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JPM Securities Converts From Corporation To LLC, As Chris Whalen Discusses Why Prop May Contribute Far More To JPM's Top Line
Update from Chris Whalen: "As it turns out, prop trading does hit the “principal activities” revenue line item as we stated yesterday to Bloomberg News. Thus the hit on JPM from the Volker Rule does look like +/- 10% of net revenues. We appreciate the quick follow up from Lauren Tyler et al."
An interesting tidbit in today's FRBNY Primary Dealer announcement, which discloses a curious development: JPMorgan is no longer a corporation, but has, effective September 1, become an LLC. Double taxation bids a fond farewell to J.P. Morgan Securities, Inc. We are currently going through Delaware filings to track down the actual application, and hopefully the reasons for the change, which are most certainly a vote of complete confidence in the American corporate system. Elsewhere, Chris Whalen shared some must-read thoughts on JP Morgan LLC's prop trading operation, which may be surprising to all those who believe that prop is a de minimis portion of the firm's revenues.
On JPMorgan Prop Trading
Yesterday we heard from our friends at Bloomberg News, asking for our comments on the implementation of the Volcker-Rule and the business restrictions on large banks. The inquiry was motivated by the announcement by JPMorgan Chase (Q1 2010 Stress Rating: “C”/Outlook: “Negative”) that it was shutting down one of its proprietary trading operations. JPM indicated that other proprietary trading operations would be shuttered later this year.
Our view on the implementation of the Volcker Rule c/o Dodd-Frank with respect to JPM is that much of what is now called “Principal transactions,” which consists of revenue from trading and private equity investing activities (See Page 45 of the JPM 10-K), goes away. This is 10% of run rate revenue at JPM. In 2009, principal transactions accounted for $9.7 billion of $100 billion in total net revenue, so losing this business is not a trivial matter.
As we told Bloomberg News, now you know why JPM is focused on overseas markets. JPM CEO Jamie Dimon must replace the revenue lost due to Dodd-Frank in the next six months and must do so via expansion outside the moribund U.S. economy.
But here is the best part. After the story was published, JPM apparently contacted Bloomberg News and claimed that revenues from prop trading do not get booked in principal transactions. What this means is that the revenue hit to JPM post-Volcker Rule may be larger than we initially expected and more than simply losing the principal activities revenue line item described above.
We wrote a note to Lauren Tyler, head of IR and JPM, asking her to clarify the accounting treatment for prop trading and followed up with a telephone call this AM. We will update you on her response. Also, we are working through the Q2 2010 results from the FDIC and will be writing on that next.
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jpm no longer funnels medicare payments as of about a week ago...CMS switched to US bank for some reason...related?
So when JPM's commodity desk hires a supertanker and stores heating oil in it to profit from the curve on its own book is that a prop trade or is that asset business? All funded by the tax payer of course.
http://www.bloomberg.com/apps/news?sid=auE79A8VeBis&pid=newsarchive
It's 90% of there revenue. No body wants anymore debt. All they do is front run the FRBNY. It's a rigged.
No, the list shows JPM Securities LLC as the primary dealer. The parent, JPMORGAN CHASE & CO. (RSSD# 1039502), is still a delaware C corp. You can see the JPM hierarchy on the Fed's National Information Center website:
http://www.ffiec.gov/nicpubweb/nicweb/OrgHierarchySearchForm.aspx?parID_...
Chris
---* BEAR STEARNS GLOBAL ASSET HOLDINGS, LTD. GRAND CAYMAN CAYMAN ISLANDS
Den of Thieves!
The answer should be simple. JPM is clearly getting ready for their metal shorts to sink the ship. Chapter 11 is nigh.
Bad Bank LLC?
Probably start over in new LLC bury bad positions in JPM on accrual basis, earnings boost of 25%
From your mouth to God's ears; the gold/silver ratio should be no higher than 40; historically less than 30. But I fear that some other bankster will take over the JPM short position; all the CB's are in on this scam. Wouldn't want everyone to replace toilet paper will all those funny colored pieces of paper.
isn't switching to an LLC similar to writing a prenup just before your divorce ?
On a different note, Citi is hiring 12,000 in China. Good use of our bailout/ring fence money! Let's see US taxpayers borrow billions of bailout dollars from China to give to Citi , they hire 12,000 additional Chinese workers, the US citizens get to pay interest for the rest of our lives and China gets the jobs.
What not to like about this economic team!
Citigroup will hire nearly 12,000 in China for its banking unithttp://thehill.com/blogs/on-the-money/banking-financial-institutions/116...
Hmmmmm, could that possibly related to this?
http://www.economicpopulist.org/content/who-killed-federal-stimulus
Thanks for catching that, BTW, YouAreBliss!
I question the motives behind any group with that list of members but Smoot-Hawley redux would be a disaster.
Preparing to spin off what they can. They had to kill the commodities desk and eat those losses because no one wants any part of that crapfest. I am sure there will be an artful hiding of losses as well.
LLCs are treated as partnerships for tax purposes but the real kicker is that the LLC is usually the sole 'general partner' in LPs (limited partnerships).
Often the same cast of characters are limited partners in the the LP and shareholders in the LLC so there are several shields from liability.
You see this type of arrangement in hedge funds and healthcare joint ventures.
So JPM Securities just flashed that it has been a hedge fund all along?
:-)
And they just built the legal version of a moat in order to weasel out of an agreement made by woodrow wilson.
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