concentration of demand for consumer goods. This is not just for Mercedes. It also includes hardware and software at Wall Street firms, building materials for high-rises, luxury goods from major retailers, and infrastructure supplies for the region's massive transportation and road systems.

What is bad for NYC is, to a very large extent, bad for the country.

Douglas A. McIntyre is an editor at 247wallst.com.

As a young investment banker, one of my favorite parts of the job was designing and ordering the "deal toys," or "tombstones" at the end of the deal. My coup de grâce: a Lucite model of an open book, executed in yellow, to commemorate the syndication of a large loan for the publisher of yellow pages phone directories. A few large companies create all the tombstones for investment banks across the U.S., and most investment bankers would sooner give up town car rides home after 8 p.m. than their deal toys.

This week in the New Yorker, sad news: investment bankers haven't been calling companies like Icon Recognition, partially because they haven't been closing deals, and because of budget cuts. At Goldman Sachs, associates have been informed they'll have to start paying for their own deal toys.

While I was an investment banking analyst, we too suffered at the hands of the 'no deal toys' memo. The managing directors and vice presidents offered to chip in and pay for the Lucite doohickeys out of their own pockets, so key are they to the morale of fragile bankers and their clients. Also, nothing says "hands off, this is MY company" like a row of deal toys with your logo proudly displayed on the credenza of the VP of Finance of your client. Before we'd figured out which credit to charge the expense to, however, management had backed down and graciously decided to bill the client for the toys.

Phew! Icon Recognition, take heart: your bankers will be back. In the meantime, maybe you should look to some other industries for professionals whose tender egos need frequent reinforcement of a hard plastic nature. Maybe politicians?

The Goldman Sachs Group (NYSE: GS) plans to can 10% of its 32,500 person staff. Despite its glorious reputation, Goldman is not that different from other financial institutions (FIs). It earned high returns by borrowing too much and now that over-borrowing is causing a painful implosion. As I pointed out last night at The Wharton Club of Boston, the current debt-led bubble has cost $37 trillion so far -- six times more than the equity-led dot-com bubble.

The cost of debt is clear from a quick examination of Goldman's financial statements under current CEO Lloyd Blankfein. When he took over from current Treasury Secretary Hank Paulson, Goldman's ratio of assets to shareholder equity was 18.7 but by the end of 2007, the ratio peaked at 26.2 as assets more than doubled to $1.1 trillion and its return on equity (ROE) climbed to 32%.

Much of the increase in Goldman's ROE was due to debt. In particular, 65% of the increase in Goldman's ROE from 2003 to 2006 was a result of its industry-leading use of borrowed money to increase its assets. While high leverage amplifies returns when asset values climb, it causes even more offsetting pain when asset values decline. For example, the $305 billion in profits earned by the top nine investment banks over the last three years has been wiped out by $323 billion in write-downs in the last year.