[oops] While Dimon campaigns against Volcker Rule, JPM trader loses $2 billion

Got caught in the cookie jar selling CDS.

we don't need no regulation!

 

Couldn't have happened to a better Wall Street CEO.

Read more: http://articles.businessinsider.com...iii-speech-capital-requirements#ixzz1uYdu4gj6

 

Hopefully this will lead to tougher implementation of Volker rule. I actually like the idea of restoring the Glass-Steagall act so that Investment Bank aspects are separate from the depository banks. This way the banks cannot gamble away other people's money in the forms of proprietary tradings. US was doing fine in terms of financial investments between 1930-1998 when this act was in play so I don't see why it would not be practical thing to do. The only problem is that many banks have already merged with Investment Bank or investment bank have become banks (i.e. Goldman Sachs). If AT&T could be broken up, then we should be able to break the banks as well.

 

Absolutely. With the FinReg rules being debated and hopefully finalized this summer, this is perfectly timed for people pushing for tougher regulations. It really takes some of the bite out of the anti-regulation crowd.

 

Aww, poor thing. I feel terrible for them. Prayers go out to JPM as they go through these austere times.

 

Sure there are I-bankers making seven figures by their 30th birthday, even though they worked like heck to get and keep those jobs; but the hundreds of thousands of customer service reps and weekend drive-thru tellers opening checking accounts and getting rolls of quarters for $10.00 an hour could certainly be sympathized with.

 

JP and Goldman are players in the commodities world but not quite on par with Vitol, Trafigura, Genvor and Glencore. I am not well versed with the Volcker Rule but how is anybody going to distinguish JP's and Goldman's activities as proprietary and non-proprietary?

Even with the Volker Rule, does anyone believe that these companies will not lose money on behalf of their clients?

I hate the comparison of loss of $2 billion (gross value) to a profit of $19 billion (a net value) in the NYT article, but that is just damn good journalism. What does that serve?

I also think JP was the largest bank prior to the financial crisis, so not sure why that tidbit about them being the biggest before the financial crisis was thrown in the article. Oh, maybe Citi, ExxonMobil or someone was slightly larger.

 

Hell. I feel sorry for me as a taxpayer when we have to bail these suckers out again.

What say you, market ideolgues?

 

Here we go again, the Obama campaign and media are furiously trying to run misdirection on this issue to avoid having egg on their face after claiming to have reformed Wall Street with regulations to prevent issues like this from happening. Dodd Frank, their 'crowning achievement' in the regulation of Wall Street, is proven to be riddled with mistakes. Dodd Frank, the bill that Obama and the media heaped praise all over two years ago, has been a total failure. Instead of the media focusing on the failed efforts of this administration to clean up Wall Street, they misdirect attention to shield the democrats from blame. Ironically, it was Tim Geithner and Chuck Schumer who blasted holes in the Volcker Rule in 2010 and allowed Wall Street banks to continue in prop trading with their 'Tier I Capital' exclusion to the bill. Remember, Dodd Frank was signed when Democrats controlled both houses of Congress. So another pillar of Obama's 'record' is proven to be empty and hollow. So what's the answer? More of the same -- more flawed regulations enforced by ineffective bureaucrats. This JPMorgan story is a big deal (and it's not over yet as not all of these trades have been unwound) -- as it disqualifies another of Obama's 'achievements'. More failures, more hide the ball from the media and administration. The deception continues.

 

The critical mistake you make here is that you know nothing about Dodd Frank, how it's structured, what it's supposed to do, what's already in place, what will be in place, and what it will do when fully implemented.

But you are good are regurgitating whatever you read on right-wing blogs, I guess, so that's something.

 

Wow, a Republican fire-eater trying mis-direction to make it look like someone else's fault so that no real reform can ever occur? You guys NEVER do this!

 

Honestly, the Volcker rule can be avoided by folding prop trading activities into hedge funds or trying to run the line between prop and non-prop trading.

Just like banning naked CDS can be avoided by running through CDS ETFs.

It's the spirit of the whole thing that is important. People talk about Dodd-Frank being stalled, but in of itself, and the looming Basel III regulations, they have driven a lot of changes in the industry. Capital ratios are a lot less messed up, and prop trading desks are already being shut down.

If the final implementation can finally kill off these kind of trades, I think that will be a great result.

also, for Christ's sake, never underestimate implied volatility. you'd think bankers would learn, but HELL NAH. Selling CDS at large volumes at the point where other banks notice is asking for trouble.

 

Jamie Dimon On Meet The Press: We Were 'Dead Wrong' To Dismiss Trading Concerns



NEW YORK -- The CEO of JPMorgan Chase, which disclosed a $2 billion loss last week, said he was "dead wrong" when he dismissed concerns about the bank's trading last month.

CEO Jamie Dimon said he did not know the extent of the problem when he said in April that the concerns were a "tempest in a teapot." After the bank reported the trading loss, investors shaved almost 10 percent off the bank's stock price.

"We made a terrible, egregious mistake," Dimon said in an interview that aired Sunday on NBC's "Meet the Press." `'There's almost no excuse for it."

The $2 billion loss came in the past six weeks. Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.

Dimon said the bank is open to inquiries from regulators. He has also promised, in an email to the bank's employees and in a conference call with stock analysts, to get to the bottom of what happened and learn from the mistake.

Dimon told NBC that he supported giving the government the authority to dismantle a failing big bank and wipe out shareholder equity. But he stressed that JPMorgan, the largest bank in the United States, is "very strong."

Lawmakers and critics of the banking industry have seized on the $2 billion loss to say that banks still take too much risk more than three years after the financial crisis.

In this case, Dimon said, that's just what happened. He added that the bank had “badly monitored” the situation and taken on “far too much risk.”

A piece of the financial regulation known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Dimon has said the trading involved in the $2 billion loss would not have fallen under the rule.

Rep. Barney Frank, D-Mass., told ABC's "This Week" that he hopes the final version of the Volcker rule will prevent the type of trading that led to the massive loss at JPMorgan.

Dimon did take a moment to combat his anti-regulation reputation, saying JPMorgan Chase backed “70 percent or so of Dodd-Frank,” while also reiterating his support for policies that would wind down failing big banks, rather than provide them with federal bailouts. JPMorgan Chase received $25 billion in TARP funds in the wake of the financial crisis.

Dimon conceded to NBC that the bank "hurt ourselves and our credibility" and expects to "pay the price for that." Asked what the price should be, Sen. Carl Levin, D-Mich., said that banks will lose their fight to weaken the rule.

"This was not a risk-reducing activity that they engaged in. This increased their risk," Levin told NBC.

"So we've got to be very, very careful that the regulators here are not undermined by this huge effort to weaken the rule by putting in a huge loophole" that includes the trading involved in the JPMorgan loss, he said.

Addressing public anger toward Wall Street, Dimon said he wants a more equitable society and does not mind paying higher taxes. But he said attacking all of business is "very counterproductive."

http://www.huffingtonpost.com/2012/...-the-press_n_1512671.html?igoogle=1?igoogle=1