What's a couple billion among friends?

[Felch]

JPMorgan’s trading mistakes

Spoiler:

JPMORGAN, widely considered the best run of all the large banks in America, if not the world, on May 10th provided the kind of news that have become all too common in the financial industry: a $2 billion charge for errant trades. The markets responded within seconds of the opening on May 11th, sending Morgan’s share price down 9%, and its value by $14 billion. Late on May 11th, Standard & Poor’s announced it was downgrading the outlook for the company, and Fitch knocked down its ratings.

But while none of these moves were trivial, they were hardly calamitous. The share price decline was sharp but finite. Morgan’s rating remains among the strongest in the industry. Its capital ratios are robust. And even after the loss, it is still expected to earn more than $4 billion in the current quarter, and produce record earnings for the year. There are no indications that customers were harmed or operations impaired.

The bluntest criticism of Morgan’s failure came from the bank’s own chief executive, Jamie Dimon. He said the losses were the result of self-inflicted “sloppiness”, “poor judgment” and “stupidity”, for which “we are accountable”. Like all large financial institutions, Morgan is already crawling with bank inspectors and other regulators, but—perhaps to deflect potential blame—there were hints of investigations to come. The Securities and Exchange Commission announced it would take a look, as did the Commodities and Futures Trading Commission. Retiring congressman Barney Frank took a final turn in the limelight, asserting Morgan’s loss justified the imposition of ever more regulation. At least one plaintiff law firm trolling for clients announced its own investigation.

And yet for all of this, it is hardly clear what Morgan did wrong. The bank has been careful to avoid providing details, not least to protect its ability to unwind positions. But it appears that the losses were the product of two separate efforts, both—in theory—appropriate. The first was to create a hedge against the bank’s exposure to high quality loans. This is an unconventional strategy for a bank, albeit one that, in principle, is a sound one.

The second move—and the one that may have gone badly wrong—was an effort to ameliorate the first hedge, providing more economic exposure. Losses mounted in recent months, suggesting that the resurgence of global economic problems may have played a role, along with badly executed —and mistaken—trades. Ideally, a hedge works in any environment. This one, no matter how well intentioned, failed. Quiet changes in personnel are expected.

Yet accusations were widespread that the trades were more likely directional bets that went wrong. Such moves would violate the spirit of the so-called “Volcker Rule” now being put in place to keep banks from speculating with deposits and instead trade only to further clients interests. Mr Dimon emphatically denied this, but those interested in evidence will have to wait until mid-summer, when details will be provided after the next earnings release. In the meantime, Mr Dimon warned that many particularly volatile components of the bad trades were still on the bank’s book, and would be until their genuine value could be realised: “We have staying power, and we are willing to use it.”

Good thing too, because, he added, more mistakes were inevitable. So too now are the howls.

It looks like weak sauce politicians are turning on JP Morgan and using this as an excuse to impose new regulations. Who the **** doesn't expect the occasional catastrophic gamble in the market? What kind of delusional world do people live in? Without risky bets, nobody would ever get a decent return on investment. We all benefit from Wall Street having big brass balls.

[Aeson]

I look forward to the day I can lose $2billion

[Dinner]

The thing is JPMC was supposedly the single best company for managing these sorts of risks so if the supposed best still makes these kinds of massive screw ups then maybe we really do need the Volker rule.

[Felch]

Anyone who wants to expand the role of government should be tarred, feathered, and then hanged by the neck until they are dead.

[ColdWizard]

Who the **** doesn't expect the occasional catastrophic gamble in the market?

The thing is JPMC was supposedly the single best company for managing these sorts of risks so if the supposed best still makes these kinds of massive screw ups then maybe we really do need the Volker rule.

Morgan’s rating remains among the strongest in the industry. Its capital ratios are robust. And even after the loss, it is still expected to earn more than $4 billion in the current quarter, and produce record earnings for the year. There are no indications that customers were harmed or operations impaired.

Oh noes, they don't **** gold

I look forward to the day I can lose $2billion

Anyone who wants to expand the role of government should be tarred, feathered, and then hanged by the neck until they are dead.

As an American, I think you are required to include "shot" at some point in that sequence. If not, I hereby request it.

[gribbler]

Anyone who wants to expand the role of government should be tarred, feathered, and then hanged by the neck until they are dead.

Stop sucking corporate dick.

[Kuciwalker]

JPMorgan’s trading mistakes

Spoiler:

JPMORGAN, widely considered the best run of all the large banks in America, if not the world, on May 10th provided the kind of news that have become all too common in the financial industry: a $2 billion charge for errant trades. The markets responded within seconds of the opening on May 11th, sending Morgan’s share price down 9%, and its value by $14 billion. Late on May 11th, Standard & Poor’s announced it was downgrading the outlook for the company, and Fitch knocked down its ratings.

But while none of these moves were trivial, they were hardly calamitous. The share price decline was sharp but finite. Morgan’s rating remains among the strongest in the industry. Its capital ratios are robust. And even after the loss, it is still expected to earn more than $4 billion in the current quarter, and produce record earnings for the year. There are no indications that customers were harmed or operations impaired.

The bluntest criticism of Morgan’s failure came from the bank’s own chief executive, Jamie Dimon. He said the losses were the result of self-inflicted “sloppiness”, “poor judgment” and “stupidity”, for which “we are accountable”. Like all large financial institutions, Morgan is already crawling with bank inspectors and other regulators, but—perhaps to deflect potential blame—there were hints of investigations to come. The Securities and Exchange Commission announced it would take a look, as did the Commodities and Futures Trading Commission. Retiring congressman Barney Frank took a final turn in the limelight, asserting Morgan’s loss justified the imposition of ever more regulation. At least one plaintiff law firm trolling for clients announced its own investigation.

And yet for all of this, it is hardly clear what Morgan did wrong. The bank has been careful to avoid providing details, not least to protect its ability to unwind positions. But it appears that the losses were the product of two separate efforts, both—in theory—appropriate. The first was to create a hedge against the bank’s exposure to high quality loans. This is an unconventional strategy for a bank, albeit one that, in principle, is a sound one.

The second move—and the one that may have gone badly wrong—was an effort to ameliorate the first hedge, providing more economic exposure. Losses mounted in recent months, suggesting that the resurgence of global economic problems may have played a role, along with badly executed —and mistaken—trades. Ideally, a hedge works in any environment. This one, no matter how well intentioned, failed. Quiet changes in personnel are expected.

Yet accusations were widespread that the trades were more likely directional bets that went wrong. Such moves would violate the spirit of the so-called “Volcker Rule” now being put in place to keep banks from speculating with deposits and instead trade only to further clients interests. Mr Dimon emphatically denied this, but those interested in evidence will have to wait until mid-summer, when details will be provided after the next earnings release. In the meantime, Mr Dimon warned that many particularly volatile components of the bad trades were still on the bank’s book, and would be until their genuine value could be realised: “We have staying power, and we are willing to use it.”

Good thing too, because, he added, more mistakes were inevitable. So too now are the howls.

It looks like weak sauce politicians are turning on JP Morgan and using this as an excuse to impose new regulations. Who the **** doesn't expect the occasional catastrophic gamble in the market? What kind of delusional world do people live in? Without risky bets, nobody would ever get a decent return on investment. We all benefit from Wall Street having big brass balls.

[Oncle Boris]

I'm curious Felch, do you think they should have let them go bankrupt?

[C0ckney]

We all benefit from Wall Street having big brass balls.

indeed we all benefited so much because of wall street's big brass balls with sub prime mortgages.

[Felch]

I'm curious Felch, do you think they should have let them go bankrupt?

Yup. Failures wanting the government to bail them out pisses me off. I'd rather all of society descend into gun toting, dope smoking, village pillaging chaos, than to have the government save anybody with capital infusions.

[Ben Kenobi]

Yup. Failures wanting the government to bail them out pisses me off. I'd rather all of society descend into gun toting, dope smoking, village pillaging chaos, than to have the government save anybody with capital infusions.

Well spoken, Felch.

[Oncle Boris]

Yup. Failures wanting the government to bail them out pisses me off. I'd rather all of society descend into gun toting, dope smoking, village pillaging chaos, than to have the government save anybody with capital infusions.

I had no idea you were that anarchist. Good for you.

[Dinner]

BTW what JPMC has been calling "hedges" appear to not actually qualify as hedges under normal accounting rules; they were just regular investments in European mortgage debt or so I've been told. This does show that even the supposed best risk managers are making some extremely risky bets and misjudging everything which means there is still a systemic risk to the whole financial system. They will eventually make more bad bets and need more bailouts so the only intelligent thing to do is break them up into smaller pieces so they can't pose a systemic risk to the entire financial system. That way we really can let them fail.

Right now though any one of the big banks could crash everything so they need to be broken up into smaller parts which actually can be allowed to fail.

[kentonio]

Now the FBI have opened an investigation into those big brass balls Felch loves so much.

http://www.huffingtonpost.com/2012/0...n_1518255.html

[Felch]

**** the FBI.

[Dauphin]

I haven't had time to read the article.

JPMorgan lost. Who won the bet?

[DaShi]

I had no idea you were that anarchist. Good for you.

He's a dope-fueled libertarian. Anarchists envy him.

[regexcellent]

wrong thread

[Dinner]

Anyone who wants to expand the role of government should be tarred, feathered, and then hanged by the neck until they are dead.

Anyone who doesn't see that the lack of proper regulations is going to eventually cause another crash needs to be hit by a bus.

[Dinner]

I haven't had time to read the article.

JPMorgan lost. Who won the bet?

My understanding is it wasn't an actual hedge (as in according to accounting rules it wasn't a hedge because to hedge A with B then the two have to move opposite of each other, if A goes up then B goes down) and instead it was an investment into European mortgage debt.

[KrazyHorse]

BTW what JPMC has been calling "hedges" appear to not actually qualify as hedges under normal accounting rules; they were just regular investments in European mortgage debt or so I've been told.

You should probably refrain from commenting on things which you are so far away from understanding.

[KrazyHorse]

My understanding is it wasn't an actual hedge (as in according to accounting rules it wasn't a hedge because to hedge A with B then the two have to move opposite of each other, if A goes up then B goes down) and instead it was an investment into European mortgage debt.

You have absolutely no understanding.

[Dinner]

My understanding is that a hedge is supposed to offset a position so if A goes down B goes up or vise versa. In any event the NBC business desk lady was saying they wouldn't qualify as hedges under the current accounting rules and that instead they would be accounted for simply as separate investments.

[Felch]

Anyone who doesn't see that the lack of proper regulations is going to eventually cause another crash needs to be hit by a bus.

Crashes are a natural part of the business cycle. What ****s us is trying to stop crashes, because that only turns the inevitable crash into an even bigger calamity. Anyone who advocates an expanded role for the government is a counter-revolutionary Tory traitor. They should be killed by a riotous mob of patriots, and their family and friends should be investigated for hidden deviant beliefs.

[gribbler]

The counter-revolutionary Tory traitors in Canada had less trouble with the last financial crisis than we did.

[Felch]

They're not traitors. They're not even a part of our revolution. Most of them are the sensible, wait your turn, follow the rules, say please and thank you types. I ****ing hate em.