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Thread: JPMorgan Loses $2 Billion in Chief Investment Office

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    I know that this has been stated over and over -- that they were "forced" to take the funds -- but I have yet to see a credible explanation of HOW that force was applied. Paulson didn't have the legal authority to force JPM to take the money. He may have pressured them, but ultimately Dimon could have told him to go pound sand.
    Check Mach's post above, there's an excerpt from one of the documents presented to the CEOs. It clearly states: "it's in your best interest, but if you resist, your regulator will do it anyway."
    Quote Originally Posted by LowDown View Post
    I've got to say that it is shadenfreudalicious to see the rich and famous fucquewads on the coast suffering from the fires.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by Rhapsody1447 View Post
    Comparing the Bear Stearns deal with Solyndra highlights your ignorance on the subject. Do you understand the difference between the Federal Reserve and the UST?
    The source is irrelevant, as the question is whether a loan guarantee constitutes publica assistance.

    Of course they were hedging something. Have you read anything on the situation? In retrospect, the botched trade could be described as proprietary since their position became net long corporate credit instead of market neutral. The point being made is that the CIO office would still have existed under a Volcker rule and there would have been very little regulators could do to prevent the loss. My last post was in response to your claim:
    What I have read is that there is insufficient information to say exactly what they were up to, but that the SEC and other regulators are looking into it. JPM itself has not been particularly forthcoming -- probably because they are still trying figure out WTF happened themselves. You are pretending that you know something that no one outside of JPM and the regulators' offices knows.
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by RabidAlpaca View Post
    Check Mach's post above, there's an excerpt from one of the documents presented to the CEOs. It clearly states: "it's in your best interest, but if you resist, your regulator will do it anyway."
    Right, I understand that that's what Paulson told them. The question is, was it a bluff or did the regulators actually have that power? We'll probably never know, because Dimon didn't call Paulson's bluff.
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    Sadly, I agree, though there's a chance it will be corrected if Obama is reelected. If Romney wins -- no chance at all.
    Sadly, I don't think Obama will do it either, nor any other mainstream candidate.


    Don't bite the hand that feeds...


    I agree with your other post, though.
    Quote Originally Posted by calamity View Post
    Reports indicate that everyone knew he was hauling a bunch of guns up there. But, since you brought it up, there's something which should be illegal: guns that breakdown.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    Right, I understand that that's what Paulson told them. The question is, was it a bluff or did the regulators actually have that power? We'll probably never know, because Dimon didn't call Paulson's bluff.
    The regulators have whatever power they decide they have. As long as the regulators pitch their actions as "what's best for the american people", the american people will sit there and watch it happen, and a few citizens will even be so bold as to defend the regulators' actions on political debate sites.

    FDR imprisoned american citizens based on their race, which he shouldn't have had the power to do, but he pitched it as for the greater good, and, that's how the history books are written.

    Having been blackmailed by an arm of the government myself, I've experienced first hand the fact that the government believes that it is above the law.
    Last edited by RabidAlpaca; 05-15-12 at 08:47 AM.
    Quote Originally Posted by LowDown View Post
    I've got to say that it is shadenfreudalicious to see the rich and famous fucquewads on the coast suffering from the fires.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    What I have read is that there is insufficient information to say exactly what they were up to, but that the SEC and other regulators are looking into it. JPM itself has not been particularly forthcoming -- probably because they are still trying figure out WTF happened themselves. You are pretending that you know something that no one outside of JPM and the regulators' offices knows.
    I stand corrected. Although I was right that the CIO office would still exist under the Volcker rule, apparently in the original draft of the Volcker rule, portfolio hedging would have been disallowed as it's trading parameters were too vague. The hedging allowed under the original Volcker rule was position specific hedges. However, the rule that was officially passed in the summer of 2010 had changed this provision to allow banks the ability to hedge on a portfolio basis. Under the Volcker rule that was passed, the losing trade would have been allowed.

    There is quite a bit of good information out there. Although the exact details of the trade haven't been released, a lot is known about what went wrong. See the following links:

    Understanding J.P. Morgan's Loss
    The Bet That Blew Up for JPMorgan Chase - NYTimes.com
    FT Alphaville » Too Big To Hedge
    FT Alphaville » Two billion dollar ‘hedge’
    Irony 101 Or How The Fed Blew Up JPMorgan's 'Hedge' In 22 Tweets | ZeroHedge (take all ZH with a grain of salt)

    Quote Originally Posted by Dealbook
    The bank’s problems may have started with its bond portfolio, worth $379 billion at the end of March. JPMorgan had just 30 percent of its portfolio investment in securities guaranteed by the federal government or its agencies, generally considered some of the safest bonds. It was a shift from the end of 2010, when those types of bonds amounted to 42 percent.

    At either level, JPMorgan looks like an outlier. By comparison, Bank of America had 87 percent of its bond portfolio, worth $293 billion, invested in such high-quality bonds in March.

    With the growing risk in its bond portfolio, JPMorgan may have wanted to be more ambitious with its hedges. In hedging, the JPMorgan unit made heavy use of derivatives instruments whose prices are linked to the value of corporate bonds
    "There is an excellent correlation between giving society what it wants and making money, and almost no correlation between the desire to make money and how much money one makes." ~Dalio

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    I agree that this 2 Billion loss is really a drop in the bucket for JP Morgan, albeit a fairly large drop. However, I do think that this story highlights the fact that JP Morgan is continuing to participate in risky speculation. As more details of the trade emerge it seems to many people that this trade was less of a hedge and more of a bet. I personally have a big problem with JP Morgan that has probably billions of dollars in federally guaranteed bank accounts taking speculative bets like this. I think this news story underlines the need to reenact glass-steagall.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by nathanj63 View Post
    I agree that this 2 Billion loss is really a drop in the bucket for JP Morgan, albeit a fairly large drop. However, I do think that this story highlights the fact that JP Morgan is continuing to participate in risky speculation. As more details of the trade emerge it seems to many people that this trade was less of a hedge and more of a bet. I personally have a big problem with JP Morgan that has probably billions of dollars in federally guaranteed bank accounts taking speculative bets like this. I think this news story underlines the need to reenact glass-steagall.
    Gee, ya think?

    The Chief Investment Officer at JPMorgan Chase is out, to be replaced by Matt Zames.

    According to CNN Zames was "formerly a senior trader at Long-Term Capital Management, the failed hedge fund that placed massive bets on the trajectory of interest rates and required a $3.6 billion bailout from the Fed in 1998."

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Is $9 billion loss a drop in the bucket too?

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by RDS View Post
    Is $9 billion loss a drop in the bucket too?
    It is ... compared to the loss resulting from the stock tanking as a result of the trade.
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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