JP Morgan Chase and Morgan Stanley have initiated coverage of General Motors stock with a positive recommendation, according to Bloomberg reports. Coincidentally, both firms are the lead underwriters for GM’s IPO. Underwriting fees paid to both JP Morgan Chase and Morgan Stanley were recently disclosed in a chart published by the Wall Street Journal showing fees and TARP money received by major underwriters for GM.
According to the WSJ, JP Morgan Chase and Morgan Stanley each received $36.9 million for underwriting General Motors’ IPO. The government plans to sell more shares in future IPOs and additional profit potential exists. Of course, the better GM shares do, the more money there is to be made.
The WSJ chart also exposes TARP money that GM underwriters received from the government with $25 billion going to JP Morgan Chase and $10 billion going to Morgan Stanley. Given all the above facts, I would not expect negative coverage from either firm.
In other news, government owned Ally Financial will pay a $462 million settlement to government owned Fannie Mae for troubled mortgage issues. The tangled web of government intervention continues to lay the groundwork for conflicts between one government entity and another. The sooner our government removes itself from private enterprise, the better.