JPMorgan! They reported Friday – quadruple earnings score!

But, with bank earnings reports always comes the fail, and it’s hard to forget JPM acquired WaMu and have a lot of mortgages on their books, and that they’ve adjusted the fulcrum on the leverage teeter-totter further from the center than some of their peers. WSJ takes a look:

Take J.P. Morgan’s big mortgage book. More prime loans are defaulting. Second, the bank’s earnings are now being hit by mortgages it assumed in its emergency acquisition of Washington Mutual. Third, the cost of taking back badly written mortgages also caused a surprise dent to income.

I am not quite sure why we have to keep reminding people that the housing market has been fail for a long time and will continue to be fail for quite a while longer, but we do. WSJ also takes a look at the Q4 dip in bond trading revenue, but dismisses it as seasonal, which is exactly what I do at work when someone asks me why something has dropped and I really don’t have anything interesting to say.

To add insult to that injury, JPM is considered one of the banks which might get reamed by the bank tax we were discussing the other day (no accident that I put Dimon in the photo):

Perhaps the biggest threat for J.P. Morgan, though, is the financial overhaul being formulated by politicians and regulators. Its large investment bank, with big trading operations and derivatives exposure, puts it squarely in the cross hairs. For instance, as a big user of market funding, it looks set to be hit harder by the Obama administration’s proposed tax on bank liabilities. Indeed, on Friday’s call, Chief Executive James Dimon inferred the tax could make it less attractive for the bank to use so-called “repo” funding. This totaled $294 billion at the end of the third quarter, or a sizable 16% of J.P. Morgan’s liabilities.

Mo’ leverage, mo’ problems. Additionally, now that Basel is more than just an art festival, there’s speculation that JPM’s 20:1 capital ratio – higher than the 15:1 ratio at $GS – might be too high, and require them to raise additional scratch.

None of this seems to scare the D-man one whit, of course.

Not much one can do about mortgages, but we’d be super emo to see JPM pounded into submission by taxes, as they are one of the banks actually lending money right now, with unfreezing the credit markets being the function which was cited for maintaining the existence of the banks, after all (I mean, without lending, you’re just talking about a glorified safe deposit box):

Just look at the $10 billion of loans J.P. Morgan Chase and Bank of America Merrill Lynch are extending to back Hershey’s potential bid to buy Cadbury, according to Saturday’s Wall Street Journal. The equity component will come from Hershey selling new shares, from Hershey’s cash holdings and from investments from wealthy individuals.

That’s a big-ass loan, and would buy a lot of candy.