The Truth About JP Morgan’s $2 Billion Loss

The Truth About JP Morgan’s $2 Billion Loss

by WashingtonsBlog

Before we can understand what’s really going on with JP Morgan’s loss, we need a little background.
JP Morgan:

• Is the world’s largest publicly-traded company

• Is the largest derivatives dealer in the world (and see this), and derivatives are inherently destabilizing for the economy

• Essentially wrote the faux “reform” legislation for derivatives, which did nothing to decrease risk, and killed any chance of real reform

• Is the creator of credit default swaps – which is the asset class which blew up and caused the loss

• Has had large potential exposures to credit default swap losses for years

• Is the largest bank in the U.S. – the biggest of the too big to fail banks killing the American economy

• Heads – with Goldman Sachs – the Treasury Borrowing Advisory Committee, which helps set government financial policy

• Has a reputation of being the most risk-averse of the big Wall Street players

• Was kept alive by a huge government bailout … but used the money to invest in India and other projects which won’t really help Americans

• Has made a killing by kicking companies (and see this) and governments (and here) when they are down, engaging in various types of fraud, and – allegedly – manipulating the silver market

In addition, Jamie Dimon – JPM’s CEO:

• Is a Class A Director of the Federal Reserve Bank of New York, which oversees all of Wall Street, including JPM.  Indeed, Dimon served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and was used by the Fed as a clearing bank for the Fed’s emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns.  At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank

• Has a reputation of being the “golden boy” and smartest guy on Wall Street

• Has been the chief spokesman and advocate for deregulation of banks

• Jokes about a new financial crisis happening “every five to seven years”

The Truth About JP Morgan’s $2 Billion Loss was originally published on Washington's Blog