JPMorgan Chase & Co., Jaime Dimon, The Volker Rule and Too Big To Fail–Videos
JPMorgan Chase CEO Jamie Dimon with Fareed Zakaria
Whalen: Too Much Regulation Caused JP Morgan $2 Billion Loss
“…May 17 (Bloomberg Law) — Last week JP Morgan Chase acknowledged a trading loss of at least $2 billion, fueling calls by some observers for more regulation of financial institutions. Chris Whalen, a Senior Managing Director at Tangent Capital Partner, tells Bloomberg Law’s Lee Pacchia that it was actually too much regulation that led to the loss. Jeff Madrick, a Senior Fellow at the Roosevelt Institute, maintains instead that regulators need to clamp down on financial institutions if the dangers of such losses are to be minimized….”
Could JP Morgan Losses Have Been Prevented?
JPMorgan Says Farewell to a Top Executive Amid Fallout
Sens. Levin, Corker Debate Implementing Financial Regulation
Should Jamie Dimon’s J.P. Morgan Duties Be Broken Up?
J.P. Morgan Moves to Protect Dimon
CBS Evening News with … : Three JPMorgan Chase executives resign
Inside Story Americas – Can US banks be trusted to self-regulate?
JP Morgan’s $2 Billion Trading Loss: Potential Impact
Jamie Dimon’s pivot from bravado to humility – Rough Cuts
After JPMorgan’s Huge Loss, Is More Regulation Needed?
Keiser Report: Countdown to Armageddon (Pt 1)
Keiser Report: Countdown to Armageddon (Pt 2)
$2 Billion Dollar ‘Mistake’ By JP Morgan CEO Jamie Dimon
Gerald Celente calls out Jamie “two-bit” Dimon and his Financial Crime Syndicate
Bloomberg Rewind (5/10) JPMorgan’s Trading Loss
JPMorgan Unit’s London Staff May Risk Dismissal
JPMorgan Trading Loss Own Words
JP Morgan’s $2 Billion Trading Loss: Potential Impact
JAMIE DIMON WRITTEN UP AND ISSUED A CORRECTIVE & DISCIPLINARY ACTION OVER $2B TRADING
J.P. Morgan’s $2B Trading Loss: Too Big to Manage?
“We Screwed Up”: JP Morgan CEO Jamie Dimon To Fox Business Network
Hedge Funds Profit as J.P. Morgan Sees Losses
JPMorgan Chase Acknowledges $2B Trading Loss
P Morgan’s “Unicorn Hedge” Fairy Tale Harpoons the London Whale!
Financial Checkup: JP Morgan Loses 2 Billion
What should happen now to JPMorgan Chase’s CEO?
Bank of America’s Scarff on JPMorgan’s Trading Loss Implications
‘London Whale’ Rattles Debt Market
In recent weeks, hedge funds and other investors have been puzzled by unusual movements in some credit markets, and have been buzzing about the identity of a deep-pocketed trader dubbed “the London whale.” That trader, according to people familiar with the matter, is a low-profile, French-born J.P. Morgan Chase & Co. employee named Bruno Michel Iksil. Mr. Iksil has taken large positions for the bank in insurance-like products called credit-default swaps. Lately, partly in reaction to market movements possibly resulting from Mr. Iksil’s trades, some hedge funds and others have made heavy opposing bets, according to people close to the matter.
The “London Whale” Swamps JPMorgan
Raw Footage of Peter Wallison Interview from The Bubble
The Bubble is a feature length documentary that ask those who predicted the greatest recession since the Great Depression, why did it happen and what are we facing? The documentary is an adaptation of Tom Woods’ New York Times bestseller Meltdown. Filmmaker Jimmy Morrison is releasing each interview in full for free every month until the film’s release.
Peter J. Wallison, a codirector of AEI’s program on financial policy studies, researches banking, insurance, and securities regulation. As general counsel of the U.S. Treasury Department, he had a significant role in the development of the Reagan administration’s proposals for the deregulation of the financial services industry. He also served as White House counsel to President Ronald Reagan and is the author of Ronald Reagan: The Power of Conviction and the Success of His Presidency (Westview Press, 2002). His other books include Competitive Equity: A Better Way to Organize Mutual Funds (2007); Privatizing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (2004); The GAAP Gap: Corporate Disclosure in the Internet Age (2000); and Optional Federal Chartering and Regulation of Insurance Companies(2000). He also writes for AEI’s Financial Services Outlook series.
A Big Think Interview With Peter Wallison
Peter Wallison’s Dissent from the Majority Report of the Financial Crisis Inquiry Commission
Financial Crisis Inquiry Commissioner Peter Wallison Questions Warren Buffet
The economic consequences of JPMorgan Chase & Co.’s $2 billion losses
Investment trading losses exceeding $2 billion at J.P. Morgan Chase & Co resulted in employees losing their jobs and a failing stock price. Will it lead to more banking regulations and bailouts?
On May 10 J.P. Morgan’s Chief Executive, Jamie Dimon, disclosed losses on a derivatives trade of more than $2 billion at the London office of the bank. These investments were supposed to hedge the risk of the bank’s other assets including the bank’s entire loan portfolio. These hedging investments actually lead not to less investment risk but significant investment losses that were disclosed by the bank before the investment position or trade was reversed.
The entire investment staff at the bank’s London office, which was responsible for the trading losses, may be at risk of losing their jobs, according to Bloomberg. The bank’s losses have led to the retirement, resignation, termination and reassignment of employees at the bank. Chief Investment Officer, Ina Drew, who was responsible for $360 billion in investments retired on May 14. However, the bank continues to employs Bruno Iksil, the investment trader, known as the London Whale, who used derivatives to bet on credit default swap indices. This trade was responsible for the bank’s losses. Dimon characterized the trade as “flawed, complex, poorly reviewed, poorly executed and poorly monitored.”
Since the end of the first quarter, the bank’ stock price has declined more than $10 per share to about $36. JPMorgan Chase & Co., the largest U.S. bank, is considered to be one of the better managed U.S. banks as evidenced by the growth in profits and shareholder equity under the Dimon’s leadership. Last year the bank earned $19 billion in profits and had shareholders common equity of $184 billion. Even if the trading losses were to double or triple, the bank’s profits would more than cover these trading losses.
The Volker rule was mandated as part of the Dodd Frank Act and is named after former chairman of the Federal Reserve, Paul Volker. The rule is in the process of being finalized and would prohibit commercial banks from engaging in proprietary trading, where the bank invests or bets its own money. However, investment portfolio hedging is exempted under the Volker rule. Therefore, even if the Volker rule was operative, it would not have prevented the bank’s trading losses.
Existing government bank regulation failed to prevent the bank’s losses. There is no reason to believe more government bank regulation would stop future investment losses. Government intervention into the economy in the form of bank regulation has repeatedly failed to prevent bank insolvencies that may lead to financial crises.
The topic is important because the vast majority of Americans do not want the federal government bailing out banks that are “too big to fail”. This was confirmed by Rasmussen Reports on May 16 in a report titled, “71% Say Government Should Let Big Troubled Banks Fail.”
I oppose government intervention in the economy including government banking regulation. The market regulates business far better than government bank regulators. JPMorgan Chase & Co.’s poor management of investment risk resulted in losses and a falling stock price. The bank’s employees paid a price by losing their jobs and the bank’s shareholders paid a price by a significant decline in the bank’s stock price. This is exactly how free market capitalism works. The federal government should not “socialize losses” by bailing out insolvent financial institution that are “too big to fail” with taxpayer money. An insolvent financial institution should be liquated with their assets sold to other successful business firms.
Ludwig von Mises said it best: “Big business depends entirely on the patronage of those who buy its products: the biggest enterprises lose its power and its influence when it loses its customers.”
Background Articles and Videos
GLOBAL AFFAIRS AND THE GLOBAL ECONOMY
IBM THINK Forum | A Conversation on Leading in Times of Deep Structural Change
A conversation with Jamie Dimon, Chairman and Chief Executive Officer, JP Morgan Chase & Co.; Dr. Victor K. Fung, Li & Fung Limited; Jim McNerney, Chairman, President and Chief Executive Officer, The Boeing Company; Moderated by Dr. Fareed Zakaria, CNN Host, Fareed Zakaria GPS, Editor-at-Large, TIME, Columnist, The Washington Post, and Author
Jamie Dimon of Chase speaks in Seattle on Nov. 2, 2011
Jamie Dimon: Address to HBS MBA Class of 2009, Class Day June 21, 2009
How will JPMorgan’s $2B loss affect banking rules?
By DANIEL WAGNER | Associated Press
“…The $2 billion trading loss at JPMorgan Chase has renewed calls for stricter oversight of Wall Street banks. Two years after Congress passed an overhaul of financial rules, many of those changes have yet to be finalized.
JPMorgan’s misstep gives advocates of stronger regulation an opening to argue that regulators should toughen their approach.
The Obama administration has argued that it went as hard on banks as possible without further upsetting global finance. Now Democratic lawmakers and administration officials say JPMorgan case proves that more change is needed.
Still, many in the industry warn against reading too much into one trading loss. They say losing money is an inevitable part of taking risk, as banks must.
Some fear that after JPMorgan’s announcement, regulators will greet industry concerns with more skepticism as they flesh out key parts of the overhaul law.
THE VOLCKER RULE
This provision restricts banks’ ability to trade for their own profit, a practice known as proprietary trading. It is named for former Federal Reserve Chairman Paul Volcker.
— Battle lines: Banks say it disrupts two of their core functions: Creating markets for customers who want to buy financial products and managing their own risk to prevent major losses.
They say proprietary trading was not a cause of the 2008 financial crisis and the rule is a means of political revenge on an unpopular industry. Advocates of stronger regulation argue that the rule would have prevented JPMorgan’s loss. They say the trades were made to boost bank profits, not to protect against market-wide risk.
— State of play: A draft of the rule satisfied neither side. It includes exceptions for hedging against risk and for market-making, but banks say they the exceptions are too narrow and difficult to enforce. It’s nearly impossible to tell whether a bank bought or sold something for itself or for customers.
— JPMorgan effect: Attitudes about the Volcker rule are likely to shift as a result of JPMorgan’s disclosure, experts say. Even if JPMorgan’s trades truly were a failed attempt to protect against risk, the resulting loss strengthens the argument that regulators should err on the side of scrutinizing trades. …”
The question I have been most frequently asked about the Financial Crisis Inquiry Commission (the “FCIC” or the “Commission”) is why Congress bothered to authorize it at all. Without waiting for the Commission’s insights into the causes of the financial crisis, Congress passed and President Obama signed the Dodd-Frank Act (DFA), far-reaching and highly consequential regulatory legislation. Congress and the President acted without seeking to understand the true causes of the wrenching events of 2008, perhaps following the precept of the President’s chief of staff: “Never let a good crisis go to waste.” Although the FCIC’s work was not the full investigation to which the American people were entitled, it has served a useful purpose by focusing attention again on the financial crisis and whether–with some distance from it–we can draw a more accurate assessment than the media did with what is often called the “first draft of history.”
To avoid the next financial crisis, we must understand what caused the one from which we are now slowly emerging, and take action to avoid the same mistakes in the future. If there is doubt that these lessons are important, consider the ongoing efforts to amend the Community Reinvestment Act of 1977 (CRA). Late in the last session of the 111th Congress, a group of Democratic Congress members introduced H.R. 6334. This bill, which was lauded by House Financial Services Committee Chairman Barney Frank as his “top priority” in the lame duck session of that Congress, would have extended the CRA to all “U.S. nonbank financial companies,” and thus would apply to even more of the national economy the same government social policy mandates responsible for the mortgage meltdown and the financial crisis. Fortunately, the bill was not acted upon. Because of the recent election, it is unlikely that supporters of H.R. 6334 will have the power to adopt similar legislation in the next Congress, but in the future, other lawmakers with views similar to Barney Frank’s may seek to mandate similar requirements. At that time, the only real bulwark against the government’s use of private entities for social policy purposes will be a full understanding of how these policies were connected to the financial crisis of 2008. …”
JPMorgan case is complicated
Robert J. Samuelson
“…The trading loss at JPMorgan is good for the system — though not for JPMorgan — because it reminds people that risk is unavoidable and because it may identify specific practices that, if they became widespread, could spawn a broader crisis. The time for genuine worry is when everyone agrees that the outlook is bright and risks are few. This suggests the wishful thinking that often precedes financial “bubbles.” Government regulation often follows a perverse cycle: too loose when the economy is strong; too rigid when it’s weak.
We don’t yet know all the details of JPMorgan’s loss. How did trades initially intended to hedge risk — to reduce it — end up having the opposite effect? Until we can answer that, the wider implications for government regulation, including the Volcker Rule, remain unsettled.
But we ought to avoid simple morality tales of avaricious bankers versus virtuous regulators. The real world is more complicated. The global financial system’s complexities and interconnections have grown. Some of these can be restrained; few can be repealed. Bankers and regulators are hostage to a rapidly changing, poorly understood system.
One lesson is obvious: Banks and other major financial institutions need ample capital. The dangers lie not in what we know — but in what we don’t.”
By Dawn Kopecki – May 14, 2012 9:41 AM CT
JP Morgan Biography Federal Reserve Act History