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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 washunut View Post
    don't like your tone. will refrain from dealing with you in the future.
    Good. I'm not a fan of people who shout orders at me without responding to my post.
    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

    Yes, she said it all and he has to go.

    Elizabeth Warren called on JPMorgan Chase CEO Jamie Dimon to resign from his post on the Federal Reserve Bank of New York's board, citing the need for "responsibility and accountability" in the financial industry.
    "We need to stop the cycle of bankers taking on risky activities, getting bailed out by the taxpayers, then using their army of lobbyists to water down regulations," Warren said. "We need a tough cop on the beat so that no one steals your purse on Main Street or your pension on Wall Street."
    Elizabeth Warren: Jamie Dimon Should Resign From New York Fed Board

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Krugman does a nice job putting it all in perspective: http://www.nytimes.com/2012/05/14/op...rssnyt&emc=rss

    In other news, Ina Drew -- JPM's CIO -- is stepping down as a result of the scandal. Ironically, her replacement is a former LTCM trader....

    http://www.bloomberg.com/news/2012-0...es-as-cio.html
    Last edited by AdamT; 05-14-12 at 11:40 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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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by RabidAlpaca View Post
    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.
    There is no doubt JP got a hell of a deal. However, given that the dollar increased roughly 15% in 2008, I don't see how the Fed's guarantee of Bear's assets represents a tax. A clear distinction must be made between actions of the Federal Reserve and the U.S. government. You can't conflate the two to try and make a point as AdamT did.

    Quote Originally Posted by AdamT View Post
    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.
    A number of large financial institutions were forced to accept bailout money in order prevent the market from exerting pressure on under-capitalized banks. JPM repaid the full $25 billion with an additional $795 million in dividends within six months of receiving the bailout.

    Quote Originally Posted by AdamT View Post
    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.
    The CIO office wasn't hedging JPM's proprietary trading accounts. The hedges were designed to hedge JPM's corporate bond and loan portfolio. The reason why regulators are having trouble implementing the Volcker rule is because it is very difficult for them to make the distinction between proprietary trading and hedging/market-making activities. There is little evidence that the Volcker rule would have prevented the $2 billion loss and "too-big-to-fail" regulation was already implemented through the Systemically Important Financial Institutions agency at the Federal Reserve.
    "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

    The Onion did an interesting little article about this.

    My favorite line:

    black_man.jpg

    "Double or nothing, Jamie! Otherwise, you'd better slink off to equities with all the other pussies."

    Richard Danziger
    Hedge Fund Manager
    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
    There is no doubt JP got a hell of a deal. However, given that the dollar increased roughly 15% in 2008, I don't see how the Fed's guarantee of Bear's assets represents a tax. A clear distinction must be made between actions of the Federal Reserve and the U.S. government. You can't conflate the two to try and make a point as AdamT did.
    Government loan guarantees have a monetary value -- they are governmet assistance any way you cut it. Or would you say that, e.g. Solyndra didn't get any government assistence?

    A number of large financial institutions were forced to accept bailout money
    Yeah, that's what you said before. I asked how they were "forced" to take the money....

    The CIO office wasn't hedging JPM's proprietary trading accounts. The hedges were designed to hedge JPM's corporate bond and loan portfolio. The reason why regulators are having trouble implementing the Volcker rule is because it is very difficult for them to make the distinction between proprietary trading and hedging/market-making activities. There is little evidence that the Volcker rule would have prevented the $2 billion loss and "too-big-to-fail" regulation was already implemented through the Systemically Important Financial Institutions agency at the Federal Reserve.
    Let's cut the bull**** -- it appears that they weren't hedging anything. These so-called hedges WERE proprietary derivatives trades that were so large they were moving the market.
    "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
    Yeah, that's what you said before. I asked how they were "forced" to take the money....
    I know it sounds ridiculous, and in fact, it is, but it did happen that way. Then Secretary of the Treasury Henry Paulson essentially strong-armed the 9 largest banks to accept the bailouts. He took them into a room and told them that it wasn't an option.

    Episode 2 of the PBS Money, Power and Wallstreet miniseries covers this in great detail
    Money, Power and Wall Street | FRONTLINE | PBS

    How Paulson forced bail-out on the banks | Business | guardian.co.uk
    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
    Yeah, that's what you said before. I asked how they were "forced" to take the money....
    This is old news. Still juicy though
    Documents Reveal How Paulson Forced Banks To Take TARP Cash - Business Insider

    We don't believe it's tenable to opt out because doing so would leave you vulnerable and exposed.
    If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.

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    Re: JPMorgan Loses $2 Billion in Chief Investment Office

    Quote Originally Posted by AdamT View Post
    Government loan guarantees have a monetary value -- they are governmet assistance any way you cut it. Or would you say that, e.g. Solyndra didn't get any government assistence?
    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?

    Quote Originally Posted by AdamT View Post
    Let's cut the bull**** -- it appears that they weren't hedging anything. These so-called hedges WERE proprietary derivatives trades that were so large they were moving the market.
    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:

    Quote Originally Posted by AdamT View Post
    If JPM wasn't trading on its own account it wouldn't need these massive hedges.
    Which is quite obviously false if you had read anything on what happened.
    "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 RabidAlpaca View Post
    I know it sounds ridiculous, and in fact, it is, but it did happen that way. Then Secretary of the Treasury Henry Paulson essentially strong-armed the 9 largest banks to accept the bailouts. He took them into a room and told them that it wasn't an option.

    Episode 2 of the PBS Money, Power and Wallstreet miniseries covers this in great detail
    Money, Power and Wall Street | FRONTLINE | PBS

    How Paulson forced bail-out on the banks | Business | guardian.co.uk
    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.
    "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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