Tuesday, May 15, 2012

So alarms were sounding inside Jpmorganchase about the trading that led to the $2 billion loss? Who could have known?


"What, me worry?": Jpmorganchase's
Jamie "The Gambler" Dimon

"This is the week of the third annual Deficit Fest, the event sponsored by Wall Street billionaire Peter G. Peterson. At this event, many of the people most responsible for the current downturn come together to tell us why we should be worried about the deficit at a time when 25 million people are unemployed, underemployed or have given up looking for work altogether and millions face the prospect of losing their homes."
-- economist Dean Baker, in
"Deficit reduction: The Great Distraction"

by Ken

I suppose it's a little unfair to Jpmorganchase genius Jamie Dimon to link him with the above taunt by Dean Baker at the people who brought us the Wall Street meltdown when Jamie D's company generally kept its distance from the immediately precipitating housing bubble. On the other hand, as a symbol -- and indeed leading spokesperson -- for the "don't mess with the banksters" mentality, he still seems to me fair game.

Good news today for Jamie D. Even as Jpmorganchase has begun shedding directly involved players in the $2 billion trading "oops," and even though the poor fellow had to listen to a bunch of nattering shareholders whine about the lost $2 billion at today's annual meeting in Tampa, in the end, as reported by Bloomberg Businessweek --
Dimon survives votes on pay, chairmanship



The CEO of JPMorgan Chase survived a shareholder push Tuesday to strip him of the title of chairman of the board, five days after he disclosed a $2 billion trading loss by the bank.

CEO Jamie Dimon also won a shareholder endorsement of his pay package from last year, which totaled $23 million, according to an Associated Press analysis of regulatory filings.

Dimon, unusually subdued, told shareholders at the JPMorgan annual meeting that the company's mistakes were "self-inflicted." Speaking with reporters later, he added: "The buck always stops with me."

Most of the shareholder ballots were cast in the weeks before Dimon revealed the trading loss.

His pay package passed with 91 percent of the vote. The vote to strip him of the chairman's title won only 40 percent support. The bank did not announce separate results from before and after the loss was revealed. . . .

The funny thing is that the news today is filled with interesting takes on that lost $2 billion, like the news, per the Washington Post's Jia Lynn Yang and Sari Horwitz, "The Justice Department has initiated a criminal probe into the $2 billion trading loss at JPMorgan Chase, according to a law enforcement source familiar with the situation."

Or there's my favorite, as reported by the New York Times's Jessica Silver-Greenberg and Nelson D. Schwartz on the Deal Book blog: "Red Flags Said to Go Unheeded by Bosses at JPMorgan":
In the years leading up to JPMorgan Chase’s $2 billion trading loss, risk managers and some senior investment bankers raised concerns that the bank was making increasingly large investments involving complex trades that were hard to understand. But even as the size of the bets climbed steadily, these former employees say, their concerns about the dangers were ignored or dismissed.

An increased appetite for such trades had the approval of the upper echelons of the bank, including Jamie Dimon, the chief executive, current and former employees said.

Initially, this led to sharply higher investing profits, but they said it also contributed to the bank’s lowering its guard.

“There was a lopsided situation, between really risky positions and relatively weaker risk managers,” said a former trader with the chief investment office, the JPMorgan unit that suffered the recent loss. The trader and other former employees spoke on the condition of anonymity because of the nature of the investigations into the trading losses. . . .

Top investment bank executives raised concerns about the growing size and complexity of the bets held by the bank’s chief investment office as early as 2007, according to interviews with half a dozen current and former bank officials. Within the investment office, led by Ina Drew, who resigned on Monday, the bets were directed by the head of the Europe trading desk in London, Achilles Macris.

Mr. Macris, who is also expected to resign, failed to heed concerns as early as 2009 from the unit’s own internal risk officer, said current and former members of the chief investment office. Mr. Macris and Ms. Drew were not available for comment. . . ..

Sirens had gone off after a series of erratic trading sessions in late March resulted in big gains one day, followed by even bigger losses the next on the London trading desk of the bank’s chief investment office. Mr. Dimon was convinced by Ms. Drew and her team that the turbulence was “manageable,” executives said. Nor did anyone on the operating committee, of which Ms. Drew is a member, question her conclusion — in fact the full operating committee wasn’t told of the scope of the problem till early last week, just days before Mr. Dimon went public.

The alarm bells were silenced in early April, but days after first-quarter earnings were reported on April 13, the erratic trading pattern continued, except this time there were few gains to offset the losses, and the red ink was flowing faster by the day.

Mr. Dimon convened a second round of checks, which soon concluded there was a ticking time bomb, but by then it was too late, a situation made worse as traders actually increased their bets instead of shrinking them, resulting in a loss that now totals more than $2 billion and threatens a management team that until now could seemingly do no wrong. . . .

I'm sure everyone will be relieved to know that Jpmorganchase has "appointed a former chief financial officer, Mike Cavanagh, to head up the task of fixing what went wrong." Mr. Cavanagh, the NYT scribes tell us, is "one of the most respected senior executives at the bank," who "has been a loyal lieutenant of Mr. Dimon since before he took over JPMorgan Chase and has been discussed as a possible successor."

I'll let you crack your own funny about that.


Hoping for Knockout Punch, CIA Sends JP Morgan Execs to Infiltrate Al-Qaeda
Terror Org Posts Huge Losses

WASHINGTON (The Borowitz Report) – In a covert mission designed to destroy what remains of al-Qaeda, the CIA has been infiltrating the terror network with executives from JP Morgan Chase, the banking giant.

The mission, which the intelligence agency had hoped to keep secret, came to light this week when al-Qaeda dismissed two of its top officials who it said were responsible for “unacceptably speculative” betting of the terror net’s funds on credit default swaps.

Across the intelligence community, the dismissals caught the attention of analysts, who thought such risky behavior seemed out of character for al-Qaeda.

“The first thing I thought was, this sounds more like the work of JP Morgan,” one analyst said, speaking on condition of anonymity. “Al-Qaeda has a reputation for being madmen, but even for them these investments were crazy.”

Pressed about the covert mission, CIA Director David Petraeus confirmed today that it had been a resounding success, telling reporters, “If you’re serious about putting someone out of business, there’s no one better than these JP Morgan guys. One of them can do more damage than a thousand drone strikes.”

But Gen. Petraeus may have spoken too soon, as the official al-Qaeda website today claimed that the terror organization was on the brink of getting a “major financial bailout package” from a consortium of state sponsors of terrorism such as Iran and North Korea.

“Al-Qaeda is too big to fail,” the website said.

My favorite line, of course, comes from the analyst who says, "on condition of anonymity": "The first thing I thought was, this sounds more like the work of JP Morgan. Al-Qaeda has a reputation for being madmen, but even for them these investments were crazy.”

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