Jamie's Cryin: Dimon, J.P. Morgan Chase Lose $2 Billion

POSTED: May 11, 10:48 AM ET


A quick note on the disastrous news emanating from J.P. Morgan Chase, whose unflappable (well, unflappable until yesterday) CEO Jamie Dimon yesterday disclosed that the bank suffered $2 billion in trading losses this quarter.

Here’s the summation from the New York Times:

Jamie Dimon, the chief executive of JPMorgan, blamed "errors, sloppiness and bad judgment" for the loss, which stemmed from a hedging strategy that backfired.

The trading in that hedge roiled markets a month ago, when rumors started circulating of a JPMorgan trader in London whose bets were so big that he was nicknamed "the London Whale" and "Voldemort," after the Harry Potter villain.


Rest of article HERE (http://www.rollingstone.com/politics/blogs/taibblog/jamies-cryin-dimon-j-p-morgan-chase-lose-2-billion-20120511)


So, no lessons learned. Not all of the provisions of Dodd-Frank have kicked in yet, so this was not illegal. Republicans are continuing to protect the right of Wall St to jeopardize the economy and the health of the taxpayer.

Of course it's not illegal to lose money. They took risks and it didn't pan out, that's business.

Now if they turn around and start begging for their own personal TARP, we'll have a problem.

Of course it's not illegal to lose money. They took risks and it didn't pan out, that's business.

Now if they turn around and start begging for their own personal TARP, we'll have a problem.


The point is that they took reckless chances that they did not understand.

Of course it's not illegal to lose money. They took risks and it didn't pan out, that's business.

Now if they turn around and start begging for their own personal TARP, we'll have a problem.

Well, if I understood this properly...

If you’re wondering why you should care if some idiot trader... 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.

Activity like this is exactly what the Volcker rule, which effectively banned risky proprietary trading by federally insured institutions, was designed to prevent.

... then the risk was at the feet of an FDIC-insured institution, not a subsidiary whose failure would not fall on FDIC.

Now while one bad trade isn't going to bring Chase down, the fact that the atmosphere there still allows for such extravagant risk taking is unsettling. Wall those risks off from the bank proper.

Jamie Dimon, the chief executive of JPMorgan, blamed "errors, sloppiness and bad judgment" for the loss, which stemmed from a hedging strategy that backfired.


... sounds like negligence to me, no?

If you have a huge pile of money you can take big bets, imo.
Won big on it in prior years

If you have a huge pile of money you can take big bets, imo.
Won big on it in prior years
That's true up to a certain level of money. But if you're a major bank, your failure may be large enough to cause catastrophic economic effects. If J. P. Morgan Chase goes down entirely, taxpayers will probably have to bail them out to minimize damage to the overall economy. But so long as they make money, they get to keep it. See the problem?

The basic way to stop this from hurting Main Street is to separate investment banks from lending banks so that if an investment bank makes a poor trade and it goes under, it won't affect the rest of the economy.

The basic way to stop this from hurting Main Street is to separate investment banks from lending banks so that if an investment bank makes a poor trade and it goes under, it won't affect the rest of the economy.

This or

Tax banks by the number of investment transactions they make with the rate decided by their size. So a small investment bank will not pay much tax and if it fails it will cause less damage. A large bank that does mainstreet and investment business will pay more tax on investment transactions as there is more risk to the rest of the economy.

Bring back aspects of Glass-Steagal ande start regulating deriviatives. Any future bailout should subject the bailed out institution to a permanent higher tier of regulation.

Poor Jamie Dimon, he is proving too incompetent to "do god's work" of speculating with other people's money and making a profit...

Kopecki: JPMorgan Loss May Be `Tip of Iceberg’

http://www.ritholtz.com/blog/2012/05/kopecki-jpmorgan-loss-may-be-tip-of-iceberg/

informative video inside.

remember Michael Hudson: "when the bubble bursts it is usually the result of a fraud or embezzlement."

things like these can send the whole thing crashing. be on your guard.

Who was the counterparty or which Wall Street bank/hedge fund is now $2 billion richer?

... sounds like negligence to me, no?

Given that you would define negligence based on the average performance of similar traders, I very much doubt it.

A $2 billion loss isn't a big deal. I don't understand why this is even in the news? When you are engaged in speculative trading it is inevitable you will take some losses.

Republicans are continuing to protect the right of Wall St to jeopardize the economy and the health of the taxpayer.

How so? Please, explain how this is the fault of Republicans when we have Democrats in control of the White House and the Senate.

A $2 billion loss isn't a big deal. I don't understand why this is even in the news? When you are engaged in speculative trading it is inevitable you will take some losses.

The problem is that the speculative trading is being done by a part of the bank that is insured by FDIC (the government). If banks want to speculate, fine. But wall off that area of the bank from the traditional banking side. Thus, if you eat a 2 billion dollar loss, it cannot in anyway impact the FDIC-insured deposits.

How so? Please, explain how this is the fault of Republicans when we have Democrats in control of the White House and the Senate.

The White House and the Senate alone do not control the whole of the government. If you could be bothered to actually pay attention to the news, you would see that House Republicans have been working to prevent implementation of the law, funding of agencies to enforce the law, and have been trying to repeal it at every opportunity.

The White House and the Senate alone do not control the whole of the government. If you could be bothered to actually pay attention to the news, you would see that House Republicans have been working to prevent implementation of the law, funding of agencies to enforce the law, and have been trying to repeal it at every opportunity.

Citations please?

I propose that all requests for citations are initially accompanied with a counter argument containing citations . On receipt of said citations , the preceding poster is obliged to comply .

Really , without this standard , citation requests are far too easy to portray as an argument in lieu of any actual argument.

Given that you would define negligence based on the average performance of similar traders, I very much doubt it.

"Average performance"? This arose as a result of admitted incompetence, which is outside the ambit of "average" unless banks are in the habit of hiring fools. All of which shouldn't matter because that's what internal control procedures are meant to handle. This is also ignoring the fact that "average performance" has nothing to do with negligence. I could for instance have a perfect record and still screw up such to such an extent that (A) breach my duty of care and (C) cause them harm, the classic test for negligence.

Citations please?

http://www.constitution.org/fed/federa10.htm

and

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

Citations please?

Last night's CBS evening news, for one. But any of many 1000s of news articles over the past couple of years for anyone who could be bothered to get news from places other than Republican press releases.

"Average performance"? This arose as a result of admitted incompetence, which is outside the ambit of "average" unless banks are in the habit of hiring fools. All of which shouldn't matter because that's what internal control procedures are meant to handle. This is also ignoring the fact that "average performance" has nothing to do with negligence. I could for instance have a perfect record and still screw up such to such an extent that (A) breach my duty of care and (C) cause them harm, the classic test for negligence.

Average performance does come into it. When discussing duty of care, that duty of care is essentially derived from the average performance of other professionals in the field.

Given that this sort of catastrophic investment failure has been all the rage for the past few years, I don't know that it would be easy to prove breach of duty of care. Them admitting it should not, in itself, be sufficient.

I'll reiterate, this didn't arise as a result of normal trading performance. Therefore the question of what the 'average' is under normal trading circumstances is immaterial.

Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'

http://www.rollingstone.com/politics/blogs/taibblog/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-20120515

I'll reiterate, this didn't arise as a result of normal trading performance. Therefore the question of what the 'average' is under normal trading circumstances is immaterial.

Right, but how can we define normal trading practices?

My original post is supposed to be a humourous-sarcastic statement of the following: "[investment] banks are in the habit of hiring fools".