Wordle-Testimony JPMorgan Chase CEOOoops. We’re sorry. We won’t do it again.

In a nutshell, that’s what JPMorgan Chase CEO Jamie Dimon will tell Congress Wednesday as he testifies before the Senate Banking Committee. Dimon has to explain how the bank lost $2 billion in trades. Not in 2008. In December 2011.

It’s not our fault, we just didn’t understand the risks. From Bloomberg:

Dimon expressed regret over losses in the bank’s chief investment office, saying that its trading strategy was “poorly conceived and vetted” by senior managers who were “in transition” and not paying adequate attention.

This is the same man who “railed” against an increase in capital requirements last year, concurrently with JPMorgan Chase “using derivatives to hedge more than $1 trillion of loans and bonds.”

The U.S. Justice Department, the Commodity Futures Trading Commission and the Securities and Exchange Commission have announced investigations of the hedging activity undertaken by the JPMorgan chief investment office (CIO).

In 2008, the Federal Reserve made it possible for JPMorgan Chase to buy Bear Stearns, to prevent its bankruptcy. According to cNet, “Bear Stearns CEO James Cayne made $61.3 million from selling his shares a day after the JP Morgan bailout.” There is no honor among thieves or bankers.

Analysts have been taking swipes at JPMorgan Chase, both for its actions and Dimon’s apology.

From David Cay Johnson at Reuters:

JPMorgan’s trades got around the Volcker rule, which tries to prevent banks from speculating in financial derivatives, by labeling as “hedges” bets that were clearly not hedges.

As Black puts it, JPMorgan is now defining as a hedge “something that performs in exactly the opposite fashion of a hedge.” A hedge is supposed to reduce risk, but according to Black, the losses came from deals that “dramatically increased risk by placing a second bet in the same direction, which compounded the risk.”

[…]

The Too Big To Fail banks’ triple play of lobbying, campaign donations and lucrative jobs for family and friends of Washington officials, elected and appointed, blocks real regulation…  Washington regulators are looking for problems in all the wrong places, when they are looking at all.

From ZeroHedge:

It does seem however that our initial perspective on this being a systemic risk hedge (i.e. a ‘delta-hedged’ senior tranche position as opposed to some easily managed and understood pairs trade) that rapidly grew out of control due to risk control inadequacies, is absolutely correct – though we suspect that is as close to the real truth anyone will ever get.

I’d like to say that it matters who wins the WhiteHouse when it comes to regulating Wall Street, but neither Bush nor Obama did much to push back against Wall Street interests.

KATHY GILL, Technology Policy Analyst
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Copyright 2012 The Moderate Voice
  • The_Ohioan

    Last night on the radio I heard a prominent Wall Street member suggesting that Glass-Steagall must be reinstated. When even the brokers are nervous, we’re in big trouble.

    “..neither Bush nor Obama did much to push back against Wall Street interests.” There it is again – “they both do it”. No they don’t. Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Bush didn’t sign any such thing, more’s the pity.

  • merkin

    Not to mention that Romney has promised to get rid of Dodd-Frank entirely, to repeal it.

    Also, the Great Financial Crisis wasn’t caused by deregulation as much as by the Bush administration’s failure to regulate, to enforce the existing laws and regulations. Does anyone believe that a Romney administration would be an improvement in this regard? That they would actually enforce the existing laws? The Republicans in the House have proposed cutting the budget of the regulatory agencies; in some cases to below what they were in the Bush years.

  • RP

    Can anyone tell me why clinton made such a big deal about signing the repeal of Glass Seagall/ Seem like this is a major contributor of banks entering into investing opportunities that increase risk.

    And if Dodd frank and all the othr regulations are so good, why has the too-big-to-fail banks become bigger under increased regulation. before the crash, they controlled about 42% of total assets in the US. Now they control about 57% of the total assets. Isn’t this what regulations is suppose to keep from happening?

    I am not against regulation. I think Galss seagall should never have been repealed. But the regulations in place today seem to be working against preventing another crash with banks becoming much larger under increased regulations.

  • The_Ohioan

    RP

    Because Clinton was one of several Dems who thought (or were persuaded by monied contributors) that banks needed more freedom in a global economy. More fools, they.

    Dodd Frank got watered down, including by Scott Brown who was the necessary vote to get it passed, and now we see the results.

    http://thinkprogress.org/politics/2010/12/12/134614/banks-brown/

    All this before CU. Now there’s little hope that these errors will be corrected. Unless Wall Street gets so nervous they take the Banks in hand.

  • slamfu

    “Can anyone tell me why clinton made such a big deal about signing the repeal of Glass Seagall”

    Lol yea, Clinton made a big deal about passing the GRAMM-LEACH-BLILEY act. What’s that you ask? Yes, those are three republican names on that bill. Clinton only signed the bill as part of a deal that included increased lending to minorities. That program was a pretty big success btw in the first few years, until the banks ran out of mortgages to bundle into new securities and literally removed any requirements, like actually stating your real income, for getting loans so they could churn out loans as fast as their automated system could get people to sign.

  • In rebuttal to my lumping Obama with Bush re Wall Street — please read the Reuters analysis.