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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 donsutherland1 View Post
    He'll work hard within the firm. The reality is that there are limitations to risk management. I favor the regulations on account of those limitations given the vital nature of the nation's financial system and its financial institutions. However, that does not preclude his working to improve his own firm's risk management capabilities.
    Wake up Don. That $2 billion went somewhere. Dimon's hired lawmakers killed the regulation that would have prevented it.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by donsutherland1 View Post
    Neither JPMorgan nor the U.S. financial system are at risk.
    On the contrary, this result is simply another red flag indicating that nothing has really changed between now and the financial crisis. The banks are even too-bigger-to-fail now than they were then. They are still trading on their own accounts, and engaged in such complex and far-flung machinations that no one can possibly monitor their risk -- including their own CEOs and risk departments (let alone the SEC). The only real improvement is that they are somewhat less leveraged, but their reserves are still inadequate to protect against a Great Recession-level threat.
    "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."

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    On the contrary, this result is simply another red flag indicating that nothing has really changed between now and the financial crisis.
    I was only discussing the recent event. I believe it reaffirms that there are limits to risk management and those limits make regulation necessary. I support the regulation that was adopted following the financial crisis. Like you, I also believe that some of the major issues that helped precipitate the financial crisis were not addressed.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by donsutherland1 View Post
    I was only discussing the recent event. I believe it reaffirms that there are limits to risk management and those limits make regulation necessary. I support the regulation that was adopted following the financial crisis. Like you, I also believe that some of the major issues that helped precipitate the financial crisis were not addressed.
    Thanks Don, I appreciate these comments. Do you support re-enacting Glass-Stiegel? What about the Volker Act?

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by leftofabbie View Post
    Thanks Don, I appreciate these comments. Do you support re-enacting Glass-Stiegel? What about the Volker Act?
    I support the Volcker Rule.

    I need to give more thought as to whether Glass-Steagall is the only or best approach for dealing with risk associated with non-banking or investment activities or whether options might be reasonable alternatives. Had it not been repealed in 1999, I would probably have left it in place, as I don't believe the arguments for its repeal were sufficiently strong.

    As it is no longer in place, one can assess whether it, some alternative, or some combination that it includes its provisions would be most effective for dealing with the risks of today's financial system. Innovation has led to many more opportunities and risks, and what might have worked well following the Great Depression in what was still a commercial bank-dominated financial system might not be quite as effective in today's system with its many "non-bank" institutions, greater linkages, and proliferation of instruments.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Thanks Don. Appreciate your thoughtful comments.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    The old regulations certainly hurt profits and innovation, I doubt bundled mortgages would have been as huge a success as they were, and huge bomb once the 'good' mortgages were contaminated with junk ones, if firewalls had been left in place. Allowing shadow banks to hold paper and loan on it, sometimes in so convoluted a way that not even the inventors understood the process, created a 'someone must be keeping track' mentality as well as a highly competitive field that pushed investment companies to take increasingly bigger risks to maintain a rate of return that draws investors. Couple that with huge trades being done by triggers mostly with no adult supervision and it starts to look like casino capitalism.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by donsutherland1 View Post
    I was only discussing the recent event. I believe it reaffirms that there are limits to risk management and those limits make regulation necessary. I support the regulation that was adopted following the financial crisis. Like you, I also believe that some of the major issues that helped precipitate the financial crisis were not addressed.
    Let's remember that we had extensive regulation of Banks prior to Dodd-Frank. Whether those regulators did a good job or had sufficient rules that should have been able to contain the last problem. Certainly the Fed, with Geithner as the president of the NY branch had the power to ban liar loans etc which they did not. They could have made sure that leverage ratios were more rationale, no additional laws were needed for this.

    There are few if any experts who point to derivative trading at the banks ( AIG certainly) as the thing that got them in trouble.

    The major things that helped cause the problem in my view, Federal agencies, Fannie,Freddie and FHA, too much concentration of assets in too few firms and rating agencies were not addressed. It seems that the law was intended to punish people we were mad ar rather than fix a problem.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by notquiteright View Post
    The old regulations certainly hurt profits and innovation, I doubt bundled mortgages would have been as huge a success as they were, and huge bomb once the 'good' mortgages were contaminated with junk ones, if firewalls had been left in place. Allowing shadow banks to hold paper and loan on it, sometimes in so convoluted a way that not even the inventors understood the process, created a 'someone must be keeping track' mentality as well as a highly competitive field that pushed investment companies to take increasingly bigger risks to maintain a rate of return that draws investors. Couple that with huge trades being done by triggers mostly with no adult supervision and it starts to look like casino capitalism.

    Starting? Also, please explain how "The old regulations certainly hurt profits and innovation".

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by leftofabbie View Post
    Starting? Also, please explain how "The old regulations certainly hurt profits and innovation".
    Yes please explain - some of us think those "innovations" did little except for the banks and some of their officers, certainly not for the industry as a whole.
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