Friday, May 18, 2012

JP Morgan Fall-Out Continues


WSJ: Inside JP Morgan's Blunder
On April 30, associates who were gathered in a conference room handed Mr. Dimon summaries and analyses of the losses. But there were no details about the trades themselves. "I want to see the positions!" he barked, throwing down the papers, according to attendees. "Now! I want to see everything!"
When Mr. Dimon saw the numbers, these people say, he couldn't breathe.
. . .Mr. Dimon publicly disclosed the losses in a conference call on May 10. Afterward, he told Mr. Lee: "Maybe I can sleep tonight," according to a person familiar with the conversation.
At home with his wife that evening, he confided to her: "I missed something bad."

Reuters: FBI to Probe Morgan Scandal
A separate source familiar with the FBI probe, opened by the agency's New York office, described it as preliminary. The probe was seen in some quarters as a necessary public step, given the ongoing debate in Washington about bank regulation, and one expert said it raised the level of concern around what happened.
"The FBI looks for evidence of crimes and goes after people who it alleges are criminals. They want to send people to jail. The SEC pursues all sorts of wrongdoing, imposes fines and is half as scary as the FBI," said Erik Gordon, a professor in the law and business schools at the University of Michigan.
The bank's trading losses have also drawn the attention of the U.S. Securities and Exchange Commission and the Federal Reserve, both of which have opened inquiries.
Bloomberg: Republican Lawmakers Off-Balance over Morgan
Some are seeking investigations, with Senator Mike Crapo of Wyoming among those calling on JP Morgan Chairman and Chief Executive Officer Jamie Dimon to testify, which he has agreed to do. Senator Richard Shelby, the Banking Committee’s top Republican, said the loss emphasizes the need for capital standards for banks tougher than what the overhaul requires. Senator Lamar Alexander of Tennessee says Congress has no business getting involved.
...As Republican lawmakers split over their response to the JPMorgan loss, Democrats are unified on their message: that the trading loss underscores the need for tougher regulation of banks.
“It’s one of those things that’s clear that they were betting like you would do at the crap table in Las Vegas and they bet the wrong way,” Senate Majority Leader Harry Reid, a Nevada Democrat, said of the company’s loss this week. “That’s fine if they did it with their own money, but the problem is, the way Wall Street’s been working, is that heads they win, tails we lose.”

CNN: Dimon Will Testify to Senate
The Senate Banking Committee on Monday announced hearings to look into the trading losses from a regulatory angle. At the time, lawmakers said they planned to question regulators, not JPMorgan officials.
But on Thursday, Johnson announced he intended to invite Dimon to speak some time after the two hearings with regulators, which are scheduled for May 22 and June 6. A Banking Committee spokesman said the hearing at which Dimon will testify has not yet been scheduled.
"I encourage all of my colleagues on the Banking Committee to participate in these three critically important and timely hearings, so we can all better understand the facts," Johnson said.
CNBC: Size Matters in a Low Rate World
...there is one aspect which does not surprise rivals, instead generating a weary sigh of recognition: The investment dilemma JPMorgan found itself in in recent years. Notably, it seems one key reason why the CIO office was engaging in funky derivatives trades was that the wider climate made it so difficult for any firm to produce safe returns without taking outlandish bets. And doing this in a “hedged” way has become doubly difficult if you are a behemoth with $360 billion of cash.
Part of the problem lies with the ultra-low interest rate climate. This week the 10-year Treasury yield fell yet again, as the euro zone’s woes intensified.

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