“Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank.”
~Mark Williams, a professor of finance at Boston University
So – now … news is coming out that JP Morgan Chase’s proprietary trading losses could total $9 BILLION on a series of trades that were supposed to “minimize risk” at the bank. Yeah … got it. We’ve written about the huge trading losses before HERE; if you don’t know the story about JP Morgan’s huge losses … you need to read the article.
Just remember every single time you hear someone say they want to repeal the Dodd-Frank act … they are saying they believe in the idea that markets can regulate themselves. They are saying that what happened in 2008 was just an anomaly and that if only we would not hold the banks back … America would be creating 1 million jobs an hour, everyone’s pay would double and each American citizen will receive one free vintage “Tickle Me Elmo” delivered to their door.
People who talk about repealing the Dodd-Frank law are promising you the world … and if you’re stupid enough to believe it – you deserve what you get … but do your neighbors, friends and family? One notable campaigner in chief against the Dodd-Frank law is Mitt Romney; he has promised to unshackle these banks (who are people) from the burdensome chains of government regulation. Of course – Mitt Romney is getting 80% of all Wall Street money right now … so I’m sure that’s all just a coincidence. </sarcasm>
What three of my favorite liberals have to say about JP Morgan Chase
Bernie Sanders says we need to break up these big banks HERE, Elizabeth Warren says that banks can’t regulate themselves properly HERE and Paul Krugman says that Chase’s behavior is reminiscent of the behavior by banks in 2008 that led us into a financial crisis HERE.
The NY Times explains the fallout HERE:
The bank’s exit from its money-losing trade is happening faster than many expected. JPMorgan previously said it hoped to clear its position by early next year; now it is already out of more than half of the trade and may be completely free this year.
As JPMorgan has moved rapidly to unwind the position — its most volatile assets in particular — internal models at the bank have recently projected losses of as much as $9 billion. In April, the bank generated an internal report that showed that the losses, assuming worst-case conditions, could reach $8 billion to $9 billion, according to a person who reviewed the report.
With much of the most volatile slice of the position sold, however, regulators are unsure how deep the reported losses will eventually be. Some expect that the red ink will not exceed $6 billion to $7 billion.
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