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June 13, 2012 8:46 PM   Subscribe

Last month, JP Morgan Chase announced it had lost $2 billion dollars in a 'hedging' maneuver. Today, Jamie Dimon, Morgan's chairman and CEO, testified before the Senate banking committee.

There, he said that 'trading strategy that led to bank's $2bn loss was "poorly conceived and vetted".

Meet the 'London Whale', the trader responsible for the position.

Esquire's Politics blog: "Master of the Universe Jamie Dimon went before Congress this morning, tugging his well-compensated forelock and explaining how terribly, terribly sorry he was to have had J.P. Morgan Chase, the death star for which he is currently employed, soak the system for $2 billion in losses through the kind of exotic trading that every Master of the Universe pinky-swore would never, ever, happen again after similar shenanigans nearly ate the world."

Naked Capitalism responds: "That is a bald faced admission that the CIO’s mandate had nothing to do with hedging."

Dimon previously on Metafilter:
The Big Lie goes viral

Interchange reform is necessary and it is long overdue.
posted by the man of twists and turns (69 comments total) 16 users marked this as a favorite

 
Burn it to the fucking ground.
posted by graventy at 8:52 PM on June 13, 2012 [23 favorites]


Open your wallet and give as much as you can to Elizabeth Warren for Senate
posted by humanfont at 8:55 PM on June 13, 2012 [23 favorites]


But guys if we regulate capitalism our amazing job creators like this will simply go somewhere else!

Seriously, let them. Deploy them as a weapon of economic sabotage.
posted by Ghostride The Whip at 8:55 PM on June 13, 2012 [25 favorites]


If the guy fixing my roof screwed up as badly as JP Morgan did, and then presented me with this list of excuses, there would be really bad stuff posted about him on Angie's List, all's I'm saying.
posted by KokuRyu at 8:56 PM on June 13, 2012 [4 favorites]


Well, the obvious solution is to tax them even less so that they don't have to suffer any more from this painful boner.
posted by Joey Michaels at 8:58 PM on June 13, 2012 [4 favorites]


Wow, so much fluffing going on in that Economist article (first link above) that it's a wonder JPMorgan isn't ready for the money shot right now.

“Wall Street isn’t going to change its ways until Washington gets serious about strong oversight and real accountability,” ran a campaign ad. Yet JPM is already among the most heavily regulated institutions in America, if not the world. Supervisors have employees climbing all over the bank; they routinely review its credit and business practices.


OK, it's heavily regulated. That doesn't mean it's well-regulated. Every senator and representative can pass their very own "We Mean It This Time!" bank reform bill, and there still (likely) wouldn't be one with teeth and eyes built into it.
posted by IAmBroom at 9:05 PM on June 13, 2012 [3 favorites]


Burn it to the fucking ground.

You do realize they've got hostages in there?
posted by benito.strauss at 9:07 PM on June 13, 2012 [6 favorites]


benito.strauss: "Burn it to the fucking ground.

You do realize they've got hostages in there?
"

And they're us.
posted by IAmBroom at 9:09 PM on June 13, 2012 [6 favorites]


Thanks so much for introducing me to Charles P. Pierce:

It finally happened. Something occurred in my second home that makes me sympathize with Scott Walker, the goggle-eyed homunculus hired by Koch Industries to manage their midwest subsidiary formerly known as the state of Wisconsin

or

Did Sandusky really find his lawyer while watching the public-access channels piped in directly from Stupid Hell?

"Jerry loves kids so much that he does things most of us wouldn't think of doing," Amendola said.

posted by KokuRyu at 9:11 PM on June 13, 2012 [14 favorites]


Time for the corporate death penalty.
posted by Slinga at 9:12 PM on June 13, 2012 [10 favorites]


Speaking to Al Jazeera, William Black, a former bank regulator and an associate professor of economics and law at the University of Missouri, said he agreed with a point made by one of the Democratic senators during Dimon's testimony - that JP Morgan was too big to manage and too big to regulate.

"What the administration is saying is that there are roughly 20 banks in America and about 15 outside of America, that if they fail - actually, when they fail - they will cause a global financial crisis," Black said.

"JP Morgan is top of that list."

Black described JP Mogan as a leading opponent of regulation that would reduce the risk of large banks "gambling on very risky derivatives".


Good night, Mefites. Sleep well. And remember: vote Republican, because the uber-wealthy are our job creators!
posted by IAmBroom at 9:13 PM on June 13, 2012 [1 favorite]


When the positions began to experience losses in March and early April, [JPMorgan Chase's traders] incorrectly concluded that those losses were the result of anomalous and temporary market movements, and therefore were likely to reverse themselves.

It's certainly possible to have anomalous prices in thinly-traded securities over a short period. It is not possible to have anomalous prices for hundreds of millions of dollars worth of securities for months on end. Jamie Dimon's statement, above, is the precise equivalent of a gambler pleading that the dice hadn't rolled a 7 for a long time now, and it was sure to happen in the next couple of rolls.
posted by Joe in Australia at 9:18 PM on June 13, 2012 [4 favorites]


I just heard some of this on NPR.

What's softer than kid gloves?
Because that's what Congress used.
Talk about softball questions.

I'll bet they laughed about it afterwards, while they shared cigars and champagne.
posted by Mezentian at 9:21 PM on June 13, 2012 [4 favorites]


and it was sure to happen in the next couple of rolls.

This morning I participated in a focus group about ETFs, for which I was paid 200 dollars for 90 minutes of my time. The homework suggested by the focus group recruiter was "go on your vanguard account and search for ETFs and see what comes up so you know what you're talking about". I don't own any ETFs but for 200 bucks I'm willing to fake my way through it. The result of my 45 minutes of reviewing the available ETFs at Vanguard and Fidelity reminded me very much of the first stroll through a casino where every conceivable variation of video poker, video roulette, video dice, video whatever, along with every twist on every parlor game every invented is blasted into your visual cortex with every imaginable combination of blinking red, yellow and blue lights. The whole thing is a friggin casino with the odds rigged in the banks favor and all the ''research" and "vehicles" available are simply marketing to distract you from that fact. It's bullshit.
posted by spicynuts at 9:23 PM on June 13, 2012 [9 favorites]


Talk about softball questions.

I'll bet they laughed about it afterwards, while they shared cigars and champagne.


I admittedly haven't watched a financial hearing in four years, but usually they're softball questions because the senators are ignorant and a bit dimwitted about the subject at hand.
posted by michaelh at 9:25 PM on June 13, 2012 [2 favorites]


I admittedly haven't watched a financial hearing in four years, but usually they're softball questions because the senators are ignorant and a bit dimwitted about the subject at hand.
posted by one more dead town's last parade at 9:26 PM on June 13, 2012 [2 favorites]


From what I gather, JPM was the largest spender on lobbying in DC, his aides either came to JPM from DC or went to work there for the senators who questioned him, and they are, in many cases, personal friends.

That the regulators can't figure out what's going on inside JPM, when apparently JPM can't figure out what it's doing because no one understand complex hedging, suggests something might be a bit off.

I don't want to overstate that last bit.
posted by Mezentian at 9:29 PM on June 13, 2012 [4 favorites]


The loss has reinforced the political appeal of bashing banks, no matter what the facts. Barack Obama went on a TV chat show on May 14th and responded to questions about the loss by implying it would have been blocked under the Volcker rule banning proprietary trading. Given the proposed wording of the rule and the apparent nature of the trade, which seems to have started out as an attempt to hedge risk, that assertion is at best a stretch.

I was hoping that a statements like these would be followed with facts to justify the assertions. But I forgot it was The Economist ("so cocksure of its rightness and superiority that it would be a shame to freight it with mere fact".
posted by vidur at 9:37 PM on June 13, 2012 [1 favorite]


Charting the Cozy Connections between JP Morgan and the Senate Banking Committee is a great piece from Mother Jones about the links between Dimon's company and the august representatives he faced across the table:

One current staffer on the Senate banking committee, Dwight Fettig, is a former lobbyist for JP Morgan. In 2009, the bank hired him to work on "financial services regulatory reform." Meanwhile, JP Morgan is stacked thick with former committee staff.
  • Naomi Camper- Currently a lobbyist for JP Morgan. Prior to that, from 2001-2004, she was an aide to Senator Johnson.
  • Kate Childress- JP Morgan lobbyist since 2008, she is also a former aide to Chuck Schumer, D-N.Y., who sits on both the Senate Banking and Finance committees.
  • Steven Patterson- A JP Morgan lobbyist and formerly a staff director for economic policy for the Banking committee.
  • Nate Gatten- A JP Morgan lobbyist based in London who was reportedly called back to Washington recently to help with the company's damage control. He is a former lobbyist for Fannie Mae, and, in the 1990s, was a banking aide to former Senator Robert Bennett, R-Utah, who also sat on the committee.
  • P. Michael Nielsen- A lobbyist with a firm run by former Senator Bennett, he has been retained by JP Morgan for help with federal probes, according to Bloomberg. He was also a senior policy adviser to the committee from 2007 to 2010.

And then we get to the campaign contributions:

  • JP Morgan is the second largest campaign contributor to Johnson, the committee chair, and to the top Republican on the committee, Richard Shelby of Alabama, over the past twenty years, according to a tally from American Banker.
  • JP Morgan employees have donated more than $80,000 to Johnson since 1998 and more than $136,000 to Shelby since 1990.
  • So far in 2012, Dimon has personally donated to committee members Bob Corker, R-Tenn., and Mark Warner, D-Va. In 2008, he gave $2,000 each to Johnson and Shelby.
  • Six of the 22 members of the banking committee have not received any money from JP Morgan PACs or employees in recent election cycles. Two of those members are retiring and aren't collecting campaign funds.

posted by mediareport at 9:38 PM on June 13, 2012 [8 favorites]


Banks are utilities and should be regulated that way.
posted by LastOfHisKind at 9:40 PM on June 13, 2012 [19 favorites]


Time for the corporate death penalty.
If we're serious about taking Citizens United/corporate personhood to its logical extreme, this is a fine question.
posted by Emperor SnooKloze at 9:47 PM on June 13, 2012 [3 favorites]


It's a million dense algorithms interacting in ways that are too complex for a usefully-sized group of humans to cooperatively understand.

It's bistro-math, and it will create faster than light travel.

LEAVE BISTRO ALONE!
posted by roboton666 at 9:50 PM on June 13, 2012


One of my favorite, long-since-dead blogs: Leveraged Sellout, had a pretty interesting last post on 16 Oct 2008: Remember the Titans: "It’s half-hearted though, and ultimately, I’ve come to accept that the structure we’ve all loved for so long is now completely obsolete."
posted by the man of twists and turns at 9:50 PM on June 13, 2012


Here's one guy who wasn't playing softball: Heckler calls CEO a crook to his face.
posted by flapjax at midnite at 9:51 PM on June 13, 2012 [7 favorites]


Bistromath
posted by roboton666 at 9:53 PM on June 13, 2012


Stuff like this makes me really hope that Dwolla manages to take off as an alternative to the traditional interchange system.
posted by heathkit at 10:06 PM on June 13, 2012 [1 favorite]


Enjoyed (in a pained and tragic kind of way) seeing/hearing Dimon being called a crook to his face.
posted by nickyskye at 10:09 PM on June 13, 2012 [2 favorites]


I admittedly haven't watched a financial hearing in four years, but usually they're softball questions because the senators are ignorant and a bit dimwitted about the subject at hand.

No. The senators are bought and paid for. If the senators aren't yet in The Club--and they usually aren't, for strategic reasons--then they will play softball because they want to keep rubbing up against that power. Why would they bite the hand that feeds them? If not for a re-election campaign, then for a nice, cush private sector "consultancy" after they're done with Congress.
posted by zardoz at 10:32 PM on June 13, 2012 [6 favorites]


If the senators aren't yet in The Club--and they usually aren't, for strategic reasons--

Are they mavrickey? Not playing by Washington's dadgum rules?

(Too soon?)
posted by Mezentian at 10:38 PM on June 13, 2012


I'm confused why this loss is a bad thing. It is inevitable that the current banking system collapse in on itself as it doesn't produce anything, and is trading air. When events like this happen, it is the bank self-destructing, and will likely bring about the realization that their inflated industry is unsustainable.
How is a reckless loss a bad thing for the world?
posted by niccolo at 10:46 PM on June 13, 2012 [2 favorites]


Because this industry's players make out like bandits if times are good or bad, but if they are bad (and they are very bad), then it takes government intervention to stop the bleeding. So we pay for the recklessness, but get no benefit from the good times.

Socialize the pain, privatize the profit.
posted by zardoz at 10:54 PM on June 13, 2012 [7 favorites]


Socialize the pain, privatize the profit.

Not to defend JPM, but please explain how the pain has been socialized in this case. The company will still make a profit for the year, just a much smaller one. The financial hit is going to fall almost entirely upon shareholders, and to a small extent upon secior executives if the talk of clawbacks is accurate.
posted by anigbrowl at 11:21 PM on June 13, 2012


please explain how the pain has been socialized in this case.

JPM is in the "too big to fail" category of banks, so if they mess up again, on a larger scale, and the bank goes under, it will be bailed out by the Fed backed by the US taxpayer.
posted by gen at 11:36 PM on June 13, 2012 [2 favorites]


But gay people want to get married and Obama is a socialist. And the LA Kings won the Stanley Cup ans Lance Armstrong has been falsely accused of doping (it was his blood right?).

Hey the Mea Culpa is trans formative admit your mistakes and you can move on, I mean your intentions were good you were trying your best to make money... whoops there goes a billion (LOL sure glad it wasn't my money I lost) fuck me if I lost a billion or two of my money it would hurt.

And the next election is going to be a cliff hanger trust me...

Why?
posted by pdxpogo at 11:53 PM on June 13, 2012 [1 favorite]


Was the bailout check scorched from writing it so fast?
posted by telstar at 11:55 PM on June 13, 2012


niccolo we are way past a reality check. N0 matter how bad they fuck up we (the American wage slaves) are going to buck up. See the 1% know they van weather the storm I mean there are no functioning guillotines and they can always find enough desperate people to defend them.
posted by pdxpogo at 12:03 AM on June 14, 2012 [1 favorite]


Was the bailout check scorched from writing it so fast?

What bailout check?
posted by anigbrowl at 12:11 AM on June 14, 2012


I found £5 on the pavement yesterday. So some of this money has been found. By me!
posted by srboisvert at 2:40 AM on June 14, 2012


Not to defend JPM, but please explain how the pain has been socialized in this case.

I think zardoz addressed that perfectly well:

Because this industry's players make out like bandits if times are good or bad, but if they are bad (and they are very bad), then it takes government intervention to stop the bleeding. So we pay for the recklessness, but get no benefit from the good times.


Jamie Dimon is very confident that, if JP Morgan loses too much money, the US Federal government will provide a bailout. Even if Dimon himself loses his job, his golden parachute(s) will ensure him a life of luxury that Louis XIV couldn't have dreamed of.

And he's probably right.

I'm not sure the phrase "moral hazard" is adequate anymore. How does one describe a system where unimaginable sums of money are gambled daily by men with only the slightest idea of how their trading algorithms even work but who make yearly bonuses surpassing the lifetime incomes of most Americans in the worst economy since the Great Depression? And who know - from recent experience - that the government will give them nearly unlimited sums of money if things go wrong? And these same Galtian overlords fervently believe that a couple of hundred dollar a month unemployment check and food stamps will make the vast majority of Americans into lazy, dependent bums?
posted by jhandey at 3:54 AM on June 14, 2012 [26 favorites]


I'm confused why this loss is a bad thing. It is inevitable that the current banking system collapse in on itself as it doesn't produce anything, and is trading air. When events like this happen, it is the bank self-destructing, and will likely bring about the realization that their inflated industry is unsustainable. How is a reckless loss a bad thing for the world?

Because we all live in their world, as 2008 showed us. As will the next upcoming financial collapse. And the next one.
posted by jhandey at 3:57 AM on June 14, 2012 [1 favorite]


q for schmod et al.: does the Senate actually have kneepads that staffers fetch for these sorts of occasions, or do the senators have to bring their own?
posted by indubitable at 4:25 AM on June 14, 2012 [2 favorites]


Good night, Mefites. Sleep well. And remember: vote Republican, because the uber-wealthy are our job creators!

I'll just put this here.

Not to defend JPM,

That seems to be exactly what you are doing.
posted by AElfwine Evenstar at 4:50 AM on June 14, 2012


Oh hey look at this. Less than half of what they gave to Obama.
posted by AElfwine Evenstar at 4:54 AM on June 14, 2012


Yet JPM is already among the most heavily regulated institutions in America, if not the world.

What industry doesn't claim the mantle of "most heavily regulated" anymore? It's like this claim has become bullet-point-one on the long list of Why Big Mean Government Should Leave Us Alone.
posted by Thorzdad at 4:58 AM on June 14, 2012




Assertion - The games in banking and finance have had some nasty effects, but they haven't messed with the real price of energy or food much, yet.

Evidence - In 1960, a US quarter ($0.25) bought about 1 gallon of gasoline. If you have that same 1960 non-debased quarter, the money it contains will still buy you a gallon of gasoline, and then some. It's actually gotten cheaper, in terms of hard money.

Assertion - If the banking system collapses, civilization will go with it, and 99% of us will starve within a year or two.

Discussion - If the banking system collapses, then it becomes impossible (or extremely inefficient) to finance large projects such as oil exploration, large pipeline projects, factories, trans-oceanic shipping, and all of the supply chain that keeps energy (and thus food) cheap.

In 2008, the bankers threatened suicide, and the congress bent over backward to write them a check to paper over their losses. What SHOULD have happened was bankruptcy proceedings for each and every failed firm, with audits from hell, and lots of prison terms.

When the system does collapse, unemployment isn't going to be our biggest concern, mass starvation will be. The Roman empire took centuries to decline, ours might not even last a single year because we have no slack in our supply chains.

To prevent this, it is necessary to reform our banks, before collapse starts, while regulation still has some foundation to rest upon. We haven't got much time left. If we wait too long, there will be no way to lend money globally, and global commerce will collapse.
posted by MikeWarot at 5:31 AM on June 14, 2012 [2 favorites]


There are hedged hedges; there are hedges we know that we hedged.
There are unwound hedges; that is to say there are hedges that, we now hedge that we didn't hedge.
But there are also unhedged unhedges– there are hedges we do not hedge, that we don't unhedge.


Et tu Menedez said it best, "a hedge or not a hedge."
posted by vozworth at 6:01 AM on June 14, 2012


...Well, you say that I'm an outlaw,
You say that I'm a thief.
Here's a Christmas dinner
For the families on relief.

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

And as through your life you travel,
Yes, as through your life you roam,
You won't never see an outlaw
Drive a family from their home.

-Woody Guthrie
posted by Benny Andajetz at 6:18 AM on June 14, 2012 [3 favorites]


The airlift was successful. London Whale spotted off the starboard bow. BREACH !!

-I'll show myself out now.
posted by vozworth at 6:32 AM on June 14, 2012


but they haven't messed with the real price of energy or food much, yet *cough*
posted by adamvasco at 6:37 AM on June 14, 2012


Firedoglake: "So then, here comes Jeff Merkley, after that display, and he lays this out. JPMorgan Chase took $29 billion in bailout money. They took $500 billion in loans from the Fed. They took who knows how much in counter-party payments from AIG. Without that federal intervention, wouldn’t YOU, Mr. Dimon, have been out of a job?"
posted by the man of twists and turns at 6:51 AM on June 14, 2012


IAmBroom: "benito.strauss: "Burn it to the fucking ground.

You do realize they've got hostages in there?
"

And they're us.
"

Directed by M. Night Shyamalan
posted by symbioid at 7:15 AM on June 14, 2012


Meanwhile, Kramer, the useful schmuck, calls Dimon "a loser" (but recommends a buy!)
posted by symbioid at 7:31 AM on June 14, 2012


Check out Jamie's cufflinks.
posted by jhandey at 8:12 AM on June 14, 2012 [1 favorite]


Open your wallet and give as much as you can to Elizabeth Warren for Senate
posted by humanfont at 8:55 PM on June 13 [18 favorites]


Seriously? Have you looked at the donators list for Warren and Brown? A fairly equal share for each comes from Wall Street. Warren's Harvard salary is endowed by Bernie Maddoff's Lawyer...
posted by Gungho at 8:14 AM on June 14, 2012


Warren's Harvard salary is endowed by Bernie Maddoff's Lawyer...

And Barack Obama has been seen palling around with known terrorist and ghostwriter Bill Ayers
posted by crayz at 8:38 AM on June 14, 2012


Seriously? Have you looked at the donators list for Warren and Brown? A fairly equal share for each comes from Wall Street. Warren's Harvard salary is endowed by Bernie Maddoff's Lawyer...

See how this works for the other side as a cheap political play, though? Spread the mud around nice and thick and get plenty on everybody. Then bank on the political puritans to enthusiastically turn on their own at the faintest hint or merest suggestion of hypocrisy or lack of principle. This is one of the main reasons we need electoral campaign funding reform: the current system makes it impossible not to end up with conflicts of interest and political obligations to donors if you want to be able to compete effectively in the system.
posted by saulgoodman at 9:40 AM on June 14, 2012 [1 favorite]


Overheard two people at my job talking about undocumented aliens, and how in Iran (there’s a country we want to emulate) people who illegally cross the border (all those people who are so desperate to get into Iran?) are put in jail for two years. We should do that here, doncha know. (No feedback on who’ll be paying for the prisons …)

Anyway, I try to avoid getting involved in the fairly frequent, loud office discussions of politics and religion. But just having read this thread this morning, and being sick, and sick of the job, I asked them in so many words if they’re equally outraged about J.P. Morgan.

Replied one (the somewhat more liberal of the two): “Who’s J.P. Morgan.”

Me: “Well, there’s your problem.”

And thus more evidenc of how the great right-wing propaganda machine continues on its glorious and quite successful quest to blame all Those Poors (Illegals, Browns, Gays, Uppity Women) while mightily distracting the dunderheads and dittoheads from the wholesale financial raping of everyone else by the 1 percent.

[Whew, getting dizzy. Stepping down from my soapbox.]
posted by NorthernLite at 10:39 AM on June 14, 2012 [2 favorites]


The thing that especially bugs me about the phrase "most heavily regulated" is that it carries within it the assumption that regulation is something that restricts business. In most cases, it's more appropriate to see regulation as the thing that provides the framework that allows business to exist in the first place.
posted by You Can't Tip a Buick at 10:39 AM on June 14, 2012 [4 favorites]


You Can't Tip a Buick: ". In most cases, it's more appropriate to see regulation as the thing that provides the framework that allows business to exist in the first place."

And occasionally something that is put in place by the business leaders themselves, to poison the well for others. Because competition is only a good thing if you're a consumer - to a vendor, it means lower profits and a harder market (at least, in the near term).

So, a heavily regulated industry may be that way because it's rigged to help existing businesses succeed.
posted by IAmBroom at 12:29 PM on June 14, 2012 [3 favorites]


The thing that especially bugs me about the phrase "most heavily regulated" is that it carries within it the assumption that regulation is something that restricts business. In most cases, it's more appropriate to see regulation as the thing that provides the framework that allows business to exist in the first place.

Or as the framework that makes entering the market so expensive that large businesses are protected from competition.

It's so frustrating that the debate is always about "more" or "less" regulation, and never "effective" regulation.
posted by heathkit at 12:30 PM on June 14, 2012 [3 favorites]


Jamie Dimon is very confident that, if JP Morgan loses too much money, the US Federal government will provide a bailout.

Yes, but people here are complaining as if the government was already picking up the tab for this $2 billion loss. It isn't. It is not costing you or I a penny, unless you happen to own shares in JP Morgan and are facing a smaller dividend. Did this loss risk destabilizing the financial system? Absolutely, it's why we need more effective (and arguably simpler) regulation. Have JP Morgan shareholders been bailed out for this loss? Absolutely not.

Let's try not to mix up past and future here.
posted by anigbrowl at 2:40 PM on June 14, 2012 [1 favorite]


He lost $2,000,000,000? He's still CEO?

What the actual fuck do today's CEO's have to do to get drop-kicked?
posted by Twang at 10:39 PM on June 14, 2012 [1 favorite]


Let's try not to mix up past and future here.

It's a systemic problem, but you know that.
posted by ryoshu at 8:10 PM on June 15, 2012


Tufts professor Amar Bhide says Dimon remarks 'Preposterous, Orwellian.' (Bloomberg Video)
posted by the man of twists and turns at 6:54 AM on June 16, 2012










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