E
EmptyTimCup
Guest
WTF - Sloppiness and Bad Judgement ...........
WTF - Sloppiness and Bad Judgement ...........
Larry Gude
Strung Out
What's the big deal? Can't we just float them a few bil? Why should they have to suffer the consequences of their actions?
:shrug:
:shrug:
The check has probably already been cut...just waiting on Timmeh's signature.
Larry Gude
Strung Out
That. Besides...2 billion is barely a dent in the 18 billion that JP is projected to earn this year. Good grief..talk about a lot of noise about little news.
E
EmptyTimCup
Guest
Larry Gude
Strung Out
And people still insist TARP worked.
What does a 'routine trading loss' on a hedge maneuver that hit yearly profits maybe 10% have to do with TARP?
Larry Gude
Strung Out
From what I've read, this loss is the result of yet another incredibly complex 'product' akin to the 'products' that were used as, essentially, a smoke screen for the truth during the housing bubble up and burst. Point being, all TARP did was kick the can down the road. None of that crap is particularly cleaned up and it is because no one wants it to be cleaned up because, if they did, then it would be readily obvious how bad TARP was.
TARP made it possible, and likely, Too Big to Fail wouldn't be done away with meaning it's just waiting to happen again. This is simply a symptom of the larger fiscal ailment.
Tilted
..
I'd guess you're being sarcastic, but in case not: They don't need money as a result of this and they will suffer the consequences of their actions just like they (and most other banks) did during and after the financial crisis a few years ago. That's a point that seems to be lost in all the vitriol and blame-shifting. The banks suffered significant loses as a result of the bad or risky deals, trades, and loans that they made. They continue to suffer significant losses as a result. The owners of those banks suffered significant losses as well.
What didn't happen is the financial system didn't completely seize up such that institutions and people alike - J.P. Morgan, Wells Fargo, you, me, most every one of us - suffered even more devastating losses, perhaps complete financial annihilation, as a consequence of things that others did. With the exception of possibly a few institutions, the banks weren't saved from the damage they brought on themselves - they suffered that damage. They were saved from the damage that would have been brought on them by the system shutting down - the damage brought on by other's mistakes and by our collective mistakes and/or extravagances.
In that sense, they were bailed out - but no more so than you or I were. We were protected from general damage that might not have been of our specific making, just as they were. The specific damage that was of their specific making they were allowed to take, just as you and I should be allowed to - though there seems to be a push now to protect individual people from the specific damage that was of their own specific making through mortgage right downs and the like. That kind of protection - that kind of bailout - is something that most of the banks did not receive. It was the system that was protected, it was saved by being greased - it just so happens that the grease joints through which the lubrication would have to have been injected were the bigger banks - that was the only way to get enough grease in fast enough to keep the whole machine (which you and I and the banks and everyone else are a part of) functioning. Those individual banks didn't benefit from the liquidity injection any more than you and I did - in fact, they were asked to pay for being the injection points. They lost money on the deal. They didn't get to keep that money and use it to offset the bad loans or trades they had made. And it looks like we (i.e taxpayers collectively) are gonna end up making money off of the deal.
All that said, I'd reiterate that I think TARP should not have been done. I think it was a mistake not because it failed, but because it succeeded (i.e. in doing what it was intended to do). And I say that not because it was some kind of unfair handout to the banks, because for the most part it wasn't. I say that because it was just kicking the can down the road as you've said. The delusion that we've built up needs to be exposed, and that means letting things crash, so that we can build anew on solid bedrock.
There's been a whole lot of blame shifting regarding this situation - a whole lot of denial of responsibility - a whole lot of imagining some kind of benefit that others (i.e. the banks) got that we didn't get. It's just not reflective of reality and what actually happened. People and banks alike are responsible for what happened - mistakes were made and extravagances were enjoyed by many. And the banks paid the price for their recklessness just as the rest of us should be expected to do.
Back to the current JP Morgan situation, it's gotten a bit overblown. Some of the trades that JP Morgan has made recently have turned out to be bad - they've been on the wrong side of the deals - just as some of their trades have been good. On the whole they're still well ahead, even considered just on a quarterly basis. All trades are risks and some will be bad while others are good - the only thing that really matters is that you come out ahead on the whole. Believe it or not, even some of the trades or investments I make turn out to be losers.
(freakin' JC Penney 
).JP Morgan remains very profitable and is no where near a liquidity problem. If it weren't for the reality that some pundits and politicians were looking for ammunition to advance efforts to implement more aggressive government regulation (even though the regulation their advancing likely would likely have had no effect on the trade in question - on this JP Morgan loss), most people would never have been aware of this loss as the mainstream media wouldn't have picked up on it. That's not to say it isn't a big deal, that it isn't important, that's just to say that it isn't a big deal for anyone but JP Morgan investors and would-be investors. It should matter to them, but there isn't much reason why it should matter to most others - other than that it can be used by pundits and politicians to persuade people that don't have the foggiest idea of what it means to agree with mostly unrelated agendas.
I would note that JP Morgan's CEO Jamie Dimon's general demeanor and way of dealing with things probably provided some fuel for the fire. He's as straight forward a business executive as you will find. He's upfront, takes responsibility, and leaves no room for others to (fairly) be more critical of him and his bank than he has been - even if that means being self-depracting and a harsher judge of their performance than is warranted. His style is such that he would have wanted to get the scale of the problem out there from the very beginning instead of downplaying it and then gradually over time painting a worse and worse picture. He described the error as egregious because he sets such a high standard for himself and his bank and expects not to make the kinds of mistakes that other banks might make. (No, I do not own any JP Morgan stock nor do I recall ever having owned any.
) Within the financial world, this is a bit of a story precisely because it is JP Morgan, which is widely regarded as the best run and most responsible large bank, and Jaime Dimon, who is widely regarded as the best of the best. IF I was interested in investing in banks for any significant period of time (which I am not), that's probably the bank I'd invest in.
Tilted
..
I doubt they were talking about what JP Morgan was worth, but if they were then they were way off. They were probably talking about assets under management which, last I looked, were significantly more than $1 Trillion.
TARP did work. How can that be denied? How may people went to their bank in December 2008 to find that, despite supposedly having $23,000 in their account, there was no money for them? How many people's paychecks bounced despite their employers supposedly being in good financial shape? How many people's mortgage checks, which they had every reason to believe were good because they thought they had plenty of money in the bank, bounced? How many riots in the streets were there and how many pitchforks were carried to the steps of the Capital? Some of the elected politicians that passed TARP ended up being selected, that's proof that TARP worked.
Now, if you're point is that TARP didn't work (in so far as your and my desires are concerned) precisely because it did work (in so far as its advocates intentions are concerned), then I'd agree with you.
Pete
Repete
I doubt they were talking about what JP Morgan was worth, but if they were then they were way off. They were probably talking about assets under management which, last I looked, were significantly more than $1 Trillion.
TARP did work. How can that be denied? How may people went to their bank in December 2008 to find that, despite supposedly having $23,000 in their account, there was no money for them? How many people's paychecks bounced despite their employers supposedly being in good financial shape? How many people's mortgage checks, which they had every reason to believe were good because they thought they had plenty of money in the bank, bounced? How many riots in the streets were there and how many pitchforks were carried to the steps of the Capital? Some of the elected politicians that passed TARP ended up being selected, that's proof that TARP worked.
Now, if you're point is that TARP didn't work (in so far as your and my desires are concerned) precisely because it did work (in so far as its advocates intentions are concerned), then I'd agree with you.
Booya!
Tilted
..
I wouldn't call it a routine trading loss, but at the same time it seems to me that it's been quite overblown. This is an important development for JP Morgan investors, but its legitimate importance beyond that is pretty limited - on that point I'd agree with you.
If my understanding of the situation is correct, the trade (in its entirety) does represent a bit of boneheadedness - a failure to pay enough attention to the big picture.
If my understanding is correct, the issue isn't so much the complexity of what was going on. It's more that JP Morgan found itself on the unpopular side of the trade but yet continued to build its position on that side of the trade (i.e. selling insurance against potential corporate defaults) to the point that it, for practical purposes, became the whole market on that side of the trade. It seems that that's what its trading partners realized and why they were able to take advantage of JP Morgan's precarious position to their benefit and JP Morgan's detriment. JP Morgan was providing so much supply that it eventually was going to have to stop, and when it did and needed to unwind the trade there wouldn't be anyone (or enough people) there that wanted to take the side of the trade that they had been taking. They shot themselves in the foot by pushing the price (that they were receiving) too low with oversupply, and creating a situation where when they stopped supplying the market, the price (at which they would then need to be buyers or remain stuck with an undesirable position) would rise significantly. They just built too large a position and left themselves unable to unwind some of it without taking large losses.
I should qualify those comments by pointing out that we aren't certain yet what happened - what caused this reported loss. A consensus seems to be forming around what it most likely was though.
Larry Gude
Strung Out
TARP did work. How can that be denied? ...
Now, if you're point is that TARP didn't work (in so far as your and my desires are concerned) precisely because it did work (in so far as its advocates intentions are concerned), then I'd agree with you.
Yup. My bad. We settled this awhile back; TARP didn't work because it did work.
kwillia
n/a
Well, come to find out it's not quite 2 billion but actually closer to 9 BILLION...:
JPMorgan Trading Loss May Reach $9 Billion - NYTimes.com
More than profits are at stake. The growing fallout from the bank’s bad bet threatens to undercut the credibility of Mr. Dimon, who has been fighting major regulatory changes that could curtail the kind of risk-taking that led to the trading losses. The bank chief was considered a deft manager of risk after steering JPMorgan through the financial crisis in far better shape than its rivals.
“Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner.
A spokesman for the bank declined to comment.
JPMorgan Trading Loss May Reach $9 Billion - NYTimes.com
More than profits are at stake. The growing fallout from the bank’s bad bet threatens to undercut the credibility of Mr. Dimon, who has been fighting major regulatory changes that could curtail the kind of risk-taking that led to the trading losses. The bank chief was considered a deft manager of risk after steering JPMorgan through the financial crisis in far better shape than its rivals.
“Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner.
A spokesman for the bank declined to comment.
Tilted
..
That's someone's speculation. The total losses will most likely reach more than $2 Billion, but we won't know for a while - the position is still being unwound and any number trying to estimate the final losses would necessary fluctuate depending on what happens with the trades / market on a daily basis.
Mr. Dimon was clear from the beginning, in the original conference call, that the losses might end up being more. The $2 Billion number was at that time. I don't think anyone (i.e. that actually listened to the conference call) thought that would be the total extent of the losses - at least, they shouldn't have.
But we shouldn't lose sight of the likely reality that this portfolio itself, let alone the bank as a whole, is still in the black. I believe Mr. Dimon reported that it had something like $6 Billion or $8 Billion in unrealized profits in it - i.e. profits above those that have been booked (by selling the positions). Some of those profits have been booked ($1 or $2 Billion is what I recall having been reported) now to offset the losses that we're referring to. It's a bit more complicated, but not unlike having a stock portfolio with 10 positions where 9 of them combined have profited a bunch of money but 1 of them has lost a bunch. The portfolio itself has still been profitable, but one really bad trade (or series of trades) has reduced that overall profitability quite a bit. Not all trades work out, that's not what really matters. Did you do well overall? That's the important question. Here, the answer is likely yes - but not as well as we could have had we not been completely boneheaded in one area.
I'd also point out that announcing these losses (and more to the point, the ongoing undesirable position and intentions to unwind more of it) probably exacerbated, and will continue to exacerbate, the losses. It's announcing to the people you need to buy this stuff that you need to get rid of it. Even realizing that, Mr. Dimon felt he should disclose the situation when he did (as opposed to, e.g., at the next quarterly earnings conference call) because stakeholders had a right to now about the situation. It may or may not have risen to a level that they were probably legally required to disclose it when they did. That point is arguable. Either way, it's in Mr. Dimon's character to be pretty forthright and they did disclose it, and that probably hurt the bottom line for JP Morgan some.
Tilted
..
JP Morgan released its earnings for the second quarter a couple of weeks ago. But it looks like no one has followed up on this issue (at least, not in this thread), so I thought I'd post their release here and hit a couple of relevant points.
The pre-tax loss from this situation ended up being $4.4 Billion (after-tax loss was $2.7 Billion). That's probably toward the middle of the range of expectations I heard. JP Morgan still posted a $5.0 Billion profit for the quarter, I'd guess in part because it chose to realize some gains from other trades to help soften the sting from the losses associated with the trades at issue. The Chief Investment Office, which is where these losses occurred, lost $3.4 Billion in the quarter after factoring in gains that it had.
I can't find it in the earnings release now (I didn't look very hard), but I believe they indicated that there might be another Billion Dollars or so in losses from these trades in future quarters. They gave a range that was possible - something like $600 Million to $1.4 Billion. I don't think those are the right numbers, I just can't recall them right now - but my recollective sense tells me they're close. It might have been during the conference call that they gave those numbers.
The pre-tax loss from this situation ended up being $4.4 Billion (after-tax loss was $2.7 Billion). That's probably toward the middle of the range of expectations I heard. JP Morgan still posted a $5.0 Billion profit for the quarter, I'd guess in part because it chose to realize some gains from other trades to help soften the sting from the losses associated with the trades at issue. The Chief Investment Office, which is where these losses occurred, lost $3.4 Billion in the quarter after factoring in gains that it had.
I can't find it in the earnings release now (I didn't look very hard), but I believe they indicated that there might be another Billion Dollars or so in losses from these trades in future quarters. They gave a range that was possible - something like $600 Million to $1.4 Billion. I don't think those are the right numbers, I just can't recall them right now - but my recollective sense tells me they're close. It might have been during the conference call that they gave those numbers.