JP Morgan - If a too-big-to-fail bank can't disclose what its trading desk is doing for fear
of blowing itself up, then the bank shouldn't be allowed to do it.""Could Jamie Dimon really be as clueless as he sounded on the phone yesterday? Last month, after Bloomberg News broke the story that JPMorgan Chase & Co. (JPM)’s chief investment office had, in essence, become a ticking time bomb, Dimon, the bank’s chief executive officer, called the press coverage “a complete tempest in a teapot.” That explanation no longer works.
Yesterday, Dimon changed tacks. Losses on the investment office’s “synthetic credit portfolio” had reached $2 billion so far this quarter, though he refused to give any meaningful details on how that had happened. Presumably, these are derivatives of some sort, but even that basic fact was too much for the bank to specify.
What Dimon lacked in information, he more than made up for in assigning blame -- to himself and JPMorgan employees. “There are many errors, sloppiness and bad judgment,” he said, as JPMorgan’s stock sank in after-hours trading. “These were egregious mistakes. They were self-inflicted.” He called himself and his colleagues “stupid.”
But there is more to it than that. Either Dimon misled the public about the gravity of the festering trades during his company’s first-quarter earnings call last month. Or he didn’t know what was happening inside the bowels of his own company. History tells us the latter is the norm for Wall Street bosses, though it’s hard to say which is worse.
Don’t bother asking JPMorgan how it accumulated all these losses. That information is proprietary, as if the taxpayers who bailed out the bank in 2008 don’t have any business knowing. Here’s an idea for a new rule: If a too-big-to-fail bank can’t disclose what its trading desk is doing for fear of blowing itself up, then the bank shouldn’t be allowed to do it..."
http://delong.typepad.com/sdj/2012/05/what-jamie-dimon-doesnt-know-is-plain-scary-bloomberg.html
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"synthetic credit portfolio". Fantasy finance at its best! Why is this nonsense still being allowed to go on?
I suppose any discussion would have to include the Democrats as well as the Republicans for being complicit in failing to enact, or at least push for, regulations with teeth to prohibit and criminalize this fraud on the American people. But that's probably a no-no. Alas!
But, moving on....
The best all-around reference volume one could own, IMO, to make sense of all this, is a little paperback titled, "The Looting of America" by Les Leopold. I refer to it frequently. Mr. Leopold is not an economist, but confesses to having "a morbid curiosity about exotic financial instruments" for the past few years. Having decided to try to make sense of it all for the layperson, he concludes his introduction with, "...if I can understand this crap, so can you."
In that regard, his narrative of how five school districts in Whitefish Bay, Wisconsin, lost their shirts to the kind of "crap" Jamie Dimon promotes is truly horrifying.
Anyway, these synthetic derivatives consist of insuring something that you don't even own. It's not called 'insurance' of course, because the insurance industry is, well.....regulated. Imagine that!
As I understand it, you can't insure something in which you don't have a material interest; say, someone else's home. If one hundred people could buy fire insurance on your home, there would likely be a suspicious fire at some point. The insurance company would be paying multiple claims and you would be homeless. But for Mr. Dimon, this all works out quite well. Until it doesn't, of course. Then the taxpayer can foot the bill.
Jamie Dimon belongs in prison. For the rest of his life would be ok with me. What's wrong with our justice system?
I guess that's a rhetorical question.
