JPMorgan Loses $2B on Synthetic Credit Securities

[lcjjdnh]

Whoops. Can we finally stop hearing about how brilliant of a CEO Jamie Dimon is now?


http://www.bloomberg.com/news/2012-05-10/jpmorgan-chase-says-cio-unit-suffered-significant-loss.html

JPMorgan Chase & Co. (JPM) said it lost about $2 billion tied to synthetic credit securities after positions taken by its chief investment office were riskier than expected.
“This portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed,” the New York-based company said today in a quarterly securities filing. JPMorgan declined 5.5 percent to $38.50 in extended trading at 4:51 p.m. in New York.
JPMorgan’s chief investment office has been transformed in recent years under Chief Executive Officer Jamie Dimon into a unit that makes bigger and riskier speculative bets with the bank’s money, five former employees of the bank said earlier this year. Some of the bets were so big that the bank probably couldn’t unwind them without losing money or roiling financial markets, the former executives said.
Dimon said last month that the bank is “very conservative” in investing the firm’s excess cash.

 

[BTExpress]

Don't forget his dynamic zeal in helping JPMorgan drive the Zell-Tribune deal to completion --- despite 23,000 red flags along the way --- with the prospect of a fraudulent conveyance decision still hovering over the whole mess.

 

[Azrael]

“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored,” Dimon said.

 

[poindexter]

In before "rogue trader" is dropped as an excuse.

 

[poindexter]

From the comments, god I hope this is true:

William Feader 9 minutes ago Collapse

JP is short 5 billion ounces of silver. If silver goes past 50 their losses will be in the tens of billions of dollars and they will have to cover.

Even if you only have 40 bucks to spare, buy an ounce of silver and help put this monster out of business.

 

[Azrael]

“These were egregious mistakes,” Mr. Dimon said on the call. “They were self-inflicted and this is not how we want to run a business.”

dealbook.nytimes.com/2012/05/10/jpmorgan-discloses-significant-losses-in-trading-group/?hp

 

[dooley_womack1]

Way to go, alphabets, you're gonna get the Net crashed

 

[TigerVols]

Here comes the summer economic collapse, right on schedule.

Good thing (a) Dimon earned all those millions he was paid (hi, Ragu!) and (b) Obama tried to keep Wall Street sweet by bringing Timothy Geithner and Lawrence Summers into his cabinet, who, in return, made sure "too big to fail" was never acted upon.

 

[Point of Order]

What the frick is a synthetic credit portfolio? What a ****head Jamie Dimon is.

 

[Point of Order]

Don't forget his dynamic zeal in helping JPMorgan drive the Zell-Tribune deal to completion --- despite 23,000 red flags along the way --- with the prospect of a fraudulent conveyance decision still hovering over the whole mess.

And who got left holding the bag? The employees who were told they could trade in their retirement plans for "ownership" in the company.

 

[Armchair_QB]

What the frick is a synthetic credit portfolio? What a ****head Jamie Dimon is.

I don't know but they found it in a sample of Ryan Braun's urine.

 

[deskslave]

Here comes the summer economic collapse, right on schedule.

Good thing (a) Dimon earned all those millions he was paid (hi, Ragu!) and (b) Obama tried to keep Wall Street sweet by bringing Timothy Geithner and Lawrence Summers into his cabinet, who, in return, made sure "too big to fail" was never acted upon.

Seriously. If the CEO deserves tremendously high pay when things are accomplished, surely he must be held responsible when things go wrong.

Otherwise, it's just another version of privatizing the gains and socializing the losses.

 

[Azrael]

"This puts egg on our face," Dimon said, apologizing on a hastily called conference call with stock analysts.

 

[Michael_ Gee]

Ever notice that in newspaper and other media reports, the phrase "hastily called" is never associated with good news?

 

[Baron Scicluna]

Here comes the summer economic collapse, right on schedule.

Good thing (a) Dimon earned all those millions he was paid (hi, Ragu!) and (b) Obama tried to keep Wall Street sweet by bringing Timothy Geithner and Lawrence Summers into his cabinet, who, in return, made sure "too big to fail" was never acted upon.

Seriously. If the CEO deserves tremendously high pay when things are accomplished, surely he must be held responsible when things go wrong.

Otherwise, it's just another version of privatizing the gains and socializing the losses.

Nahh, they'll just give him a bonus because the losses weren't $3 billion, or $4 billion or $5 billion. Because he "saved" the company.

And maybe next time, Dimon will worry a bit more about his company, and less time how much he thinks journalists are "overpaid".

 

[Azrael]

In a conference call after the market closed on Thursday, JP Morgan Chairman Jamie Dimon said, "There were many errors, sloppiness and bad judgement."

Peter Morici wholeheartedly agrees. A business professor at the University of Maryland, Morici compared JP Morgan's chairman to a local bookie.

"The difference between Jamie Dimon and the guy making book on the corner, on the horses, is Jamie wears a good suit," Morici said.

"He's not interested in making loans, he's interested in taking your deposits and gambling with them. He just gambled and lost."


www.wusa9.com/news/article/205040/158/JP-Morgan-Chase-Reports-2B-Loss

 

[The Big Ragu]

In a conference call after the market closed on Thursday, JP Morgan Chairman Jamie Dimon said, "There were many errors, sloppiness and bad judgement."

Peter Morici wholeheartedly agrees. A business professor at the University of Maryland, Morici compared JP Morgan's chairman to a local bookie.

"The difference between Jamie Dimon and the guy making book on the corner, on the horses, is Jamie wears a good suit," Morici said.

"He's not interested in making loans, he's interested in taking your deposits and gambling with them. He just gambled and lost."


www.wusa9.com/news/article/205040/158/JP-Morgan-Chase-Reports-2B-Loss

That is the case if JP Morgan can't make good on your deposits. If this effects nothing but JP Morgan's profits for shareholders, then it is irrelevant to your deposits or investments. That should be the case. ... but may not necessarily be the case.

We don't know what they lost $2 billion doing yet. The story could get much worse, still. Or it could be relatively contained. If they were long some synthetic index or complicated derivative involving European mortgages, the fallout could be huge. But that would have been insanity (not saying they DIDN'T do that, but it will be shocking if that was the case).

This sucks for Jamie Dimon, and the timing was poor, but not because it really has any affect on anyone on this board. It just gives juice to people like Paul Volcker who want to put restrictions on proprietary trading.

Before anyone rejoices out of glee about it, though, shouldn't we first know what they were doing and if they put their bank at risk? Sandy Weill put a bank into insolvency (without a bailout). Has Dimon done that? I doubt it, but we don't know yet to comment.

JP Morgan was the bank to buy, and he was the king of Wall Street, and this is a reputation hit -- from an investor's standpoint. But he is smart, and generally on top of things, so if I were the type who invested in financial equities, I would use any hit to JP Morgan's stock as a buying opportunity, because I'd bet with Jamie Dimon way more than I would bet against him, and count on the stock rebounding.

 

[The Big Ragu]

One other thing about Dimon and the fuel this is going to give people with regard to regulating proprietary trading. ... If you want a poster child for that cause, turn to Sandy Weill or Alan Schwartz. When they were busy making banks insolvent, JP Morgan was on solid footing and was forced by Hank Paulson and Ben Bernanke to take a "bail out" they didn't need or want -- because the government didn't want to signal which banks were about to fail and which weren't. JP Morgan would have benefited form its major competitors going out of business, though, and instead ended up taking one for the team -- in the forced interest of the greater good, as it was put to Dimon.

If that was the case then, then it is a bit unfair to use something like this to try to force more regulation with this as the rallying call. Dimon was one of the few people in a position like his, not to run a bank into the ground. If this is a contained mistake that affects only his business, it should remain that way.

 

[TigerVols]

To translate: Jamie Dimon made a colossal mistake, but he's a bright guy who never makes colossal mistakes so you should continue to invest in his abilities.

 

[TigerVols]

One other thing about Dimon and the fuel this is going to give people with regard to regulating proprietary trading. ... If you want a poster child for that cause, turn to Sandy Weill or Alan Schwartz. When they were busy making banks insolvent, JP Morgan was on solid footing and was forced by Hank Paulson and Ben Bernanke to take a "bail out" they didn't need or want -- because the government didn't want to signal which banks were about to fail and which weren't. JP Morgan would have benefited form its major competitors going out of business, though, and instead ended up taking one for the team -- in the forced interest of the greater good, as it was put to Dimon.

If that was the case then, then it is a bit unfair to use something like this to try to force more regulation with this as the rallying call. Dimon was one of the few people in a position like his, not to run a bank into the ground. If this is a contained mistake that affects only his business, it should remain that way.

This alone is proof that banks need more regulation: If a bank can lose $2 billion (plus potentially at least $1 billion in market cap) in less than 6 weeks, and not be "run into the ground," then that bank is just too damn big for the public good.