• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

JPMorgan Loses $2 Billion in Chief Investment Office

washunut said:
No he was not the culprit of this transaction. I would agree that the person who was responsible needs to go.
Click to expand...

He is the captain of the ship, so he is ultimately responsible, moreover he is one of the most vocal opponents of regulations that seek to downsize banks like JPM and limit systemic risk. His argument implies that gargantuan banks like JPM are NOT too big to manage, so by his own terms he should have been on top of this situation. A classic case of bing hoisted on one's own petard.
 
Hey they can just take 2 billion out of the bonus pool to cover the loss.. no problem!
 
AdamT said:
He is the captain of the ship, so he is ultimately responsible, moreover he is one of the most vocal opponents of regulations that seek to downsize banks like JPM and limit systemic risk. His argument implies that gargantuan banks like JPM are NOT too big to manage, so by his own terms he should have been on top of this situation. A classic case of bing hoisted on one's own petard.
Click to expand...


Funny, you would be one of the first on this site to defend Obama when one of his staff does something stupid and say you can't blame him.

JP Morgan has equity of nearly $200 billion, so while to the uninformed the number looks horrible it is quite manageable for them.

Just because he has rightfully fought Geithner and Bernanke from gutting an industry people like you are taking every cheap shot you can, have fun while you can.
 
washunut said:
Funny, you would be one of the first on this site to defend Obama when one of his staff does something stupid and say you can't blame him.

JP Morgan has equity of nearly $200 billion, so while to the uninformed the number looks horrible it is quite manageable for them.

Just because he has rightfully fought Geithner and Bernanke from gutting an industry people like you are taking every cheap shot you can, have fun while you can.
Click to expand...

Its more than manageable. Now this years bonus numbers have not been released yet as far as I know, but I suspect the bonus pool is going to be over 10 billion... it was far larger in 2010. So 2 billion loss for a bad trade.. drop in the ocean.

If they have the nerve to post a quarterly or yearly loss because of this.. then the outrage will be huge.... since that would most likely mean money back from the feds in taxes..
 
washunut said:
Just because he has rightfully fought Geithner and Bernanke from gutting an industry people like you are taking every cheap shot you can, have fun while you can.
Click to expand...

Geithner and Bernanke "gutting an industry"!!!!!!! Are you serious? The two men have done as much as anyone to shield those who led the disastrous financial shenanigans that resulted in our present economic problems.
 
Somerville said:
Geithner and Bernanke "gutting an industry"!!!!!!! Are you serious? The two men have done as much as anyone to shield those who led the disastrous financial shenanigans that resulted in our present economic problems.
Click to expand...

A little history lesson for the uninformed. Geithner was the president of the NY Fed. He was responsible for regulating the am amount of risk banks were allowed to take BEFORE the crisis. If he had not allowed banks to leverage up or had not allowed liar loans this thing may have been avoided.

Bernanke did a very good job during the crisis, but a lousy one after and has been a fig leaf for the administration the last couple of years. He will go down as both brave during the crisis and then allowing the Fed to lose it's independence.
 
leftofabbie said:
JP Morgan "loses" two billion dollars of investor money, yet Republicans think Morgan is over-regulated.
Click to expand...

They lost $2B of investor money; but as they are FDIC insured and too big to fail, they also gambled with taxpayer money. They did the very thing that got us into the huge mess 3 years ago. Unfortunately, the current regulatory environment, tax structure and the fact no one went to jail over the 2008 meltdown work together to provide incentives for bank execs to gamble with other people's money. They personally get the upside; yet have no personal downside.

That is not the way capitalism is suppose to work. In true capitalism the reward only goes to those that are exposed to the risk. How many of us would be more than happy to put someone else's money on the roulette wheel if we took the profit and only had to say "sorry" if we lost it? How many of us would do that with our money?
 
upsideguy said:
They lost $2B of investor money; but as they are FDIC insured and too big to fail, they also gambled with taxpayer money. They did the very thing that got us into the huge mess 3 years ago. Unfortunately, the current regulatory environment, tax structure and the fact no one went to jail over the 2008 meltdown work together to provide incentives for bank execs to gamble with other people's money. They personally get the upside; yet have no personal downside.

That is not the way capitalism is suppose to work. In true capitalism the reward only goes to those that are exposed to the risk. How many of us would be more than happy to put someone else's money on the roulette wheel if we took the profit and only had to say "sorry" if we lost it? How many of us would do that with our money?
Click to expand...


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.
 
washunut said:
Funny, you would be one of the first on this site to defend Obama when one of his staff does something stupid and say you can't blame him.

JP Morgan has equity of nearly $200 billion, so while to the uninformed the number looks horrible it is quite manageable for them.

Just because he has rightfully fought Geithner and Bernanke from gutting an industry people like you are taking every cheap shot you can, have fun while you can.
Click to expand...

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.
 
washunut said:
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.
Click to expand...

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 debacle sparked new fears about big banks and prompted Dallas Federal Reserve Bank President Richard Fisher, who has called for the breakup of the top five U.S. banks, to say he is worried the biggest banks do not have adequate risk management.

The fallout extended across much of the banking sector, with shares of some of Wall Street's top names declining on Friday. Among others, Citigroup dropped 4.2 percent, Goldman Sachs fell 3.9 percent and Bank of America slipped 1.9 percent.

JPMorgan was far away the worst performer, however, falling 9.3 percent on a day when some 212 million of its shares traded, the most volume in its history.

Fitch Ratings downgraded JPMorgan's debt ratings by one notch and put all of the ratings of the bank and its subsidiaries on negative ratings watch.

While Fitch saw the size of the loss as manageable, "the magnitude of the loss and ongoing nature of these positions implies a lack of liquidity," the ratings agency said. "It also raises questions regarding JPM's risk appetite, risk management framework, practices and oversight; all key credit factors."

"Fitch believes the potential reputational risk and risk governance issues raised at JPM are no longer consistent with an 'AA-' rating," it said.

JPMorgan $2 billion loss hits shares, dents image - Yahoo! News
Click to expand...

The $2 billion trading loss led to a $15 billion loss in market capitalization.
 
Last edited:
AdamT said:
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.
Click to expand...


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.
 
AdamT said:
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.
Click to expand...



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.
 
washunut said:
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.
Click to expand...

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).
 
washunut said:
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.
Click to expand...

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:
upsideguy said:
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).
Click to expand...

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.
 
AdamT said:
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?
Click to expand...

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.
 
washunut said:
Never said no changes were needed, that comes from your mind only.
Click to expand...

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.
 
washunut said:
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.
Click to expand...

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.
 
RabidAlpaca said:
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.
Click to expand...


Check what corporate bonds with a 20 year duration sell for and get back to me.
 
AdamT said:
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.
Click to expand...


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.
 
washunut said:
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.
Click to expand...

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?
 
AdamT said:
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?
Click to expand...

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.
 
washunut said:
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.
Click to expand...

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.
Click to expand...

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.
Click to expand...

Oh lord, really? :lol: 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.
Click to expand...

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.
Click to expand...

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.
Click to expand...

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.
 
obvious Child said:
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.
Click to expand...

True but you can limit what banks can do with their customers money. No more CDS's for example.
 
washunut said:
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.
Click to expand...

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:
You must log in or register to reply here.
Back
Top Bottom