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shared by kevinan108 on 18 May 12 - No Cached

The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses.
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In March, the company raised the quarterly dividend by 5 cents, to 30 cents, which will cost the bank about $190 million more this quarter.
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At the bank’s annual meeting in Tampa, Fla., on Tuesday, Mr. Dimon did not definitively rule out cutting the dividend, although he said that he “hoped” it would not be cut.
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“JPMorgan Chase has a big hedge fund inside a commercial bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner. “They should be taking in deposits and making loans, not taking large speculative bets.”
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In its simplest form, traders said, the complex position assembled by the bank included a bullish bet on an index of investment-grade corporate debt, later paired with a bearish bet on high-yield securities, achieved by selling insurance contracts known as credit-default swaps.
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shared by kevinan108 on 18 May 12 - No Cached

He has, however, been fond of giving Gatewood-like speeches about how he and his colleagues know what they’re doing, and don’t need the government looking over their shoulders.
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So there’s a large heap of poetic justice — and a major policy lesson — in JPMorgan’s shock announcement that it somehow managed to lose $2 billion in a failed bit of financial wheeling-dealing.
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In the 1930s, after the mother of all banking panics, we arrived at a workable solution, involving both guarantees and oversight.
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It probably won’t last; I expect Wall Street to be back to its usual arrogance within weeks if not days.
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As far as we can tell, it used the market for derivatives — complex financial instruments — to make a huge bet on the safety of corporate debt, something like the bets that the insurer A.I.G. made on housing debt a few years ago.
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This system gave us half a century of relative financial stability. Eventually, however, the lessons of history were forgotten.
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No loopholes, no exemptions, no exceptions, no compromise, no ambiguous language. Until Congress reinstates it, moral hazard governs and the losers will be the Americans taxpayers. History will keep repeating itself unless politics and money are taken out of the equation.
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