12 May 2012

JP Morgan Chase Goes Wile E. Coyote

So, JP Morgan Chase just lost at least $2 billion in ill conceived derivatives trades:
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an “egregious” failure in a unit managing risks, jeopardizing Wall Street banks’ efforts to loosen a federal ban on bets with their own money.

The firm’s chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday. Losses mounted as JPMorgan tried to mitigate transactions designed to hedge credit exposure.

“There were many errors, sloppiness and bad judgment,” Dimon said as the company’s stock fell in extended trading. “These were egregious mistakes, they were self-inflicted.”

The chief investment office was thrust into the debate over U.S. efforts to ban proprietary trading when Bloomberg News reported last month that the unit had taken bets so big that JPMorgan, the largest and most profitable U.S. bank, probably couldn’t unwind them without losing money or roiling financial markets. Dimon, 56, had transformed the unit in recent years to make bigger and riskier speculative trades with the bank’s money, five former employees said.
Just so you know, the "Synthetic credit securities" mentioned means that this is basically pure gambling.  There is no ownership or insurance interest in the underlying investment.

It's not surprising that the SEC has decided to look at this.

As a result of this blowup, Fitch's and S&P have downgraded the bank.

Henry Blodgett accurately obaserves that, "It's Just Kids Playing With Dynamite".

Rather unsurprisingly, advocates of more regulation of the financial industry, are calling for an aggressive implimentation of the Volker rule.

Of course, Jamie Dimon does not think that this shows a need for more regulations, because, "Just because we're stupid doesn't mean everybody else was."

No, actually,  you're all stupid f%$3s, and you blew up our economy 4 years ago, and the taxpayer dumped more money into you keeping you afloat than we spent on the WW II.

Why no senior banksters have been indicted is beyond me.


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