Weekly Wrap

A "tell" for Election Year 2010? That is how pundits describe next Tuesday's special election in Massachusetts for the U.S. Senate seat formerly held by the late Ted Kennedy. In a normal year, a seasoned Democratic public servant like Martha Coakley (above) would coast to victory in the liberal Bay State. But recent polls are all over the place as to how close this race really is. Republicans are trumpeting that little-known state senator Scott Brown (below) has pulled into a dead heat. Can this be for real?


This race may be an early referendum on President Barack Obama's ambitious healthcare reform bill, still being worked out in Congress. The President had hoped to have the legislation passed by Christmas and now wants it no later than his State of the Union address (date still uncertain, possibly in early February). The real deadline may be January 28, the day before the Massachusetts Secretary of State certifies the results of the special election. If Brown wins, he becomes the 41st Republican Senator, the marginal vote that a unified Republican caucus needs to filibuster the healthcare bill. It's a race within the race.

Coakley probably wishes that Congress had met the original target date. That would have gotten her off the hook for a bill that most Americans oppose but which she supports. Brown has pounded her on this issue, which distracts voters from the good work that she has done as the state's attorney general. She investigated contractor abuses arising from Boston's infamous Big Dig and two years ago was busy chasing down miscreants on Wall Street for peddling toxic derivatives to citizens and cities alike (documented here and here). As well, she questions the surge in Afghanistan, a stance that should earn her brownie points in the only state won by anti-war candidate George McGovern in the 1972 Presidential election.

If Coakley loses, or even wins with less than a 50% majority, it will be because of her party affiliation--and her party's damn-the-torpedoes commitment to bigger government. As David Rosenberg of Gluskin Sheff offers in this morning's "Breakfast with Dave," the outcome in Massachusetts may betray "the general public's concern over the implications of running up a fiscal tab that could threaten the country's future prosperity to curb today's consumer deleveraging pain--a mini Tea Party of sorts, which is why the vote is being held in the right state."

Don't forget the banks. No way can I wrap the week without a quick look at the financial sector. Reporting this morning, JPMorgan Chase was the first of the big banks out with fourth-quarter earnings. The lipstick was good (profits quadrupled from the preceding quarter), but the underlying complexion was spotty. Revenues came in a bit light; and loan-loss provisions for two divisions, Retail Financial Services and Card Services, added up to $8.5 billion. Firmwide credit reserves now total $32.5 billion and, according to management, may expand further in 2010, meaning charge-offs for bad loans are far from over. "Consumer credit costs remain high and weak employment and home prices persist,” said CEO Jamie Dimon. “Accordingly, we remain cautious.”

How cautious? The company left its quarterly dividend at a nickel a share, where it has been for the past year (after getting axed from 38 cents last February). Investors are disappointed, knocking a buck off the share price in today's trading. And this is one of the strongest banks out there. What happens when ne'er-do-wells Citigroup and Bank of America, more highly leveraged to struggling consumers, report next week? The mind boggles. Maybe that's why the Dow is down triple digits today. Black Tuesday, anyone?

But Diamond Jamie has his. Even as the company was flipping nickels to shareholders, the average compensation for each JPMorgan employee jumped 20% in 2009. Doesn't that make you feel good all over?