Chris Temple''s commentary on Morgan, Barrick, and the Blanchard lawsuit

Section:

12:56a ET Friday, January 3, 2003

Dear Friend of GATA and Gold:

The story from CBSMarketWatch about J.P. Morgan
Chase that is appended here is especially interesting
for its last three paragraphs, wherein the company
denies any liability in regard to gold -- "any real
exposure," to quote the company's chairman exactly.
The chairman insists that he doesn't know where the
Morgan/gold "rumor" comes from, and the company's
lawyer even says the company has asked the Securities
and Exchange Commission to investigate its origin.

As of this hour, GATA has not been contacted by
the SEC about the Morgan/gold "rumor," but we can't
speak for the U.S. Office of the Comptroller of the
Currency, where Morgan's hugely disproportionate
position in gold derivatives long has been a matter
of public record.

Of course if Morgan's gold position is really just
a front for surreptitious market intervention by the
U.S. government, and the liability of that position
actually rests with the government, Morgan's chairman
could be telling the truth, if only a half truth.

The whole truth might be the end of the gold price
suppression scheme.

Maybe CBSMarketWatch or some other news organization
will try to clarify this.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Morgan adds up Enron, other costs;
Insurers to fork over $600 million in settlement

By Luisa Beltran and Greg Morcroft
CBS.MarketWatch.com
Thursday, Jan. 2, 2003

http://cbs.marketwatch.com/news/story.asp?guid=%7B52265566%2DD227%
2D48B1%2D9E26%2D6E7599C1C21C%7D&siteid=mktw

NEW YORK -- J.P. Morgan made its financial New Year's
resolution Thursday, setting aside more than $1 billion
to cover its settlement with insurers in an Enron-related
suit and beefing up its kitty for future litigation and
regulatory expenses.

The move will likely lead to a fourth-quarter loss at the
nation's second-largest bank, but it is expected to help
calm jittery investors and further strengthen the company's
ability to maintain its oft-criticized dividend policy and
attract more investors.

J.P. Morgan Chase looks likely to post a loss in the fourth
quarter after taking a charge to settle Enron litigation and
establishing a $900 million reserve to cover future litigation
and regulatory expenses, the company said Thursday.

The current Thomson First Call estimate for the quarter is
a profit of 36 cents per share, excluding special items.

"You shouldn't expect to have positive earnings for the
quarter," Chief Financial Officer Dina Dublon told analysts
on an afternoon conference call.

Analyst Richard Bove of Hoefer & Arnett said he now
expects the bank to report a profit of 30 cents per share
before charges for the fourth quarter but a loss of 13 cents
after charges.

The powerhouse financial institution said it will take a
pretax charge of about $400 million and also revealed plans
for the $900 million pretax reserve. On an after-tax basis,
these items equal $860 million.

"Excluding these items, fourth-quarter results are seen
in the range of consensus," Dublon said.

Bove said operating earnings for the first quarter of 2003
are expected to jump back to 50 cents per share and to hit
65 cents by the fourth quarter of next year.

"People don't care what happened in [2002's] fourth quarter,"
Bove said. "They care where the company is going in
coming months. The expectation is that EPS will be
substantially higher."

"This means that J.P. Morgan's dividend is well-protected,"
he added. Based on Tuesday's closing price, the stock's
dividend works out to a yield of 5.75 percent.

Shares of J.P. Morgan Chase, a Dow industrials component,
surged 6 percent to close at $25.44 Thursday.

"Technically speaking, JPM has spent the past two years
in a steady downtrend defined by lower highs and lower lows.
The equity may potentially be on its way to achieving a lower
high," options tracker Bernie Schaeffer said in his daily
options commentary.

"Options players are quite optimistic on JPM shares despite
its hazy technical picture," Schaeffer added.

Further boosting the firm's prospects, Moody's Investors
Service reiterated its rating "A1" on J.P. Morgan's credit
following the settlement news.

Moody's said the risks related to bonds were already
incorporated in its ratings and added that J.P. Morgan
continues to generate a "substantial and diversified stream
of income" with which to absorb such costs.

News of the charge and the reserve came hours after the
bank disclosed that it had reached a settlement with a
group of 11 insurers in its bid to recover $1 billion from the
companies regarding Enron surety bonds.

Terms of the agreement call for the insurers to pay about
60 percent of the amount of surety bonds the insurers wrote.

"The settlement represents us being on the right side of the
deal, and represents the risk of going the whole way on the
litigation," J.P. Morgan Chase Chief Executive William Harrison
said on the conference call.

Travelers Property Casualty confirmed that it would pay about
$139 million under the pact.

Liberty Mutual has signed on to the settlement. The insurer
has agreed to pay less than $12 million to resolve litigation
with J.P. Morgan, the insurer said in a statement.

In December, J.P. Morgan Chase began battling 11 insurers,
including Chubb and St. Paul Cos.' St. Paul Fire & Marine
Insurance Co., in court to recover about $1 billion. The
insurers had issued surety bonds that guaranteed commodity
deals between Enron and a J.P. Morgan-related entity, Mahonia
Ltd.

But once Enron went bankrupt in December 2001, the insurers
refused to pay the bonds, claiming the deals were really loans
between J.P. Morgan Chase and Enron, not commodity
transactions.

Bank executives added that the $900 million reserve included
likely costs for lawsuits involving non-Enron-related
liabilities, like litigation involving WorldCom and other
firms with which the company did business.

"These various cases will be resolved little by little over
about four years," J.P. Morgan Chase general counsel William
McDavid said on the conference call.

In November, Dublon told CBS.MarketWatch.com that she
expected a resolution of the Enron case by late December
or early January. If J.P. Morgan Chase lost the case, the bank
would likely take a charge to income and not boost reserves,
Dublon had said.

Dublon and the others on Thursday's conference call said that
despite the charge and reserve, the company's fourth-quarter
performance showed some positive signs, particularly a
strengthening in revenues as trading business picked up.

"Revenues are probably quite a bit higher than estimates,
but expenses are higher than expected due to severance
costs," Dublon told listeners.

She said overall charges will be higher than the $300 million
that J.P. Morgan Chase predicted earlier for its
investment-banking operations.

Vice Chairman Marc Shapiro told investors and analysts
that the firm's credit quality had not changed much since
the end of the third quarter.

"Telecom is playing out as anticipated," Shapiro said,
referring to another area of troubled loans for the financial
industry.

"Merchant energy is the sector most likely to be hurt by
any drop in credit quality," he said.

Shapiro also said the company would maintain its
34-cent-per-share quarterly dividend payment -- a policy
that's been criticized in the past even as it has been
staunchly defended by the bank's management.

In a footnote, the executives said that, despite persistent
rumors to the contrary, it has no exposure to the recent
run-up in gold prices.

"We don't have any real exposure to gold. I don't know where
that rumor keeps coming from, but it's not true," CEO Harrison
said.

"We have seen this rumor pop up again and again," added
chief counsel McDavid, "and we have asked the SEC to look
into it."

---------------------------

Luisa Beltran is a reporter for CBS.MarketWatch.com in
New York. Greg Morcroft is New York news editor of
CBS.MarketWatch.com.