Post: #1

http://news.yahoo.com/surprise-2-billion...13329.html

Experts and industry officials were skeptical that the trading was designed to protect against JPMorgan's own losses, as Dimon contended in a surprise conference call with stock analysts and reporters late Thursday.

The bank appeared to have been betting for its own benefit, a practice known as "proprietary trading," said Rossi and other former bank executives.

Dimon said the type of trading that led to the $2 billion loss would not be banned by the so-called Volcker rule, which is still being written and is expected to ban certain types of trading by banks with their own money.

The Federal Reserve said last month that it would begin enforcing that rule in July 2014. Bank executives, including Dimon, have argued for weaker rules and broader exemptions.

JPMorgan has been a strong critic of provisions that would have made this loss less likely, said Michael Greenberger, former enforcement director of the Commodity Futures Trading Commission, which regulates some derivatives.

"These instruments are not regularly and efficiently priced, and a company can wake up one day, as AIG did in 2008, and find out they're in a terrific hole. It can just blow up overnight," said Greenberger, a professor at the University of Maryland.

Post: #2

Reminds me of...

That said, this case kind of reminds me about that French stock trader scandal at Societe Generale a few years ago. It's ridiculous what kind of stuff is traded today and under what conditions and oversight (both by the government and the bank itself).

Post: #3

(05-11-2012 03:39 PM)Handsome Creepy Eel Wrote:  and under what conditions and oversight (both by the government and the bank itself).

Does that mean you are for better government regulation? So many ideologues want to blame everything in the world on the US government so there would be some resistance.

Post: #4

Hm, resistance to what? But I think government regulation is important so that banks do what banks are supposed to do (i.e. deposits & loans) instead of twisting the majority of their capital through the computer trading algorithms that even they don't know how they function. Some part of the current crisis is definitely due to the global (not just US) deregulation of the last 30 years, which implies that the crisis will be repeated if that underlying problem is not fixed.

Banking used to be a boring office job once upon a time.

Post: #5

(05-12-2012 01:09 AM)Handsome Creepy Eel Wrote:  Hm, resistance to what? But I think government regulation is important so that banks do what banks are supposed to do (i.e. deposits & loans) instead of twisting the majority of their capital through the computer trading algorithms that even they don't know how they function. Some part of the current crisis is definitely due to the global (not just US) deregulation of the last 30 years, which implies that the crisis will be repeated if that underlying problem is not fixed.

Banking used to be a boring office job once upon a time.

I agree. The push back would be from the financial community and those that are always pushing to decrease the government's role in just about anything.

Post: #6

Investment banks should be able to trade as they wish, but not be allowed big enough that they threaten the entire financial system, which forces the gov't to bail them out when their trades go bad.

Post: #7

The solutions are simple.

1 .Reintroduce GLASS STEAGAL

either you are bank or you are a investment bank/hedgefund/pe firm.

2. No bailouts (i.e. socialism for billionaires) - you fuck up - you pay the price and file bankruptcy like everyone else.

Post: #8

Quote:If you’re wondering why you should care if some idiot trader (who apparently has been making $100 million a year at Chase, a company that has been the recipient of at least $390 billion in emergency Fed loans) loses $2 billion for Jamie Dimon, here’s why: because J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem.

Read more: http://www.rollingstone.com/politics/blo...z1ukqP0Lnf

Post: #9

Roosh is right...if IS a problem if we have to bail out these guys. And the "IF" in this case is big.

But that fact is that ever AFTER this disastrous set of trades, JP Morgan Chase will MAKE MONEY. (Full disclosure, I own some JP Morgan Chase stock). So as a stockholder, I am pissed, but as a taxpayer, I am not. They can handle this.

The problem occurs when these trades are interconnected --that there is a cascade effect. One guy fails to make good, making the other guy vulnerable, who in turn makes the NEXT guy vulnerable, and so on in a disastrous implosion.

Meanwhile, I wouldn't be all that worried about this one event. You know what we SHOULD be worried about?

The Euro. Greece. Spain. Portugal. This $2 billion loss on the balance sheet of one of the strongest banks in the word is fucking peanuts -- remember, the government FOrCED Chase to take tarp money and Chase actually HELPED us get out the 2008 pickle by picking up the Bear Stearns pieces.

No this Chase debacle is nothing compared to the cost of propping up countries with huge balance of payments deficits and unemployment rates in the 20+% range as the try to maintain an unsustainble quasi-socialist cradle to grave welfare state and don't have the productive capacity to pay for it.

Get worried about that...and I mean really worried.

Post: #10

(05-13-2012 08:05 AM)Roosh Wrote:  

Quote:If you’re wondering why you should care if some idiot trader (who apparently has been making $100 million a year at Chase, a company that has been the recipient of at least $390 billion in emergency Fed loans) loses $2 billion for Jamie Dimon, here’s why: because J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem.

Read more: http://www.rollingstone.com/politics/blo...z1ukqP0Lnf

The problem here is what's called a "moral hazard." Michael Douglas talked about it in the second Wall Street movie. Even though the movie sucked, that little tidbit was informative.

A moral hazard is the tendency to take higher risks because the party taking the risk doesn't bear the costs. JPM took money in the past and they did pay it back. But they engaged in the same behavior again because they know that bailouts will be there in the future. And the problem is compounded because the repeal of Glass-Steagal has allowed commercial banks to play the same high stakes poker as the investment banks. And they do it with your money whether you want them to or not. Yes, your money is insured, but only up to a point, and since the taxpayers(you) are the insurer, you you have to pay to cover the loss of your money. They put all the risk on you, while they reap the profits.

The official reason for the repeal was to make life more convenient for outfits who move large sums of money around (which is a poor reason to begin with.) The real reason they did it was because Wall Street owns DC. And despite how the news always talks about Americans not saving money, the fact is, many do. The commercial banks wanted to go gambling with the depositors money. And there was no risk in it for them.

Post: #11

I always laugh when these cases make the headlines. As if JP Morgan, Societe Generale, or anyone else, would ever allow a "rogue trader" to have an open position with $2 Billion exposure all by themselves with no oversight.

It's obvious here that JP Morgan entered into a speculative trade that they hoped would pay off handsomely. They shouldn't pretend that they were actually hedging some other position. It will just make them look worse.

Post: #12

JPMorgan Chase's chief investment officer, Ina Drew, retires in wake of $2 billion trading loss.

Heads expected to roll at JPMorgan over $2B loss - http://news.yahoo.com/jpmorgan-execs-set...s-say.html

Post: #13

FDIC insurance only covers general accounts up to 350k. All banks have to get this to be chartered. This does not mean the US Gov "legally" has to cover JPs losses or any other banks loses on the speculative market.

The Gov can however via its cronies and bought politicians bailout out JP tho. That's the difference.

The real number of this loss is $6 billion by the way because you have to include legal tieuos and losses also.

In reality it's another overreaction. 6billion is pocket chance to these banks. What this does highlight is that these banks are basically insolvent and have been since 2008. All the big banks to us swap shit with each other and nickle and dime fees and spillover within the "market".

You need regulation to set the boundaries and rules of the game. Without it you get a lawless mess which ultimately ends up a monopoly in a few hands. Neither strictly controlled markets work nor do "free markets", all end in busts.

Yea Ina needs to bounce it was her call to gamble on that shity index.

Post: #14

(05-14-2012 01:46 AM)porscheguy Wrote:  The problem here is what's called a "moral hazard." Michael Douglas talked about it in the second Wall Street movie. Even though the movie sucked, that little tidbit was informative.

A moral hazard is the tendency to take higher risks because the party taking the risk doesn't bear the costs. JPM took money in the past and they did pay it back. But they engaged in the same behavior again because they know that bailouts will be there in the future.

No, not remotely correct. The traders in London -- some of whom were making 8 figures -- thought they could make a shitload of money really really fast. These traders -- and I know some -- are among the most arrogant, self-assured Alphas (and that includes the women who do this kind of work) and are absolutely confident that nothing bad can happen to them.

The notion that they think "Ooops, that's OK, the Feds will back me up" is simply NOT the way they think.

Meanwhile, I will say it again, and I will it loud.

DESPITE THIS TRADE, CHASE WILL MAKE MONEY THIS QUARTER!!

And guess what? Chase is accepting the moral hazard of this trade, just like a company should.

By the way, I am going to buy more JP Morgan Chase stock today. It's a buying opportunity.

(05-14-2012 01:46 AM)porscheguy Wrote:  And the problem is compounded because the repeal of Glass-Steagal has allowed commercial banks to play the same high stakes poker as the investment banks. And they do it with your money whether you want them to or not. Yes, your money is insured, but only up to a point, and since the taxpayers(you) are the insurer, you you have to pay to cover the loss of your money. They put all the risk on you, while they reap the profits.

No, not remotely correct. I find it amusing when people say words to the effect, "If we repealed Glass Steagall, things would be much better."

Meanwhile, we forget that the dominoes that triggered the 2008 meltdown were driven by dedicated investment banks (Lehman, Bear Stearns) and insurance companies (AIG). Of course, banks were players in this realm, mostly Citibank and BofA, but it was the highly leveraged NON banks that lit the spark. And the fuel for the fire? CDO and CMOs package mostly by...you guessed it...investment banks.

So what did the Feds do? They MADE investment banks COMMERCIAL banks!!

Want a poster child example for the stupidity of government? Here ya go.

No, the talk about bringing back Glass Steagall is all process shit. Again, what we need to do is have regulations related to leverage AND most importantly, interconnectedness of transactions, so one guys toilet dump doesn't soil the whole system.

Post: #15

(05-14-2012 10:01 AM)tenderman100 Wrote:  The notion that they think "Ooops, that's OK, the Feds will back me up" is simply NOT the way they think.

It may not be the way they THINK, but their ACTIONS suggest otherwise. And most degenerate gamblers are absolutely certain that the next hand of cards is the one that's going to pay off big. They don't think that the next hand is more likely to put them on the street.

Post: #16

Hopefully, the private sector won't need taxpayers to bail them out again.

http://news.yahoo.com/report-jpmorgan-tr...nance.html

Shares of JPMorgan Chase & Co. tumbled Thursday as a published report said that the bank's losses on a bad trade may reach as much as $9 billion — far higher than the estimated $2 billion loss disclosed last month.

In May, JPMorgan said the loss came from trading in credit derivatives designed to hedge against financial risk, not to make a profit for the New York bank.

The New York Times, citing sources it did not identify by name, said that the losses have grown recently as JPMorgan has been unwinding its positions. The newspaper said its sources were current and former traders and executives at JPMorgan, which is the largest bank in the U.S. by assets.

The New York Times story cites an internal report that JPMorgan made in April that showed the losses could reach $8 billion to $9 billion, in a worst-case scenario. But the newspaper added that because JPMorgan has already been unwinding its positions, some expect that the losses will not be more than $6 billion to $7 billion.

A JPMorgan representative declined to comment.

Post: #17

I would still buy this stock, remember the whole bp oil spill a few years ago. stock got killed but recovered within a year