JP Morgan loses $2 billion from London trader "Voldemort"

[Sixstrings]

JPMorgan Chase Admits Big Losses On 'Egregious' Credit Trades

JPMorgan Chase has suffered big, unexpected losses at a closely watched trading desk, providing fodder to supporters of a new financial regulation the bank's CEO has loudly opposed.

The biggest U.S. bank by assets said on Thursday that it had lost $2 billion on bad bets on credit derivatives, made by a London trading desk, run by a man other traders have alternately dubbed "The London Whale" and "Voldemort." The office is intended to hedge the giant bank's credit risk, not increase it.

In a regulatory filing on Thursday, the bank said that, since the end of March, its chief investment office "has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed."

In a quickly scheduled conference call Thursday evening, CEO Jamie Dimon, who has been persistently critical of government efforts to regulate banks, said JPMorgan's trading losses were due to "egregious and self-inflicted mistakes," from trades that were "poorly executed and poorly monitored."

In recent months, news reports had alleged the office's trading desk was engaged in speculative trading, not hedging. Supporters of financial regulation used the reports as evidence of the need for the "Volcker Rule," a feature of the Dodd-Frank financial-reform act that would prohibit government-insured banks from taking big market bets with their own money.
http://www.huffingtonpost.com/2012/05/10/jpmorgan-chase-london-whale_n_1507662.html

Here we go again.. haven't we seen this movie before? Frickin "derivatives" and "synthetic credit portfolios," PhD mathematicians hired by banks, using algorithmic equations nobody understands to create these new "financial products."

Frank-Dodd law was a sham. Banks de-fanged all of it after it got passed. We need glass-steaggall back -- it's the only answer, just as it was after the Great Depression.

[Sixstrings]

They may have another $3 billion loss on top of that..

Is JPM Staring At Another $3 Billion Loss?

The red vertical arrow shows the current dislocation if one assumes the cessation of Iksil's unwind efforts stalled IG9's selloff - which is the $3bn loss that remains to be seen and the black dotted line is an indication of the kind of notional unwind that would occur - which with a market moving as it is - would be highly disjointing.
http://www.zerohedge.com/news/jpm-staring-another-3-billion-loss

Remember, this bank is backstopped by your tax dollars you pay out of your paycheck every week. And ultimately the Federal Reserve -- the soundness of our money is at the mercy of these banks. If they fail, WE PAY, and they still make out like kings eating caviar in the Hamptons, while we ultimately pay through inflated food prices, inflation on everything.

It amounts to a straight-up wealth transfer, from the bottom 99.9% to the very top vampire squid. It's disgusting. This is NOT capitalism, and any real Libertarian would admit that.

EDIT: I'll admit I'm out of my depth on this.. this bank is bringing in $4-$5 billion every quarter so may not be serious. All this is a bit of a mystery to me though.. if there's blood in the water hedge funds can bet against JP Morgan same as they can Greece. Point is, ultimately the soundness of the dollars in our pockets is what's at stake, and the banks always have us over a barrel "we screwed up, but bail us out or the world ends, oh ya and don't regulate us."

[radon]

From the zerohedge article, it looks like the trader took some stupid positions, why would he do it. This specifics of the case looks more like a failure of the bank's internal controls rather than regulatory oversight. Regardless of whether the regulation is in place, if the internal controls fail in the future, the same story may happen again.

[Cloud9]

J.P. runs the snap program.

[Sixstrings]

From the zerohedge article, it looks like the trader took some stupid positions, why would he do it.

Well it's above my pay grade. From what I read, he was trying to hedge against credit dervivitive risk but it was such a large position it was moving the market.

This specifics of the case looks more like a failure of the bank's internal controls rather than regulatory oversight.

I think the derivitives and securitized packaged financial products or whatever the hell they are, none of this existed ten or fifteen years ago, it's just all bad. The more the financial industry "innovates" the deeper in the shit the 99.9% get.

What's it like in Russia? Are banks banks over there or is it just like here, they can buy stocks be hedge funds and all that?

We'll have to differ on our opinion about regulation -- for me, I think glass-steaggal should never have been repealed. A bank should be a bank. And let hedge funds be hedge funds, but NEVER insured by the FDIC and never backstopped by the central bank or the US Treasury. FDIC was created to protect consumer deposits that's IT. It was never intended for government to bail out gambling losses, and that's what the above amounts to. It's a gaming loss.

[radon]

What's it like in Russia? Are banks banks over there or is it just like here, they can buy stocks be hedge funds and all that?

They are heavily regulated, cannot be hedge funds. They can buy stocks, but the range of the investment instruments is limited, and the total exposure to stocks is restricted by a certain regulatory ratio established by the Central bank.

We'll have to differ on our opinion about regulation -- for me, I think glass-steaggal should never have been repealed. A bank should be a bank. And let hedge funds be hedge funds, but NEVER insured by the FDIC and never backstopped by the central bank or the US Treasury. FDIC was created to protect consumer deposits that's IT. It was never intended for government to bail out gambling losses, and that's what the above amounts to. It's a gaming loss.

Totally agree with that.

What's important is that they are denied the taxpayer money. No more bailouts. You can introduce regulation, but then their internal controls will fail to notice that the regulation is not complied with, they will again have some gambling loss, and tell again "oh, sorry, we overlooked it, need to have another bailout". Let them go under, at least the investment banking divisions. More important and scarier for them than regulation.

[Ache]

In new normal of trillion dollar bail outs, what is $2 BILLION? Its will soon be forgotten.

[Lore]

It's the implication of our large, to big to fail, institutions gambling. Resulting in an ultimate risk to the tax payer.

[Plantagenet]

Obama and the dems claimed that the Dodd-Frank bill was going to prevent this sort of thing happening again on Wall Street.

The massive MFGlobal fraud and now the JP Morgan credit default swap losses show that Dodd-Frank didn't fix anything.

[Lore]

Obama and the dems claimed that the Dodd-Frank bill was going to prevent this sort of thing happening again on Wall Street.

The massive MFGlobal fraud and now the JP Morgan credit default swap losses show that Dodd-Frank didn't fix anything.

Oh God... Now what are we going to do!

[Plantagenet]

Obama and the dems claimed that the Dodd-Frank bill was going to prevent this sort of thing happening again on Wall Street.

The massive MFGlobal fraud and now the JP Morgan credit default swap losses show that Dodd-Frank didn't fix anything.

Oh God... Now what are we going to do!

Don't you even know what to do with crooks? Oh---thats right. You're a democrat

If the Obama administration wasn't corrupt, it would arrest and prosecute people like Obama crony John Corzine, former NJ gov (DEM) and US Senator from NJ (DEM) and head of MFGlobal when the money was stolen. The Congressional investigation of MFGlobal turned up emails that tied the theft of investors money directly to Corzine.

But instead, Corzine is an honored Democrat, and an Obama bundler on Wall Street and personally a FOO and big donor for Obama----so the Justice Dept. will look the other way.

[Sixstrings]

What's important is that they are denied the taxpayer money. No more bailouts. You can introduce regulation, but then their internal controls will fail to notice that the regulation is not complied with, they will again have some gambling loss, and tell again "oh, sorry, we overlooked it, need to have another bailout". Let them go under, at least the investment banking divisions. More important and scarier for them than regulation.

Well this is nice, we agree about something. Russia is wise to regulate its banks. I *think* Canada kept those same regulations and never de-regulated like we did. Other nations have too, maybe Australia. Unfortunately because of how linked global central banking and the global economy is, the whole world was affected by banking deregulation here in the US, in the UK, and in Ireland.

Housing bubble wasn't just in the US, it was overbuilt vacation homes in Spain for Brits too, and housing bubble in Ireland. And all the loans were securitized, cut up in pieces and packaged with pieces of totally different kinds of loans then marketed as "financial products" all over the world -- insured by AIG.

We're still right where we were before, if it all starts to crash the banksters will come to Congress and warn them of doomsday, riots and martial law if they don't get bailed out.

P.S. I don't totally understand all this and don't claim to.. for example, I read somewhere that JP Morgan has exposure to $80 TRILLION in derivitives. While the bank's liquid assets are around $160 billion. What I don't get is what that means exactly, "$80 trillion dollars in derivitives." It sounds like if the bet goes bad then of course the bank goes under unless the federal reserve opens the floodgates to bail them out regardless of cost.

This looks like a good explanatory infograph:

Derivatives: The Unregulated Global Casino for Banks
http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html

I'll have to chew on it it later when I have time.

[Sixstrings]

Obama and the dems claimed that the Dodd-Frank bill was going to prevent this sort of thing happening again on Wall Street.

The massive MFGlobal fraud and now the JP Morgan credit default swap losses show that Dodd-Frank didn't fix anything.

Oh God... Now what are we going to do!

I know! Let's vote a bankster for presdient, that will fix it!

[radon]

If the bank suffered trading losses, then someone somewhere booked good profits. Knowing who took the profits may shed some light on the story.

[GASMON]

Knowing who took the profits may shed some light on the story.

The owners of these !!







When you see these icons of wealth, along with their owners, you now know where the money came from.

Look closeley at their facial expressions - they will be laughing away -- at YOU.

Gas

[Lore]

Don't you even know what to do with crooks? Oh---thats right. You're a democrat
If the Obama administration wasn't corrupt, it would arrest and prosecute people like Obama crony John Corzine, former NJ gov (DEM) and US Senator from NJ (DEM) and head of MFGlobal when the money was stolen. The Congressional investigation of MFGlobal turned up emails that tied the theft of investors money directly to Corzine.
But instead, Corzine is an honored Democrat, and an Obama bundler on Wall Street and personally a FOO and big donor for Obama----so the Justice Dept. will look the other way.

A couple of things, once again, you're wrong at here. For one, I'm not a Democrat. Secondly, if the Obama administration wasn't corrupt they would have brought the previous administration up on charges for war crimes. There seems to be a general failure in our government of correcting malfeasance among the power brokers.

[dolanbaker]

Knowing who took the profits may shed some light on the story.

The owners of these !!
Bling!!
When you see these icons of wealth, along with their owners, you now know where the money came from.

Look closely at their facial expressions - they will be laughing away -- at YOU.

Gas

Sad but true!

If there's one the world needs more than anything else, it's a (much) smaller financial sector!

Eliminating a lot of the parasitic functions could end austerity for a sizeable percentage of the population.

[BobInget]

That two billion or will it be five? Did not go directly to money Hell.
Somewhere on this planet, other banksters chalked up profit.
When trillions are moved round the world every hour of the day, a few billion fall through
cracks. In 2011, JPM no doubt was winning more bets then loses. We never heard of this trader's team
while they were making billions for their bank. OTOH, Few institutions are going to advertize their losses.
(unless they are too big to hide)

Put in perspective. BP's Macondo's GOM disaster cost perhaps eleven billion, killed more wildlife
put a great body of water in peril for a dozen years. BP restored their dividend.

Perhaps the greatest human tradgey of our generation is Japan.
Poor planning at Fook may kill off millions of innocents, never mind causing trillions in financial losses.
I have little doubt, few banks will stop doing business with Japan or JPM. . Check out Panasonic and Sony losses for Q-1. Toyota OTOH, posted 1.5 billion in profits for Q-1.... Go figure, maybe trucks fall apart faster then flat screens.

[radon]

Somewhere on this planet, other banksters chalked up profit.

Well, yes, - then why would a trader called Voldemort, and then London Whale on the top of it - presumably signifying that he kinda understands what he is doing, and able to expose the bank to billions-worth positions, - why would he make such stupid bets?

He was trading against the arbitrage opportunity, apparently, as follows from the articles.

[rockdoc123]

I guess at least one person should point out that the head of the trading group actually doesn't make all the trades. He takes responsibility for them obviously. I wonder what the tradeoff here is as to how much money was made through his agressive trade approach over the last five years versus lost recently.