Saturday, May 12, 2012

Wall Street Journal: J. P. Morgan's $2 Billion Blunder

The Too Big To Fail Banks are failing again.

Yesterday and today the Wall Street Journal reported on J. P. Morgan's blunders.
The headline of this post is from the WSJ May 11, 2012 p. A1.

Today (5/12) the WSJ has another lead article: "Bank Ordered Flawed Trades" (pp. A1, A2).

Today's article notes that the person likely to have to take the fall is Ina Drew (a woman).

JP Morgan must have watched the film, Margin Call.

Gerald Celente is right when he says that these "White Shoe Boys" will protect their corrupt own. Women and minorities will be targeted as the rogues.

Anyway, the problem is that these too-big-to-fail monsters tend to take the entire market down with them. Get ready for some market turbulence.

Here is a brief excerpt from Robert Reich's commentary: Resurrecting Glass-Steagall. Robert Reich's Blog 11 May 12

[excerpt] "J.P. Morgan Chase & Co., the nation’s largest bank, whose chief executive, Jamie Dimon, has lead Wall Street’s war against regulation, announced Thursday it had lost $2 billion in trades over the past six weeks and could face an additional $1 billion of losses, due to excessively risky bets.

The bets were “poorly executed” and “poorly monitored,” said Dimon, a result of “many errors, “sloppiness,” and “bad judgment.” But not to worry. “We will admit it, we will fix it and move on.”

Move on? Word on the Street is that J.P. Morgan’s exposure is so large that it can’t dump these bad bets without affecting the market and losing even more money. And given its mammoth size and interlinked connections with every other financial institution, anything that shakes J.P. Morgan is likely to rock the rest of the Street..."
ZeroHedge is reporting that Fitch downgraded JP Morgan and has it on watch. ZeroHedge also warns of turbulence to come

[excerpt from Zerohedge article] "In addition, ongoing volatility and further losses are likely to arise from these positions as the firm unwinds them, creating some uncertainty. The firm's Value at Risk (VaR) methodology was also changed in first-quarter 2012 (1Q'12) but subsequently reverted back to the original methodology. This resulted in a near doubling of VaR to $170 million, from 4Q'11 VaR of $88 million. The variance emanated from the CIO VaR and a negative $47 million diversification benefit. Fitch believes this also highlights some problems with modeling related to this portfolio...."

Naked Capitalism examined the VaR model in more detail: JP Morgan Loss Bomb Confirms that its Time to Kill VaR (Vallue at Risk Model) Friday, May 11, 2012

[Excerpt Naked Capitalism ] "One of the amusing bits of the hastily arranged JP Morgan conference call on its $2 billion and growing “hedge” losses and related first quarter earning release was the way the heretofore loud and proud bank was revealed to have feet of clay on the risk management front. Jamie Dimon said that the bank had determined that its value at risk model was “inadequate” and it would be using an older model. And no wonder. The Financial Times report contained this bombshell:
JPMorgan also restated its “value at risk”, a measure of maximum possible daily losses, of the CIO [the unit that executed the trading strategy that blew up] in the first quarter from $67m to $129m
“Restating” greatly underplays the significance of what happened. VaR is a prospective risk metric....

Majia here: How long are we going to allow these too-big-to-fail monsters to sabotage our economy? 

They create market massive market disruptions. 

They monopolize the economy and destroy competition through their predatory acquisitions. (See Lynn's Cornered for the best discussion of this)

The too-big-to-fail banks are parasitic and they are intimately entwined with the oil-nuclear-complex that is poisoning our planet as well.


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