The Panama Papers opened yet another window on the global system of financial corruption, showing how political leaders and businesses use shell companies in secrecy havens like the British Virgin Islands and many US states to evade taxes and hide corruption and other crimes. Yet the system of corruption depends on another factor beyond secrecy, one that is perhaps even more important: impunity. Impunity means that the rich and powerful escape from punishment even when their malfeasance is in full view. Continue reading »
On February 12, Jamie Dimon made headlines when he bought 500,000 shares, or some $26 million worth of JPM stock which coming one day after the market hit its lowest point in the recent selloff, has become known as the “Dimon Bottom.” Was it just good timing or was there something more to the purchase some wondered. As it turns out the purchase may have been nothing more than Jamie frontrunning his own company’s multi-billion buyback, because as JPM announced moments ago, the company of which he is a CEO, just authorized the repurchase of an additional $1.9 billion in stock over the next three months, thereby assuring CEO Jamie of an even great profits on his recent acquisition.
– JP Morgan to Pay Another Slap on the Wrist Fine for Engaging in Systemic Consumer Credit Card Debt Fraud (Liberty Blitzkrieg, July 8, 2015):
Just yesterday, I published a post titled: Florida Man Sentenced to 2.5 Years in Jail for Having Sex on the Beach. The purpose of that post wasn’t to justify his actions, but rather to highlight the difference between how average citizens are treated under the U.S. “justice” system, and how thieving, remorseless financial oligarchs are treated.
While, Mr. Caballero may have ruined the day of a few beach goers by crudely having sex on a public beach in broad daylight, he didn’t run the U.S. economy into the ground and cause destitution to tens of millions of Americans. Nor did he received trillions in taxpayer backstops and bailouts, only to turn around and pay himself a record bonus and then carry on with extremely profitable, illegal financial schemes. No, it was the bank executives who did (and continue to do) all of that. Guess who ends up in prison? Continue reading »
– How Jamie Dimon Became A Billionaire (ZeroHedge, June 3, 2015):
Two years ago, bank analyst Mike Mayo asked JPM chief Jamie Dimon a simple question: why should affluent customers not pick UBS over JPM due to a mismatch in capital ratios, to which Dimon’s response was even simpler: “that’s why I’m richer than you.” To which we then added: “No logic, no rationale: all about the bottom line, which to Jamie at least is all that matters.”
H/t reader M.G.:
“Looks like the greedy guts are adding to unemployment.
Remember, for every job lost, seven more are put at risk.”
– JPMorgan Chase & Co. (JPM) To Cut More Than 5,000 Workers By End Of 2016: Report (International business Times, May 28, 2015):
JPMorgan Chase & Co. (NYSE:JPM) is starting to lay off more than 5,000 employees in a $1.4 billion cost-cutting measure to be completed by the end of 2016, the Wall Street Journal reported Thursday, citing people familiar with the matter. A spokeswoman for JPMorgan Chase would not comment on the report, but said the layoffs are part of cost-cutting efforts outlined in a presentation released earlier this year.
JP Morgan, the largest U.S. bank, is overhauling its nearly 5,600 branches. Chairman and CEO James Dimon said Wednesday the average Chase bank branch will lose one employee over the next two years. The bank has already cut 1,000 jobs. Continue reading »
– “Another Crisis Is Coming”: Jamie Dimon Warns Of The Next Market Crash (ZeroHedge, April 9, 2015):
The Treasury flash crash and similar recent events in currency markets are “shots across the bow,” Jamie Dimon says in his latest letter to shareholders. The JPM chief goes on to warn, as we have for years, that declining liquidity in credit markets is likely to exacerbate future crises: “The likely explanation for the lower depth in almost all bond markets is that inventories of market-makers’ positions are dramatically lower than in the past. For instance, the total inventory of Treasuries readily available to market-makers today is $1.7 trillion, down from $2.7 trillion at its peak in 2007. The trend in dealer positions of corporate bonds is similar.”
From the article:
“Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as “massive criminal securities fraud” in the bank’s mortgage operations.
And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the finishing touches on what will amount to a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption. “I could be sued into bankruptcy,” she says. “I could lose my license to practice law. I could lose everything. But if we don’t start speaking up, then this really is all we’re going to get: the biggest financial cover-up in history.”
They’re gonna destroy her for that … sooner or later. The elitists are ‘patient’.
– The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare (Rolling Stone, Nov 6, 2014):
By Matt Taibbi
She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn’t take it anymore.
“It was like watching an old lady get mugged on the street,” she says. “I thought, ‘I can’t sit by any longer.'”
Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She’s had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.
Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing. Continue reading »
– The $70 Trillion Problem Keeping Jamie Dimon Up At Night (ZeroHedge, Oct 11, 2014):
Yesterday, in a periodic repeat of what he says every 6 or so months, Jamie Dimon – devoid of other things to worry about – warned once again about the dangers hidden within the shadow banking system (the last time he warned about the exact same thing was in April of this year). The throat cancer patient and JPM CEO was speaking at the Institute of International Finance membership meeting in Washington, D.C., and delivered a mostly upbeat message: in fact when he said that the industry was “very close to resolving too big to fail” we couldn’t help but wonder if JPM would spin off Chase or Bear Stearns first. However, when he was asked what keeps him up at night, he said non-bank lending poses a danger “because no one is paying attention to it.” He said the system is “huge” and “growing.” Dimon is right that the problem is huge and growing: according to the IMF which just two days earlier released an exhaustive report on the topic, shadow banking (which does not include the $600 trillion in notional mostly interest rate swap derivatives) amounts to over $70 trillion globally.
Throat Cancer … caused by too many ‘toxic assets’ maybe?
Thinking about Jamie Dimon, I am sure that he would be on the list of people that I would refuse to help, …
… unless he would confess and unload all of his dark deeds as CEO of JPMorgan.
– Steve Jobs Dead At 56, His Life Ended Prematurely By Chemotherapy And Radiotherapy For Cancer
– Jamie Dimon Diagnosed With Throat Cancer, To Start Radiation And Chemotherapy (ZeroHedge, July 2, 2014):
He may be “richer than you“, but when it comes to cancer everyone is equal. Moments ago, Dow Jones and Bloomberg broke news that JPMorgan CEO Jamie Dimon has been diagnosed with throat cancer.
- J.P. Morgan JPM Chairman, CEO Jamie Dimon Tells Employees, Shareholders He Has Been Diagnosed With Throat Cancer, Condition Curable
- Dimon Says Prognosis “Excellent,” Cancer “Caught Quickly”
- Dimon Says Cancer Confined, No Evidence Elsewhere
- Dimon to start Radiation and Chemotherapy Treatment at Sloan Kettering, treatment to last 8 weeks
- Dimon advised able to continue to be actively involved in the business
And now the best healthcare that money can buy will be promptly put to use. We wish him a speedy recovery as it would be far more equitable for the JPM CEO to answer for his actions in full health before a jury of his peers, where guilt can not be “admitted or denied” away.
Full Dimon email
Message from Jamie Dimon to all colleagues and shareholders
Subject line: Sharing some personal news
Dear Colleagues and Shareholders – Continue reading »
– Dimon Gets 74 Percent Raise After Billions in Fines (Bloomberg, Jan 24, 2014):
After agreeing to pay $23 billion in penalties and settlements in 2013, JPMorgan Chase (JPM) Chief Executive Jamie Dimon was rewarded today by the board he chairs, receiving a 74 percent pay raise to $20 million.
Dimon has presided over a series of costly settlements with government investigators, including paying $13 billion for mortgage activity that helped lead to the financial crisis and $2 billion for failing to do anything about signs that client Bernie Madoff was running a Ponzi scheme. But in the amoral logic of the stock market, each payout has been met with gains in the company’s stock price, as investors see one fewer uncertainty looming over future profits.
– Jamie Dimon Gets Pay Raise After Raking Up $25 Billion In Legal Fees (ZeroHedge, Jan 24, 2014):
Earlier this week we reported that at JPMorgan, the many will pay for the crimes of the few, after the bank revealed that compensation for most workers would be flat with 2012, and no raises were planned for the bank’s employees as a result of the massive, $20+ billion legal bill the bank has raked up in recent months as one after another market manipulation, fraud and malfeasance by current and former JPM workers has been revealed. One person, however, will be exempt from this blanket punishment: the firm’s CEO Jamie Dimon, of course. Because there is always a reason Jamie is richer than you…
YouTube Added: 30.10.2013
Matt Taibbi, Rolling Stone Magazine, joins Thom Hartmann. It didn’t take Wall Street’s allies in the financial media long to start whining about JPMorgan’s $13 billion settlement with the federal government. But is that record fine really as bad as the people on CNBC say it is?
More details full earnings release here:
So much for the JPM “fortress balance sheet.” Moments ago the bank which 18 months ago stunned the world with the biggest prop trading loss in history, just reported its first quarterly loss under Jamie Dimon, missing expected revenue of $24 billion with a print of $23.88 billion, but it was net income where the stunner was in the form of a $0.4 billion net income. The reason: the fact that from the government’s best friend, Jamie Dimon has become the punching bag du jour, and having to pay $9.15 billion in pretax legal expenses, the biggest in company history.
Quote Jamie Dimon:
While we had strong underlying performance across the businesses, unfortunately, the quarter was marred by large legal expense. We continuously evaluate our legal reserves, but in this highly charged and unpredictable environment, with escalating demands and penalties from multiple government agencies, we thought it was prudent to significantly strengthen them. While we expect our litigation costs should abate and normalize over time, they may continue to be volatile over the next several quarters.
Speaking of “strong underlying performance”, considering that the other key component of Q3 net income was a whopping $1.6 billion in loan loss reserve releases, one wonders just how truly strong Q3 earnings really were. But of course, this being Wall Street, all negative news is “one-time” and to be added back. Which is why JPM promptly took benefit for all charges, which means adding back the $7.2 billion legal expense and $992 MM reserve release after tax benefit. In short: of the firm’s $1.42 in pro forma EPS, a whopping $1.59 was purely from the addback of these two items.
– JP Morgan reports third-quarter loss after ‘painful’ $9.2bn legal costs (Guardian, Oct 11, 2013):
America’s biggest bank, JP Morgan, has plunged to a loss in the third quarter of 2013 after being weighed down by legal expenses of $9.2bn (£5.8bn).
Jamie Dimon, the bank’s chairman and chief executive, called the loss “painful”. “We are just trying to improve and move on. Remember, these things are related to multiple year events. Remember, we didn’t lose any money during the crisis,” he told analysts on a conference call.
– Jamie And Lloyd Visit Obama (ZeroHedge, Oct 2, 2013):
Five years ago today, the CEOs of the big banks visited one US president with one goal in mind: get billions in taxpayer dollars to get bailed out. Today, the same bank CEOs are once again at the White House, this time invited by a different president, “as part of the Obama Administration’s ongoing efforts to mend relations with the financial services sector and woo their support for White House policy.” One can assume that in addition to the trite generalities surrounding the shut government and the debt ceiling, one topic of conversation is how Wall Street can accentuate the severity of the ongoing governance crisis and most certainly includes such demands by Obama as “stop sending stocks higher when the only catalyst is my inability to create any sort of compromise.”
So here they are:
– US Banks As Broken As Ever: JPM Excess Deposits Rise To New Record; Loans At Pre-Lehman Levels (ZeroHedge, July 12, 2013):
The final item of note from today’s JPM release is perhaps also the most important one, and once again serves as evidence of all that is broken with the US financial system. To wit: deposits held by JPM rose modestly to a new all time high of $1,202,950 million, or $1.2 trillion. This compares to $970 billion in Q3 2008 at the time Lehman failed. What about the flip side of this key bank liability: loans. As of June 30, 2013, total JPM loans declined from $729 billion to $726 billion, the lowest since September 2012. But more disturbing, this number is $35 billion less than the $761 billion at September 2008. It means that JPM’s excess deposits have now risen to a new all time high of $477 billion, up from $474 billion last quarter.
Why is this a problem? Two reasons. Continue reading »
– And For Its Next Trick, JPMorgan Takes Over The SEC (ZeroHedge, Mai 1, 2013):
JPM wasn’t satisfied with demonstrating its implicit control over the US bond issuing authority by promoting Matt Zames to the post of COO, the same Matt Zames who courtesy of his Chairmanship of the TBAC, also effectively runs the US Treasury where he “advises” the brand new Treasury Secretary who has no idea what he is doing. Oh no. Just to cover all its bases, Jamie Dimon’s firm decided to also take over the SEC as well.From a Notice of Withdrawal of appearance of one Andrew J. Ceresney filed in the case of the People of New York versus JPMorgan, in which find that Mr. Ceresney, formerly partner at Debevoise, the same firm that current SEC chief Mary Jo White came from, is no longer with the firm.
So, where is he then?
Cerseney… Cerseney… where have we seen that name…. Oh yes.
George Canellos and Andrew Ceresney Named Co-Directors of Enforcement
FOR IMMEDIATE RELEASE
Washington, D.C., April 22, 2013 — The Securities and Exchange Commission today announced that Acting Director George Canellos and former federal prosecutor Andrew Ceresney have been named Co-Directors of the Division of Enforcement. Continue reading »
– Presenting The S&P500’s 50 Point Surge Courtesy Of The Illegal “Geithner Leak” (ZeroHedge, Jan 19, 2013):
Yesterday we broke the news of what is prima facie evidence, sourced by none other than the Federal Reserve’s official August 16, 2007 conference call transcript, that then-NY Fed president and FOMC Vice Chairman Tim Geithner leaked material, non-public, and very much market moving information (the “Geithner Leak”) to at least one banker, in this case then Bank of America CEO Ken Leiws, in advance of a formal Fed announcement – an act explicitly prohibited by virtually every capital markets law (and reading thereof). It was refreshing to see that at least several other mainstream outlets, including Reuters, The Hill and the NYT, carried this story which is far more significant than Season 1 of Lance Armstrong’s produced theatrical confession and rating bonanza. It is notable that Richmond Fed’s Jeff Lacker who made the inadvertent (or very much advertent) disclosure has not backed down from his prior allegation and told the NYT yesterday that “My understanding was that President Geithner had discussed a reduction in the discount rate with these banks in connection with these initiatives.” What, however, the mainstream media has not touched upon, yet, is just how profound the market response to the Geithner Leak was, and by implication, how much money those who were aware of what the Fed was about to do made. Perhaps, it should because as we show below, the implications were staggering. But perhaps what is even more relevant, is why the Fed’s previously disclosed details of Mr. Geithner’s daily actions at the time, have exactly no mention of any of this.
Before we get into the prime of today’s narrative, a quick detour.
Tags: Bank of America, Banking, Barack Obama, Ben Bernanke, Economy, Fed, Federal Reserve, Freedom of Information Act, Global News, Government, Jamie Dimon, Lloyd Blankfein, Mark Pittman, Obama administration, Politics, S&P 500
– Secrets and Lies of the Bailout (Rolling Stone, Jan 4, 2013):
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?
It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
Tags: AIG, Bailout, Bank of America, Banking, Barack Obama, Ben Bernanke, Bush administration, Citigroup, Economy, FDIC, Fed, Federal Reserve, Financial Crisis, General Motors, George Bush, Global News, GM, Goldman Sachs, Government, Great Depression, Henry Paulson, Jamie Dimon, Larry Summers, Lehman Brothers, Merrill Lynch, Neil Barofsky, Nomi Prins, Obama administration, Politics, Ponzi schemes, Sheila Bair, Society, TARP, Taxpayers, Timothy Geithner, U.S., Wachovia, Wall Street, Wells Fargo
– Is JPMorgan About To Take Over America, Again? (ZeroHedge, Nov 27, 2012):
Great and wondrous things seem to be afoot among the righteous bankers of the world. A few months ago Matt Zames was named to get JPMorgan’s CIO office out of trouble – and also happens to be the Chairman of the all-powerful Treasury Borrowing Advisory Committee. Just yesterday, Mark Carney completed Europe’s full-house of ex-Goldman Sachs alum running the region’s monetary policy. Today we hear Lloyd Blankfein will be sidling up to Obama tomorrow. And now this; from the never-crony-capitalist himself, billionaire Warren Buffett has publicly blessed Jamie “apart from the failure of control” Dimon as the best man for the top job at the Treasury. “If we did run into problems in markets, I think he would actually be the best person you could have in the job,” Buffett added (sounding more like the ‘we’ meant he) and dismissed the London-Whale “failure of control” with sometimes “people go off the reservation.” With Zames running the Shadow Treasury and Dimon running the Real Treasury, is it any wonder that inquiring minds are asking who really runs America (and for whom)? Of course, in the pre-Fed era – over 100 years ago, JPMorgan Sr. ‘bailed-out’ America before…
– Dimon: JPMorgan Spends $500 Million per Data Center (Data Center Knowledge, Aug 13, 2012):
JPMorgan Chase spends $500 million to build a data center, according to CEO Jamie Dimon. That figure places the firm’s facilities among the most expensive in the industry, on a par with investments by Google and Microsoft in their largest data centers.
Dimon noted the company’s data center investments in an interview with New York magazine, in which the CEO cited such spending as one of the advantages of the banking company’s massive scale.
“There are huge benefits to size,” Dimon said. “We bank Caterpillar in like 40 countries. We can do a $20 billion bridge loan overnight for a company that’s about to do a major acquisition. Size lets us build a $500 million data center that speeds up transactions and invest billions of dollars in products like ATMs and apps that allow your iPhone to deposit checks.
“These aren’t, like, little things,” Dimon continued. “And they accrue to the customer. That’s what capitalism is.” Continue reading »
JPM’s $150 Billion FDIC Reality Adjustment
Reuters published an exclusive story this morning:
Buried in the final paragraph:
In a presentation in March, JPMorgan Chase said it had a recovery plan in place and said it was ordered by regulators. The presentation was organized by Harvard Law School and was closed to the media at the time, but is now available online.
Here’s the BEST part of the JPM document. Continue reading »
YouTube Added: 09.08.2012
In this episode, Max Keiser and Stacy Herbert discuss a financial journalist so dangerous the frontpage of the Financial Times dare not speak his name and the semaphore of fraud and fraud flows that is high frequency trading and silver manipulation. They also talk about blonde bimbo regulators and the self-police force that never finds any evidence crimes they themselves have committed. In the second half of the show, Max Keiser talks to whistleblower Paul Moore, a former Head of Risk at HBOS, about financial holocaust and the City of London’s role in enabling banking fraud.
YouTube Added: 28.07.2012
In this episode, Max Keiser presents a double header with co-host, Stacy Herbert, to discuss crime and punishment in the financial sector. In London, JP Morgan banker, Tony Blair, has responded to the Keiser Report with his claim that hanging 20 bankers will not help and that, in fact, he asserts, public anger with the financial crisis is wrong. They also discuss the ‘blazer over cuffs look’ being the new black this season as Sean Fitzpatrick is arrested in Dublin, while over in Pennsylvania, Joe Paterno’s statue is draped in blue tarpaulin and hauled away as bond investors punish the university with higher rates and Moody’s threatens a downgrade. Finally, in Los Angeles, victims of vandalism are shocked to discover that it was a senior UBS banker who was smashing windows with a slingshot.
– Criminal Inquiry Shifts To JPMorgan’s Mispricing Of Hundreds Of Billions In CDS: Is Dimon The Next Diamond? (ZeroHedge, July 16, 2012):
On the last day of May, when we first learned via Bloomberg that there was even the scantest likelihood that JPM may have been massaging its CDS marks within the (London-based of course) CIO organization – the backbone of hundreds of billions in notional exposure, and thus a huge counterfeited benefit to trader bonuses and corporate earnings – we wrote, “The Second Act Of The JPM CIO Fiasco Has Arrived – Mismarking Hundreds Of Billions In Credit Default Swaps“ in which we explained precisely how this activity would and did take place, precisely why other traders caught doing the same are on the verge of being thrown in jail, precisely why everyone else does it, and precisely why the biggest CDS self-reporting and client/banker owned-organization (this is where images of Libor should appear), MarkIt, may well be implicated in everything – very much in the same way that the BBA is the heart of Lie-borgate. Because unlike all other allegations of impropriety, most of which rely on Level 2 and Level 3 assets whose valuations are in the eye of the oh so very sophisticated beholder (in this case JPM) who has complex DCFs and speaks confidently when explaining marks to naive, stupid outsiders (in other words baffles with bullshit), when it comes to one of the last places where Mark to Market is still applicable and used: the OTC CDS market, and where daily P&L records are kept, it will take any regulator, enforcer, or criminal investigator precisely 1 minute to find out if there was fraud, or gambling, going on here.
Then lo and behold, none other than JPM admitted minutes before releasing its Q2 earnings that it had been doing precisely what Zero Hedge accused it of doing nearly 2 months earlier (but of course Jamie Dimon had no idea, no idea, what the media accused his firm of doing), and in doing so exposed itself to just as much litigation risk as Barclays in the Lie-borgate scandal, while further throwing a monkey wrench into the CDS market, where all the other banks (who had been doing just the same), will no longer be able to pick off the bid/ask spread in the process crushing CDS trader bonuses, and resulting in billions in foregone imaginary profits.
Most importantly, it opened up the firm to a criminal investigation. Which as Reuters reports, is precisely what has now happened.
From Reuters’ Matt Goldstein and Jennifer Ablan: Continue reading »
– Jamie Dimon’s Quandary: Now That JPM’s Internal Hedge Fund Is Gone, Where Will 25% Of Net Income Come From? (ZeroHedge, July 14, 2012)
– This Is How To Kill JPM’s CIO Operation (ZeroHedge, July 14, 2012):
While JPM may or may not have succeeded in burying its deeply humiliating CIO fiasco at the expense of two things: i) a loss of up to 25% in recurring net income and ii) Jamie Dimon proudly throwing numerous of his key traders under the regulatory bus as scapegoats because it took the firm until July 12 to realize that its entire CDS book was criminally mismarked, thus confirming a “weakness in internal controls” (a statement not only we, but Bloomberg’s Jonathan Weil vomits all over), the truth is that one way or another, Jamie Dimon will find a way to reposition his prop trading book somewhere else, even if it means far smaller and less obtrusive profits for the next several years. Yet there is a way to virtually make sure that Jamie Dimon is never allowed to trade as a hedge fund ever again, and in the process risk insolvency and yet another taxpayer bailout. Ironically, it is JPMorgan itself that tells everyone precisely what it is.
As the firm presents in Earnings Presentation statement Appendix, which succinctly summarizes the firm’s balance sheet, all the CIO/Treasury group is, is merely an conduit to allocate excess liabilities, which in the case of JPMorgan simply means deposit cash, and use these to generate shareholder returns.
A quick glance at the chart above shows that when it comes to traditional banking aspects, there is a roughly $400 billion mismatch between traditional liabilities (Deposits, which amount to $1,116 billion), and assets (Loans, which are $693 billion). The balance of the balance sheet consists of various shadow bank transformation operations, whereby $982 billion in shadow liabilities (yes, there is a reason why we say that rehypothecated, unregulated, and uninflationary-until-replaced-with-deposits Shadow liabilities are just as important as deposits in the grand scheme of things when it comes to funding matched ROA) fund $965 billion in shadow bank asset operations (including reverse repos, Prime Broker ops, trading assets, LOB cash and other).
– The Second Act Of The JPM CIO Fiasco Has Arrived – Mismarking Hundreds Of Billions In Credit Default Swaps (ZeroHedge, May 30, 2012):
As anyone who has ever traded CDS (or any other OTC, non-exchange traded product) knows, when you have a short risk position, unless compliance tells you to and they rarely do as they have no idea what CDS is most of the time, you always mark the EOD price at the offer, and vice versa, on long risk positions, you always use the bid. That way the P&L always looks better. And for portfolios in which the DV01 is in the hundreds of thousands of dollars (or much, much more if your name was Bruno Iksil), marking at either side of an illiquid market can result in tens if not hundreds of millions of unrealistic profits booked in advance, simply to make one’s book look better, mostly for year end bonus purposes. Apparently JPM’s soon to be fired Bruno Iksil was no stranger to this: as Bloomberg reports, JPM’s CIO unit “was valuing some of its trades at prices that differed from those of its investment bank, according to people familiar with the matter. The discrepancy between prices used by the chief investment office and JPMorgan’s credit-swaps dealer, the biggest in the U.S., may have obscured by hundreds of millions of dollars the magnitude of the loss before it was disclosed May 10, said one of the people, who asked not to be identified because they aren’t authorized to discuss the matter. “I’ve never run into anything like that,” said Sanford C. Bernstein & Co.’s Brad Hintz in New York. “That’s why you have a centralized accounting group that’s comparing marks” between different parts of the bank “to make sure you don’t have any outliers,” said the former chief financial officer of Lehman Brothers Holdings Inc.” Continue reading »
– JPMorgan’s Potential Trading Loss Just Keeps Spiraling Higher (Business Insider, May 20, 2012):
When JPMorgan first announced that its CIO office had blundered into a huge trading loss, the number was pegged at $2 billion, though the company said it could go higher.
Then the loss was reported to be $3 billion.
$5 billion or more?
The nation’s largest bank has said publicly that its losses on the trades have surpassed $2 billion, and people familiar with the matter have said they could over time reach $5 billion.
But the losses could be even bigger if the company sells its positions into a market that has turned against its positions, some traders say. Improvements in the markets could slice the bank’s losses.
So the basic issue seems to be: Unwind now and stomach large losses, or wait and hope that things improve.
Either way, it’s clear that JPMorgan has a live and active problem on its hands.