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Wednesday, May 30, 2012
Too Big To Fail: JPMorgan Rolls the Dice, Loses $2 Billion
JPMorgan CEO Jamie Dimon and accomplices, who are Too Big To Jail, discovered their proprietary trading operation not only made bad bets but was running amok. Dimon then had to come to the altar of the financial world and confess only sins that had to be publicly disclosed. In an extraordinary press conference on Thursday, May 10, CEO Dimon revealed that the corporate investment office, the prop trading desk, had suffered losses of $2 billion dollars from synthetic derivatives, 'credits'. Just in the past 6 weeks. A minimum net loss of $800 million was expected to be recognized in this current quarter, the QE 6-30-12. The remaining losses were being offset by realizing gains on available for sale securities, selling securities with unrealized gains.
JPMorgan Chase & Co. is the largest bank in the United States with total assets of $2.3+ trillion and is Too Big To Fail in the USA and global financial system. The privately held USA central bank, the Federal Reserve, has laid hands and anointed them a bank holding company. Both the Federal Reserve explicitly and United States taxpayers, via Congress and the President implicitly, have guaranteed JPMorgan and all the big banks against financial failure. This is due to the Wall Street Banksters effectively paying off, er, I mean lobbying, Congress and the President. In past, simpler times these were called bribes.
The big banks of America can legally gamble via proprietary trading. That is, the big banks can play the market, any market these criminals can think of, on their own behalf and hope they make some extra money. In short, this Mafia operation called the President, Congress, and Big Banks expect USA taxpayers to pick up any resulting tab ultimately, if they lose everything to the casino.
Wouldn't the regulators prevent all this obviously illegal mayhem? Forget the revolving regulatory door called the SEC, FRB, FDIC, et al. The boards and leaders of these regulatory agencies are the Banksters themselves. Yep, the old story of the fox watching the hen-house. They showed how incompetent and corrupt they were when the entire financial system almost melted down in 2008! They were on deck steering the Titanic. Turning a blind eye was renamed systemic risk. Certain corrupt Congressmen have even said if the rules are too strict they will push to cut funding to regulatory agencies so they couldn't effectively enforce any pesky rules against their masters.
The solution to this taxpayer-guaranteed greed is very simple. Reinstate the Glass-Steagall Act of 1933, which separates banks from all this nonsense. The separately funded trading company can gamble all they want - with their own damn money - their capital. The bank is separate, behind a firewall, with its own capital and operates as a traditional bank. But nooo, the Mafia Banksters don't want that. Then came the Dodd–Frank Wall Street Reform and Consumer Protection Act and the Volcker Rule. The original Volcker Rule would prohibit proprietary trading by banks. But nooo, the Mafia Banksters don't want that either, of course. So the foot-dragging, proposals, lobbying, pay offs, and bribing continues as the Volcker Rule is threatened, debated, and watered down.
The Banking Act of 1933 (Glass–Steagall Act) limited commercial bank securities activities and affiliations between commercial banks and securities firms. Slowly exceptions were made to the Act, creeping favoritism. The Gramm-Leach-Bliley Act in 1999 was the nail in the coffin for the already weakened Glass-Steagall Act. The 2008 financial system meltdown was then inevitable and just a matter of time. It can also happen again as the Wall Street Banksters are still in command of the political and regulatory system.
From my review of JPMorgan earnings reported April 13, 2012: "The traditional banking business is a component, but not all of JPMorgan, no matter how much management talks about banking. About 30% of total assets are net loans and 36% are trading assets and investment securities. Cash, cash equivalents, securities, and trading assets combined are 60% of total assets. Ultimately that leaves 10% in non-earning assets such as goodwill and buildings. Just keep in mind when trading JPM stock, you are trading their traders for a portion of the quarterly earnings per share lotto".
JPMorgan Disclosure and Confession Filed via SEC Form 10Q on May 10, 2012
In Corporate, within the Corporate/Private Equity segment, net income (excluding Private Equity results and litigation expense) for the second quarter is currently estimated to be a loss of approximately $800 million. (Prior guidance for Corporate quarterly net income (excluding Private Equity results, litigation expense and nonrecurring significant items) was approximately $200 million.) Actual second quarter results could be substantially different from the current estimate and will depend on market levels and portfolio actions related to investments held by the Chief Investment Office (CIO), as well as other activities in Corporate during the remainder of the quarter.
Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO's synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO's AFS securities portfolio. As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value.
The Firm is currently repositioning CIO's synthetic credit portfolio, which it is doing in conjunction with its assessment of the Firm's overall credit exposure. As this repositioning is being effected in a manner designed to maximize economic value, CIO may hold certain of its current synthetic credit positions for the longer term.
Accordingly, net income in Corporate likely will be more volatile in future periods than it has been in the past.
JPMorgan Trading Loss Own Words May 11 (Bloomberg) -- Jamie Dimon, chief executive officer of JPMorgan Chase & Co., and Bloomberg's Dawn Kopecki and Christine Harper talk about JPMorgan's $2 billion trading loss after what Dimon said was an "egregious" failure in the firm's chief investment office. This report also includes comments from Bloomberg Television contributing editors William Cohan, Thomas Brown and Neil Barofsky, Portales Partners' Charles Peabody, Aegis Capital's Stanley Crouch, Fifth Third Asset Management's Keith Wirtz and Rochdale Securities' Richard Bove. (Source: Bloomberg)
Watch video here.
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