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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
    Speaking of uninformed and blindly following talking points....

    Yeah, this loss isn't going to sink the bank, but it is yet another sign that additional regulation is required. Apparetnly the credit ratings firms and the market aren't as copacetic as you are:



    The $2 billion trading loss led to a $15 billion loss in market capitalization.

    Fitch has been wrong so many times it is sad. The market may well overreact more, which would give folks a buying opportunity.

    If Geithner as head of the NY Fed had done a better job as regulator of the large banks, we would never had had the mess we have. So more regulation is not the answer, smarter regulators is.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    No, I have always said that Obama is ultimately responsible for the actions of his subordinates. And believe me, I don't find anything "fun" about this industry that brought the world's economy to its knees, and I don't think there's anything funny about Dimon's wrong-headed efforts to fix the serious problems that led to the disaster.


    Interesting how you lump all the firms into the same bucket. Not that you care about facts, but JP Morgan was able to buy by Bear Sterns because they were in better shape than their peers.

    But as your role on this site seems to be pure political hack, versus a true debate of facts I guess in doesn't matter. Just bash a critic of the administration whenever they slip.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by washunut View Post
    Are you simply uninformed, or more likely blindly following dem talking points. While this was a lousy set of transactions, it by no means put the company into any financial stress, let alone talk about a bailout. The company has nearly $200 billion in capital and will still earn a profit for the quarter.

    No wonder it is so easy for politicians to lie to us all of the time. Most people would rather rant than study any subject.
    Yes, I took this as an opportunity to speak about a broader issue and no, at no time suggested that JPMorgan was headed for a bailout. My argument was that the mentality that let to the financial crisis of 2008 is still at play today... and why (that is the individual taxation and regulatory environment remains favorable to induce people to play with other people's money). Though it appears this tucks under the hedge management umbrella, the particular trader at the root of this is known for taking large positions (which, frankly, is generally not considered hedging... and as further evidenced by the substantial loss

    JPMorgan $2 billion loss hits shares, credit, image | Reuters

    Moreover, the fact is that I do know something about investment banks, having bought one and sold one in my career (I used to do acquisitions and divestitures for a company) and I do know something about the mentality of bankers. The fact is they were trading with other people's money. As for the magnitude of the loss, while it hardly made JPM illiquid nor otherwise threatened their solvency, a $2B trading loss is egregious given the net tangible assets of JPM are but $125B (and even a larger % of accumulated earnings of $88B). So this is a big deal.

    JPM Balance Sheet | JP Morgan Chase & Co. Common St Stock - Yahoo! Finance

    And, no I don't need talking points...my ideas are my own and do not subscribe to a specific political agenda (though I am generally liberal).

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by washunut View Post
    Interesting how you lump all the firms into the same bucket. Not that you care about facts, but JP Morgan was able to buy by Bear Sterns because they were in better shape than their peers.

    But as your role on this site seems to be pure political hack, versus a true debate of facts I guess in doesn't matter. Just bash a critic of the administration whenever they slip.
    Ease up on the name calling, there, Chief. JPM is no different than the other too-big-to-fail firms in the sense that they all have the potential to implode and they are all big enough that the taxpayers would have to pick up the pieces. JPM has been one of the better firms, but let's not forget that they needed a $25 BILLION bailout just a few years ago. Yeah, the took over Bear, but did you forget that the federal government guaranteed Bear's liabilities to the tune of $30? You think they could have taken the firm over without that guarantee? Not on this planet. That's a $25 BILLION bailout + $30 BILLION guarantee = $55 BILLION in government assistance. Awesome. No changes needed, right?
    Last edited by AdamT; 05-13-12 at 06:06 PM.
    "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 upsideguy View Post
    Yes, I took this as an opportunity to speak about a broader issue and no, at no time suggested that JPMorgan was headed for a bailout. My argument was that the mentality that let to the financial crisis of 2008 is still at play today... and why (that is the individual taxation and regulatory environment remains favorable to induce people to play with other people's money). Though it appears this tucks under the hedge management umbrella, the particular trader at the root of this is known for taking large positions (which, frankly, is generally not considered hedging... and as further evidenced by the substantial loss

    JPMorgan $2 billion loss hits shares, credit, image | Reuters

    Moreover, the fact is that I do know something about investment banks, having bought one and sold one in my career (I used to do acquisitions and divestitures for a company) and I do know something about the mentality of bankers. The fact is they were trading with other people's money. As for the magnitude of the loss, while it hardly made JPM illiquid nor otherwise threatened their solvency, a $2B trading loss is egregious given the net tangible assets of JPM are but $125B (and even a larger % of accumulated earnings of $88B). So this is a big deal.

    JPM Balance Sheet | JP Morgan Chase & Co. Common St Stock - Yahoo! Finance

    And, no I don't need talking points...my ideas are my own and do not subscribe to a specific political agenda (though I am generally liberal).
    My sense is that the mentality and the practice of the large banks is materially different than it was prior to the crash. Albeit not that you can see this in the transaction that blew up. Leverage ratios are better, quality of loans is improved, regulators are much more involved as evidenced by the tests the fed puts the banks through.

    What I find somewhat of a strawman is saying these people invest other peoples money. All execs in all industries do the same with their shareholder money. If you really did acqusitions, you know that there plenty of studies that say that about 60% of these transactions do not meet the expectations. You need to look at a longer track record of any executive and to say that Dimon has done a bad job is hard to justify.

    One point that has been made that i agree with but have no idea how to address is the compensation for these large traders. I doubt that banks pay more than they think they need to in a competitive marketplace.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    Ease up on the name calling, there, Chief. JPM is no different than the other too-big-to-fail firms in the sense that they all have the potential to implode and they are all big enough that the taxpayers would have to pick up the pieces. JPM has been one of the better firms, but let's not forget that they needed a $25 BILLION bailout just a few years ago. Yeah, the took over Bear, but did you forget that the federal government guaranteed Bear's liabilities to the tune of $30? You think they could have taken the firm over without that guarantee? Not on this planet. That's a $25 BILLION bailout + $30 BILLION guarantee = $55 BILLION in government assistance. Awesome. No changes needed, right?
    Never said no changes were needed, that comes from your mind only. The 30 billion guarentee was not government assistance but what it took for someone to avoid another Lehman. As you know the short term financing the government extended was a very expensive loan that was repaid with billions of profit made by the government.

    During a panic run on all of our financial institutions, even solid companies come under pressure. Also marking to market long term assets proved to be a mistake that helped compound our problems.

    Just think what would happen to the mortgage business if banks had to take a write down every time there was a hiccup in interest rates. Who in their right mind would give out a 20 year mortgage at less than 4% with the fiscal problems we are under.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by washunut View Post
    Never said no changes were needed, that comes from your mind only.
    Uh, actually it comes right out of your yap: "more regulation is not the answer, smarter regulators is."

    Seems that three senior execs are being shown the door. The $2 billion loss is likely the tip of the iceberg as JPM will now have to unwind the $100 billion or so investment that led to the loss -- and everyone on the Street knows it. This was not a case of a rogue trader going off on his own. Dimon personally directed the responsible unit to engage in higher risk trades in order to bring in more profit.
    "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 washunut View Post
    Just think what would happen to the mortgage business if banks had to take a write down every time there was a hiccup in interest rates. Who in their right mind would give out a 20 year mortgage at less than 4% with the fiscal problems we are under.
    Considering the current federal funds rate (the rate to borrow money from the government) is .25%, I'd say anything at all over that is a pretty massive markup for doing absolutely nothing but being a middle-man.
    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 RabidAlpaca View Post
    Considering the current federal funds rate (the rate to borrow money from the government) is .25%, I'd say anything at all over that is a pretty massive markup for doing absolutely nothing but being a middle-man.

    Check what corporate bonds with a 20 year duration sell for and get back to me.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    Uh, actually it comes right out of your yap: "more regulation is not the answer, smarter regulators is."

    Seems that three senior execs are being shown the door. The $2 billion loss is likely the tip of the iceberg as JPM will now have to unwind the $100 billion or so investment that led to the loss -- and everyone on the Street knows it. This was not a case of a rogue trader going off on his own. Dimon personally directed the responsible unit to engage in higher risk trades in order to bring in more profit.

    Better regulators would be a major change to the landscape. If you can't/ won't understand that is not my problem. If Geithner had not allowed SIVs to be created at banks, kept leverage ratios at a sane level and not allowed the deterioration of credit or done a better job regulating rating agencies much of the problems would have been avoided.

    Yes there may be more losses as they unwind the rest of the position, but Dimon had a responsibility to disclose any material change to his earnings expectations.

    I am not sure I have heard about the call for riskier trades, you could be right but something tells me that is something you extrapolated.

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