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Thread: JPMorgan Loses $2 Billion in Chief Investment Office

  1. #71
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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by washunut View Post
    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.
    So you think that there were existing regulations that would have allowed the Fed to shut down, or prohibit SIVs ... but they just didn't do it? Can you cite the relevant regulations? What about the regulations covering ratings firms? Same deal? What about leverage limits? What about transparency in over the counter derivatives trading? What about predatory lending? Where are all these existing regulations that simply weren't enforced?
    "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
    So you think that there were existing regulations that would have allowed the Fed to shut down, or prohibit SIVs ... but they just didn't do it? Can you cite the relevant regulations? What about the regulations covering ratings firms? Same deal? What about leverage limits? What about transparency in over the counter derivatives trading? What about predatory lending? Where are all these existing regulations that simply weren't enforced?
    Yes the Fed could have considered the debt on the outside companies called SIVs to be part of the total balance sheet of companies like Citi had they chosen to. Leverage limits are set by the government, surprised you don't know that. Derivatives were not a problem at the banks but created the mess at AIG. If insurance regulators had chosen to make sure they had proper coverage just like other insurance policies they write they could not have written so much " insurance" against the problem mortgages. Not sure that companies like JP Morgan had something that fell under predatory lending. Many mortgage companies that were responsible are now out of business and the biggest of the culprits ( in my view) Countrywide, was bought out by BAC which is causing that company a ton of grief.

    You seem to know little about the regulatory powers of the Fed. That is understandable. Most folks are content to blame the group they choose to demonize.

    saying all this there were plenty of problems in all sorts of places that caused this huge mess. The mistake of many many is to oversimplify the issues. This seems to be a reason why are politics seem so dysfunctional people care less about the truth than being able to place blame.

  3. #73
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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by washunut View Post
    Yes the Fed could have considered the debt on the outside companies called SIVs to be part of the total balance sheet of companies like Citi had they chosen to.
    They could have? On what basis. I asked you for the regulations that you claim aren't being enforced -- not naked assertions.

    Leverage limits are set by the government, surprised you don't know that.
    Yes, I do know that. This is what we call regulation and it was and is insufficient.

    Derivatives were not a problem at the banks but created the mess at AIG.
    Oh lord, really? What do you think caused the catastrophic failure of the SIVs, exactly?

    If insurance regulators had chosen to make sure they had proper coverage just like other insurance policies they write they could not have written so much " insurance" against the problem mortgages. Not sure that companies like JP Morgan had something that fell under predatory lending. Many mortgage companies that were responsible are now out of business and the biggest of the culprits ( in my view) Countrywide, was bought out by BAC which is causing that company a ton of grief.
    Again, this is a case of insufficient regulation -- not a failure to have smarter regulators. You seem to be arguing against your own positions.

    You seem to know little about the regulatory powers of the Fed. That is understandable. Most folks are content to blame the group they choose to demonize.
    I'm not demonizing the Fed, so I'm not sure what you're trying to get at. I asked you to cite the Fed (or other) regulations that you claim were not enforced, but you seem to be talking out of your derrier instead.

    saying all this there were plenty of problems in all sorts of places that caused this huge mess. The mistake of many many is to oversimplify the issues. This seems to be a reason why are politics seem so dysfunctional people care less about the truth than being able to place blame.
    I don't know how you can conclude that I've oversimplified anything as I haven't explained -- at least in this thread -- what I perceive the full scope of the problems to be.
    "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 obvious Child View Post
    What is amazing about this case is that a department that is designed to hedge risk took what amounts to a massive singular position. What is even more insane is that the trader utilized CDS in essentially a naked way.

    What tops the cake is that the managers were okay with this. I don't see how regulation can fix this. You can't fix dumb.
    True but you can limit what banks can do with their customers money. No more CDS's for example.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by washunut View Post
    Yes the Fed could have considered the debt on the outside companies called SIVs to be part of the total balance sheet of companies like Citi had they chosen to. Leverage limits are set by the government, surprised you don't know that. Derivatives were not a problem at the banks but created the mess at AIG. If insurance regulators had chosen to make sure they had proper coverage just like other insurance policies they write they could not have written so much " insurance" against the problem mortgages. Not sure that companies like JP Morgan had something that fell under predatory lending. Many mortgage companies that were responsible are now out of business and the biggest of the culprits ( in my view) Countrywide, was bought out by BAC which is causing that company a ton of grief.

    You seem to know little about the regulatory powers of the Fed. That is understandable. Most folks are content to blame the group they choose to demonize.

    saying all this there were plenty of problems in all sorts of places that caused this huge mess. The mistake of many many is to oversimplify the issues. This seems to be a reason why are politics seem so dysfunctional people care less about the truth than being able to place blame.
    I just use "deep throats" advice. "Follow the money" . Who do you think profited from these risky investments? Who lost? It makes things alot clearer and simpler than your convoluted shaggy dog story.
    The banks did it all to make obscene amounts of cash and they had the regulations changed so they could do it LEGALLY. And they will keep doing as long as they can get away with it. They even duped Greenspan into believing that they were not gamblers looking for the big score. See how easy that is?
    Last edited by iguanaman; 05-14-12 at 01:34 AM.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by washunut View Post
    Check what corporate bonds with a 20 year duration sell for and get back to me.
    Was that an order? I tell you what, hommie, you address my post and I'll address yours.
    Last edited by RabidAlpaca; 05-14-12 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
    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?
    JPM didn't need the $25 billion, they were forced to take it. The $30 billion guarantee came from the Federal Reserve, not the taxpayer. That can hardly be considered government assistance to JPM; the Feds proposed it in order to allow Bear Stearns to avoid bankruptcy.

    As for the $2 Billion trading loss, the new Systemically Important Financial Institutions agency is already supervising JP Morgan and completely missed it. Even if the Volcker rule was already implemented, it probably wouldn't have even applied to these trades in the first place since they were carried on JP Morgan's books as hedges against bank positions.
    "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

    Quote Originally Posted by Rhapsody1447 View Post
    JPM didn't need the $25 billion, they were forced to take it. The $30 billion guarantee came from the Federal Reserve, not the taxpayer. That can hardly be considered government assistance to JPM; the Feds proposed it in order to allow Bear Stearns to avoid bankruptcy.
    Ultimately the federal reserve is giving away the taxpayer's money. It may not be in the traditional sense, but when you create more money to pay the banks, the subsequent devaluation of the dollar through inflation is the most vicious of all taxes.

    JP Morgan got a hell of a deal absorbing Bear Sterns, a deal propped up by government, regardless of how you look at it.
    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
    Was that an order? I tell you what, hommie, you address my post and I'll address yours.

    don't like your tone. will refrain from dealing with you in the future.

  10. #80
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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by Rhapsody1447 View Post
    JPM didn't need the $25 billion, they were forced to take it.
    How were they forced to take it? I don't remember seeing Paulson driving a tank to the steps of JPM and threatening to blow them up if they didn't take $25 billion in taxpayer money.

    As for the $2 Billion trading loss, the new Systemically Important Financial Institutions agency is already supervising JP Morgan and completely missed it. Even if the Volcker rule was already implemented, it probably wouldn't have even applied to these trades in the first place since they were carried on JP Morgan's books as hedges against bank positions.
    If JPM wasn't trading on its own account it wouldn't need these massive hedges. What we have here is a gigantic, too-big-to-fail bank making huges bets on derivatives futures, with management encouraging more risk, but oblivious to the extent of the risk being undertaken. Basically it's Long Term Capital Management all over again, albeit it on a smaller scale, and it indicates that the problem has not been fixed. The CEO, Dimon, said that he didn't know it was going on, didn't know the extent of the losses, and didn't even know if his bank had broken any laws.
    Last edited by AdamT; 05-14-12 at 10:49 AM.
    "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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