Infantile and non-factual

by Idéfix Sun May 13, 2012 10:20 pm

Infantile and non-factual: those were the words that Jamie Dimon, the head of JPMorganChase used to describe the regulations that sought to limit risk-taking by big banks. He used the words at an event that his bank held for its wealthy clients just a month ago. After the passage of Dodd-Frank, Wall Street has been delaying implementation of the new regulations, and has been chipping away at the law that is already on the books. Dimon and his bank were at the forefront of those efforts. Then comes the admission that just one "egregious mistake" -- as Dimon put it -- cost his bank $2 billion in losses. As the tables are turned, Dimon says today that he was "dead wrong" -- if he was just infantile and non-factual, that wouldn't be such a bad thing. But he gets to play high-stakes poker while American taxpayers hold the bag. And the latest news is, he found a few scapegoats whose heads will roll.

The irony is that if those regulations that Dimon thought so infantile and non-factual were fully in place, the likelihood of that $2 billion loss would have been a lot lower.

http://www.nytimes.com/2012/05/13/business/jpmorgan-shooting-itself-in-the-foot-fair-game.html?_r=1
http://www.washingtonpost.com/business/dimon-admits-he-was-dead-wrong/2012/05/13/gIQAuLHNNU_story.html

by Merlot Daruwala Sun May 13, 2012 10:48 pm

Haha..yeah. That man is sure having to eat humble crow big time. And Wall St's pushback on the Volcker rule is now dead in the water. Truly terrible timing for Dimon to inflict this self-injury.

The irony though is that the losses happened not from the proprietary trading per se but from really large hedges taken by the Investment office to mitigate enterprise risk!

by Propagandhi711 Mon May 14, 2012 11:57 am

well to be fair, JPM didn't take taxpayer money and was infact the white knight in '08 crisis so american public isn't holding the bag for his high stakes poker losses as such. but this is such an egg on his face and will hopefully help breakup these TBTF institutions. it's good for these massive industry captain egos to take a beating once in a while.

by Idéfix Mon May 14, 2012 10:50 pm

Merlot Daruwala wrote:The irony though is that the losses happened not from the proprietary trading per se but from really large hedges taken by the Investment office to mitigate enterprise risk!

True, but my suspicion is that the enterprise risk management function was run like a proprietary trading operation, with similar risk appetites and incentives. Otherwise it is hard to understand why they took the risks with shareholder capital that they did take. If your bets with shareholder money succeed, you get a huge bonus; if your bets fail, the most you stand to lose is your job -- given that trade-off, it's hard to imagine how any rational person would do something different.

Propagandhi711 wrote:well to be fair, JPM didn't take taxpayer money and was infact the white
knight in '08 crisis so american public isn't holding the bag for his
high stakes poker losses as such.

You are right about that... but if JPM ended up with near-fatal losses now, the public will be left holding the bag.

Hopefully as a result of this "terrible, egregious mistake" the drumbeat against Dodd-Frank and the Volcker rule will die down at least in this election cycle. We can always count on Wall Street to lobby Congress and the White House for a back-door chipping away of regulations once public attention drifts away from this fiasco.

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