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Earnings season heats up this week with Citigroup powering past analyst expectations for the first quarter. The major banking firm reported net earnings of $4.4 billion, the highest income its reported since second quarter 2007. The results for the bank, one of the hardest hit institutions in the financial crisis, suggest that the firm may finally be recovering.
The latest numbers from Citi and other top banks, including Bank of America and JPMorgan Chase, have far beat industry analyst expectations, due in large part to strong performances from their trading divisions. Several other key banks are due to report this week, including Goldman Sachs on Tuesday.
Investors have their eye on Goldman Sachs, but not just for its earnings report due out tomorrow morning. Two members of Congress called for an investigation into the bank’s role in the mortgage market collapse on Sunday. The Securities and Exchange Commission accused Goldman Sachs of fraud related to the sub-prime mortgage collapse in a civil lawsuit on Friday. The news sent stocks tumbling. Shares of Goldman Sachs plunged nearly 13 percent. JPMorgan Chase and Bank of America both lost about 5 percent. And more backlash from Europe. Britain’s Prime Minister, Gordon Brown, accused the investment bank of “moral bankruptcy”, echoing calls for an investigation. Germany also said it was considering legal action against the bank.
Meanwhile a major partisan showdown over financial regulation reform is headed to Congress. Senate Republicans reiterated their opposition Sunday to a bill that Democrats say will prevent another Wall Street meltdown like the one that precipitated the U.S. recession. Some officials hinted that behind-the-scenes talks could yield a deal, but rhetoric signaled deep divisions between Republicans and Democrats trying to score political points as the campaign season approaches in November. Democrats believe the Goldman scandal will help win some votes for its overhaul effort.
And it looks like Toyota will be digging into its pockets on Monday, signing a deal to pay a $16.4 million fine to the U.S. government in the “sticky pedal” saga, according to a senior Transportation Department official. The fine is the largest ever enforced on an automaker. The Transportation Department's National Highway Traffic Safety Administration sought the fine after it learned, through documents obtained from Toyota, that the automaker knew of sticky gas pedal problems since at least September last year, the agency said this month. The fine does not release Toyota from any potential criminal or civil liability related to the sticky-pedal defect.
Travelers worried about more airline fees—this time for carry on bags—can still continue to take along their toothbrush cost free. Several major airlines promised they will not charge passengers for carry-on baggage, after Spirit Airlines became the first in the U.S. to propose charging passengers $45 to store luggage in overhead bins. Senator Charles Schumer, D-New York, said he personally contacted officials at American Airlines, Delta Airlines, JetBlue, United Airlines and US Airways, and secured commitments from all five companies.
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