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Guest Post: JPM Chase Chairman, Jamie Dimon, The Whale Man, And Glass-Steagall

Tyler Durden's picture




 

From Nomi Prins

JPM Chase Chairman, Jamie Dimon, The Whale Man, And Glass-Steagall

It was fitting that while President Obama and his Hollywood apostles broke fundraising records at a sumptuous $40,000 per plate dinner at George Clooney’s place, word of JPM Chase’s ‘mistake’ rippled through the news. Not long ago, Dimon’s name was batted about to become Treasury Secretary.  But as lines are drawn and pundits take sides in the Jamie Dimon ego deflation saga – or, as I see it - why big banks should be made smaller and then, broken up into commercial vs. speculative components ala Glass Steagall – it’s important to look beyond the size of the $2 billion dollar (and counting) beached whale of a trading loss.

Yes, $2 billion in the scheme of JPM Chase’s book and quarterly earnings is tiny, a ‘trading blip’ as it’s been called by some business press. But that’s not a mitigating factor in what it represents. In this era dominated by a few consolidated and complex banks, the very fact that it’s a relatively small loss IS the red flag. 

First - because the loss could (and will) grow. Second, because even if it doesn’t, it’s a blatant example of a big bank incurring un-due risk within a barely regulated, highly correlated financial markets. It only takes another Paulson hedge fund, or a trading desk at Goldman Sachs, to short the hell out of the corporates that JPM Chase is synthetically long, or take whatever the other side really is, to create a liquidity crisis that will further screw those least able to access credit – individuals, small businesses, and productive capital users.

We know this. We’ve seen this. We're in this. There’s no such thing as an isolated trading loss anymore. And yet Jamie Dimon, seated atop the most powerful bank in the world, has smugly led the charge to adamantly oppose any moves to alter the banking framework that allows him, or any bank, to call a bet - a hedge or client position or market-making maneuver  - with central bank, government official, and regulatory impunity.

Flashback to the unimaginable in 1933

It’s 1933 and the country has undergone several years of painful Depression following the 1920s speculation that crashed in the fall of 1929. Investigations into the bank related causes began under Republican President, Herbert Hoover and continued under Democratic President, FDR.

Okay, that’s pretty common knowledge. But, here’s something that isn’t: of all the giant banks operating their trusts schemes and taking advantage of off-book deals, and international bets in the late 1920s, it was an incoming head of Chase (replacing Al Wiggins who shorted Chase stock in a network of fraud) that advocated for Glass-Steagall. Indeed, despite all pedigree to the opposite (his father was Senator Nelson Aldrich architect of the Federal Reserve and brother-in-law, John D. Rockefeller), Chase Chair, Winthrop Aldrich, took to the front pages of the New York Times in March, 1933 to pitch decisive separation of commercial and speculative activity arguments.  Fellow bankers hated him.

His motives weren’t totally altruistic to be sure, but somewhere in his calculation that Chase would survive a separation of activities and emerge stronger than rival, Morgan Bank, was an awareness that something more – permanent – had to be put in place if only to save the banking industry from future confidence breaches and loss. It turned out he was right. And wrong. (much more on that in my next book, research still ongoing.)

Financial history has a sense of irony. JPM Chase was the post-Glass-Steagall repeal marriage, 66 years in the making, of  Morgan Bank and Chase. Today, it is the largest bank in America, possessing greater control of the nation’s cash than any other bank.  It also has the largest derivatives exposure ($70 trillion) including nearly $6 trillion worth of credit derivatives. 

It is the size of a bank holding company’s deposits that dictates the extent of the risk it takes, risk ‘models’ not withstanding: the more deposits, the more risk, the more potential loss. JPM Chase is not alone in using its position as deposit taker to increase speculation, but it has more to play with.

And the more access to other people’s money, the greater the gambling incentive. The largest banks hold deposits (our deposits) hostage in the global game of financial warfare. Related access to capital and bailouts are enabling weaponry in the fight for worldwide insitutional supremacy.

The Alleged Hedge

Now, consider JPM Chase’s alleged ‘hedge’ itself; a trading position taken in the London department, the chief investment office,  set up to allegedly protect the bank’s overall book and ‘invest’ its excess capital.  Any investment is a bet. A hedge is supposed to mitigate loss if the bet fails. An investment is not a hedge.

Let’s pretend for a moment that banks were about simple conventional - banking – taking deposits and making loans. In that context, it would be nonsensical to hedge loan risk by pouring on more loan risk, or put out a fire by pouring fuel on its flames.

In other words, if a bank lends money to, say Boeing, it accepts a rate, in return,  more or less related to its assessment of the risk involved in getting its money back, which translates into an interest payment. To hedge that payment, a bank could purchase ‘insurance’ or ‘protection’ from a counterparty solvent enough to make good on any shortfall in Boeing’s ability to pay its interest, or in the event of an Boeing default.  What is not a hedge for the loan, is further exposure to the risk that Boeing could default.  Yet, in a more complex manner, that’s exactly what happened here.

By engaging in a trade that tied up 15% of its assets, or $350 billion, no matter what label that trade received, the Whale man and his managers (leading up to Jamie Dimon), went long credit risk by shorting an index of synthetic credits, thereby placing the bank in the position of paying out, or losing money, if those credits deteriorate. In effect, and super-simplistically, it doubled down. In its more complex form, the firm took a short position in an index of credit default swaps representing 125 North American investment grade corporations (including Boeing), called the CDX.NA.IG.9. The index has been diving in price, hence the loss - and mounting loss to JPM.

Deception and Delusion

Going long the corporate credit market while still immersed in the fallout of having been long the European sovereign and US real estate market, demonstrates the same cluelessness about the economy and financial system prevalent in the media and in Washington every time the words ‘slow recovery’ rather than something to the effect of ‘prolonged, continued, enduring depression’ are uttered.

In such a charade, why wouldn’t JPM Chase, a bank existing on an array of federal largesse, and Jamie Dimon who was re-voted to Class A NY Fed Director, the position he held during the 2008 crisis, in early 2010 – rubber stamp a bet that corporate economic health is a foregone conclusion.

It was under that same misplaced, other people’s money optimism and hubris that MF Global stole (or for the apologists, ‘mistakenly took’) $1.6 billion of its segregated customers' money to stay in a bad bet. Former MF Global CEO, the ‘honorable’ Jon Corzine’s bet was that certain European sovereign credits would improve. Only they didn’t. Not in time for his margins to hold out.

It’s more than ironic, that JPM Chase, the bank still entangled with MF Global customer money, took the same bet, albeit with different credits and is trying to pawn it off as an ‘egregious’ mistake, a blip on the radar of an otherwise pristinely risk-managed bank.

It’s also supremely annoying that Dimon is right about something, that the Volcker Rule wouldn’t necessarily apply to this ‘hedge.’ There’s nothing particularly wrong with the Volcker Rule; it will mitigate some fraction of risk, though given the SEC and Fed’s inability to understand what risk is, it’s unlikely they’ll take the mental leap to segment trades as mitigating it, or not. Yet, the Volcker Rule will not change one fundamental pillar of global systemic risk – as long as banks are not segregated ala Glass Steagall along deposit-taking  / loan-making vs. speculation lines, they will have access to capital to burn. And burn it they will. 

 

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Mon, 05/14/2012 - 17:01 | 2424941 SourNStout
SourNStout's picture

Jamie Dimon is Public Bankster #1

I wouldn't be surprised if he gets a job at the Federal Reserve at some point. 

Audit --- Expose ---- End it

Mon, 05/14/2012 - 17:06 | 2424957 NotApplicable
NotApplicable's picture

So, I guess the author is calling for more banking regulation to fix everything? Or was the Glass-Steagall just random history tossed in?

Signed,

Confused.

Mon, 05/14/2012 - 17:12 | 2424962 idea_hamster
idea_hamster's picture

"the firm took a short position in ... CDX.NA.IG.9. The index has been diving in price, hence the loss - and mounting loss to JPM."

Sorry -- but isn't this backwards?  JPM shorts IG9 CDX; index falls; short makes money.

I thought that it was the recent, though small, move higher in IG9 that caused the loss -- that would comport with a short position.

Somebody jump down my throat and call me a moron (i.e., "correct me, ZH-style") if I'm wrong here....

Mon, 05/14/2012 - 17:14 | 2424990 buzzsaw99
buzzsaw99's picture

When we naked short something it is akin to terrorism, when they do it is called a hedge.

Mon, 05/14/2012 - 17:23 | 2425006 idea_hamster
idea_hamster's picture

Objection: non-responsive.

Mon, 05/14/2012 - 17:24 | 2425008 buzzsaw99
buzzsaw99's picture

You want to be called a moron instead? lol

Mon, 05/14/2012 - 17:26 | 2425010 idea_hamster
idea_hamster's picture

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2...

Isn't that the move that we think caused the loss?  Not the earlier downward slide?

If so, then the article has the position or the P&L response backwards.

Mon, 05/14/2012 - 17:27 | 2425014 buzzsaw99
buzzsaw99's picture

Don't disagree.

Mon, 05/14/2012 - 17:37 | 2425038 Tuffmug
Tuffmug's picture

It's confusing. JPM lost because the index rose. This is an index of CDS's. CDS's increase in price as default risk increases. Shorting the index means you are betting that CDS's prices go down and the index goes down because credit risk is declining.

Mon, 05/14/2012 - 18:07 | 2425104 InjuredThales
InjuredThales's picture

You are correct: they were short the index and long credit.  The author is just wrong.

Mon, 05/14/2012 - 19:14 | 2425216 Convolved Man
Convolved Man's picture

Nobody wants to explain in simple terms, even if it's possible, exactly what operations the CIO at JPM has going on.  This is reasonable.  JPM needs to get out of losing investing/trading/hedging/betting (pick the best term) positions involving credit default swaps, while at the same time others either do not want to be the "greater fool" or want to profit from JPM's losing positions.

I am extremely interested, as a casual observer, in hearing "just the facts, ma'am" in order to spend less time filtering noise.  To assemble an unbiased filter, one must first wade through a significant amount of background information on synthetic derivative theory and applications in our modern financial services and economic systems.  This information is readily available using internet searches of recognized subject matter expert blog sites, SEC filings, product prospectus, and publications from leading economic/financial organizations and research institutes.

My journey started some five years ago, when the very existence of the OTC derivatives market became a harbinger of personal financial difficulties and global economic collapse -- an eventuality warned about over a decade earlier.

The newest tidbit in this "$2 billion loss not really a problem" storyline is the resurrection of the LTCM hedge fund fiasco of 1998.

Mon, 05/14/2012 - 22:49 | 2425661 franzpick
franzpick's picture

One simple question that Kudlow nor anyone else has asked is how prudent was JPM in losing 25% of its annual $16 BIL income in one trade "hedge" position?  This sounds like trouble to me - the camel's nose in the bank-chasing-yield tent: my screens point to JPM 32 within days, some moderate bounce, and then on down as the reality of these risks comes into sharper focus.

Mon, 05/14/2012 - 20:30 | 2425342 earnyermoney
earnyermoney's picture

click on the Nomi Prins link at the top of the post and you'll go to her blog. She gave a concise answer to this very question.

Mon, 05/14/2012 - 18:39 | 2425155 GernB
GernB's picture

There's a difference between calling for more regulation and calling for appropriate regulation. In many cases simply using market forces, and disclosure rules may take the place of thousands of pages of regulations attempting to protect consumers so they can remain blissfully ignorant of the risks being taken with their money. Separating investment banks from commercial banks could work better than the alternative of trying to create reasonable rules in an unreasonable environment. If the model of having investment banks also be commercial banks runs the risk of putting savers money at high risk then the first response might be to make consumers aware of what is happening with their money. If that doesn't work then maybe the whole model is wrong and should be scrapped.

Mon, 05/14/2012 - 17:06 | 2424961 The trend is yo...
The trend is your friend's picture

He already has an office their. it just doesn't have his name on the door.  Cuz that would be pushing it a little too far

Mon, 05/14/2012 - 17:16 | 2424985 BlueCollaredOne
BlueCollaredOne's picture

He's way ahead of you. He's already chairman of the New York fed.

http://www.newyorkfed.org/aboutthefed/org_nydirectors.html

Mon, 05/14/2012 - 17:31 | 2425025 SourNStout
SourNStout's picture

The incestuousness of the banksters never ceases to amaze me.

Bilderberg / NWO is next for Bankster #1, if he's not already part of the wizards behind the glass.

Mon, 05/14/2012 - 18:15 | 2425115 BlueCollaredOne
BlueCollaredOne's picture

I meant to say on board of directors. I cant edit my original post because of a reply already took place before I caught my mistake

Mon, 05/14/2012 - 18:07 | 2425108 Mach1513
Mach1513's picture

CHAIRMAN?

Mon, 05/14/2012 - 17:07 | 2424949 fuu
fuu's picture

Jamie's Lament

Once more with feeling...

Mon, 05/14/2012 - 17:02 | 2424951 Buzzworthy
Buzzworthy's picture

"Nearly $6 trillion WORTH of credit derivatives"

Wouldn't "nearly $6 trillion of worthless derivatives" be more accurate?

Mon, 05/14/2012 - 17:06 | 2424955 The trend is yo...
The trend is your friend's picture

Vaporize the deposits

Mon, 05/14/2012 - 17:07 | 2424963 mayhem_korner
mayhem_korner's picture

Not long ago, Dimon’s name was batted about to become Treasury Secretary.

 

Well, in Barry's eyes, he's more qualified now than ever.

Mon, 05/14/2012 - 18:37 | 2425150 bdc63
bdc63's picture

Maybe Barry will make Dimon and Corzine mud wrestle for the Treasury Secretary position ... 

Mon, 05/14/2012 - 17:09 | 2424966 resurger
resurger's picture

Where is Max Ficher?

Mon, 05/14/2012 - 17:14 | 2424980 fuu
fuu's picture

Over at wallstreetbear commenting on gold never going over $1560 again in our lifetimes and Ron Paul ending his active campaign.

Mon, 05/14/2012 - 17:15 | 2424991 mayhem_korner
mayhem_korner's picture

 

 

Speaking of which, your friends at CNBC have just given gold its last rites (again):

http://www.cnbc.com/id/47416506

Mon, 05/14/2012 - 17:19 | 2424998 fuu
fuu's picture

Uhh they can all DIAF as far as I am concerned.

Mon, 05/14/2012 - 17:26 | 2425013 NotApplicable
NotApplicable's picture

Especially that Roubini troll. Did he ever tire of Tyler bitch-slapping him on Twitter?

I'd like to think that someone so "smart" would learn the difference between broadcast and narrowcast, and seek to avoid the one where he can't always get the last word.

But this is the freak with the Wall of Vaginas, so there's no telling if he's grounded well enough to notice.

Mon, 05/14/2012 - 17:29 | 2425020 fuu
fuu's picture

From mayhem_corner's link:

"Nouriel Roubini, cofounder of Roubini Economics raised the question on Twitter today:

“Gold down to $1562. Gold bugs hiding deep in their gold caves pondering why gold isn't rallying in spite of sharp spike in risk-off sentiment.” "

I am going to go with no.

Mon, 05/14/2012 - 17:50 | 2425074 Bay of Pigs
Bay of Pigs's picture

Hiding in caves? The anti gold shrieking is getting louder by the day.

A bottom must surely be close.

 

Mon, 05/14/2012 - 17:32 | 2425029 tekhneek
tekhneek's picture

"Freedom76 | May 14, 2012 05:18 PM  ET

Quick! Dig up your gold and trade it for Federal Reserve Notes and then bury your FRNs. When your grandchildren dig up the notes, they will be amazed at grandpa’s wisdom to hold paper instead of gold to preserve wealth in these uncertain financial times."
Mon, 05/14/2012 - 17:13 | 2424976 buzzsaw99
buzzsaw99's picture

It's only clownbux.

Mon, 05/14/2012 - 17:14 | 2424989 CClarity
CClarity's picture

It’s more than ironic, that JPM Chase, the bank still entangled with MF Global customer money, took the same bet, albeit with different credits and is trying to pawn it off as an ‘egregious’ mistake, a blip on the radar of an otherwise pristinely risk-managed bank.

Was thinking about exactly this all weekend.  Will MF Global mess fade now or will the lastest JPM gaffe add fuel to the fire?  Simply amazing!

Mon, 05/14/2012 - 17:29 | 2425017 NotApplicable
NotApplicable's picture

Well, it's gonna make any clawback a little harder. Now they'll have to go after the bar where Bruno spent all of the proceeds on bubbly.

Mon, 05/14/2012 - 17:20 | 2425004 Hedgetard55
Hedgetard55's picture

Anyone thinking of trying to catch the machete called Silver Wheaton?

Mon, 05/14/2012 - 17:48 | 2425070 zebrasquid
zebrasquid's picture

Silver Wheaton has taken a similar swoon 4 times in the past two years.   

Need an iron stomach to hold these shares.   I'd rather have a bag of junk silver, easier to ignore and more rewarding to have on hand if things really get ugly on the streets.

 

Mon, 05/14/2012 - 17:30 | 2425021 dogbreath100
dogbreath100's picture

JP Morgan lost 2 billion. Whose money was it? Where did it go? Did they loose it accidently on purpose?

 

Mon, 05/14/2012 - 17:48 | 2425047 hangemhigh
hangemhigh's picture

jim willie thinks that the asian cartel is raiding western bullion banks by attacking their toxic derivative positions and forcing them to sell gold to meet the resulting margin calls.............. do you suppose  it's possible something like that is what just happened to jpm/dimona??............BSC redux??????  

"The Gold Wars have significantly changed in the last two years in particular. From 2004 to 2009, the battle was to win a fair higher gold price. No longer. The war has turned the corner and reached an end game scenario. The objectives have changed. The tactics used have been altered………..The objective is to remove gold from the bullion bank inventories and major bank inventories, all of it. This is a new battlefield in the war. Being a Zombie bank means losing all the gold in reserves, in a time hourglass process that reflects the reality of their balance sheets."

"By the end of 2013, no big bank will own any physical gold. They cannot defend against off-side positions in the sovereign bond market and the currency market…….. Other big banks are losing all their gold from the balance sheet. UBS is a dead body on the field, their false story of a rogue trader having provided a little distraction."

"Every couple months (the last being in January),……an evil player in a vulnerable position…. knows he is dead and must forfeit its gold. The gold market stalls until the hairball is passed and another gold cartel player is gutted, carried off the battlefield under the cover of press darkness. Therefore the Gold price stays down until the order is completely filled, and only then will recover a couple hundred dollars in price per ounce, but only after this gold cartel player is killed off."

"The US press would never report on a cartel bank having to sell $70 to $100 million worth of gold bullion to remove their big off-side position in bonds or currencies……..The pattern showed itself in January, when after a similar event, the gold price moved from roughly 1600 to almost 1800. By February 29th, the cartel leaped on the day into position to conduct one of the largest naked short events in history. "

http://www.financialsense.com/contributors/jim-willie/the-gold-groundhog-grind   

 

Mon, 05/14/2012 - 18:05 | 2425105 Snakeeyes
Snakeeyes's picture

I think the whale shorted CDX.NA.IG.9, but then it rose suddenly causing a huge loss. I don't know which maturitiy he hedged with, but this chart (10) shows a BIG and sudden increase,

http://confoundedinterest.wordpress.com/2012/05/13/regulation-jpmorgan-chase-and-the-parable-of-the-titanic-and-eastland/

Mon, 05/14/2012 - 18:25 | 2425137 GernB
GernB's picture

If you apply the rules of root cause analysis, you are forced to ask why did Chase take the potition they did. It is difficult to escape the feeling that the reason is interest rate manipulation. A bank whose purpose it is to lend depositors money and thus make them a return, found it increasingly difficult to make money for their clients simply lending money in an environment where interest rates have been manipulated to near zero. So they find ways to increase those returns in riskier assets. In short they fell prey to the pressures the Fed has put on all investors, to shift money to riskier investments to get a return.

Mon, 05/14/2012 - 18:48 | 2425176 Eric L. Prentis
Eric L. Prentis's picture

Jamie Dimon should shut his trap and resign already.

Mon, 05/14/2012 - 18:51 | 2425187 sgt_doom
sgt_doom's picture

http://www.sec.gov/news/press/2009/2009-232.htm

J.P. Morgan Settles SEC Charges in Jefferson County, Ala. Illegal Payments Scheme

http://www.sec.gov/litigation/litreleases/2011/lr22031.htm

J.P. Morgan to Pay $228 Million to Settle Charges By SEC, Others

http://www.sec.gov/litigation/litreleases/2011/lr22008.htm
J.P. Morgan Securities to Pay $153.6 Million to Settle SEC Charges of Misleading Investors in CDO Tied to U.S. Housing Market

http://www.sec.gov/litigation/litreleases/lr18252.htm
J.P. Morgan Chase Simultaneously Settles Charges for $135 Million

http://www.sec.gov/litigation/litreleases/lr18114.htm
SEC SUES J.P. MORGAN FOR RESEARCH ANALYST CONFLICTS OF INTEREST FIRM TO SETTLE WITH SEC, NASD, NYSE, NY ATTORNEY GENERAL, AND STATE REGULATORS

http://www.sec.gov/spotlight/enron.htm

(Way too many to copy --- just view all the links there, please!)

Mon, 05/14/2012 - 19:13 | 2425200 earleflorida
earleflorida's picture

FWIW Dept: 

http://www.fee.org/articles/great-myths-of-the-great-depression

http://en.wikipedia.org/wiki/Smoot_Hawley_Tariff_Act

Fourteen [14] U.S. Presidents resided from Mar. 4, 1869 - Mar. 4, 1933 *[Lincoln was a Republican?]. Eleven [11] of the fourteen presidents were Republican's and three [3] were democratic. Democratic President Stephen Grover Cleveland served two [2] non consecutive terms...    http://en.wikipedia.org/wiki/Grover_Cleveland    ... and Thomas Woodrow Wilson that creates the FRB/CB [1913], all by his innocent self, and then has the audacity to bring America into WWI, ~  one year later with the people opposed [Spanish Flu kills 50ml-100ml ppl,]? The guy was a crossdressing republican [imo]. His second wife ran the WH for ~ three years "All by Herself"! ... http://en.wikipedia.org/wiki/Woodrow_Wilson

Please note that U.S. Sen Nelson.W. Aldrich closeness to Woody, along with Carter Glass & Robert Owen. Pathetic!!!

Just sayin, as briefly as I can, that the Laissez`faire of the Supreme Court packed with RailRoad Lawyers and Corporate Money,and filthy-corrupt, 'in your pocket' GOP Presidents  fucked it up for "We the People"!

FDR made it right, period! 

thankyou     jmo

Mon, 05/14/2012 - 19:09 | 2425206 Debtman And Robbin
Debtman And Robbin's picture

I must confess I'm pretty drunk, but this is one of the most childish posts I have read in a while...

Let’s pretend for a moment that banks were about simple conventional - banking - taking deposits and making loans.

How could anyone in his right mind pretend, even if only for a moment, that such a stupid assumption has anything to do with reality? 

 

In other words, if a bank lends money to, say Boeing, it accepts a rate, in return,  more or less related to its assessment of the risk involved in getting its money back, which translates into an interest payment. To hedge that payment, a bank could purchase ‘insurance’ or ‘protection’ from a counterparty solvent enough to make good on any shortfall in Boeing’s ability to pay its interest, or in the event of an Boeing default.  What is not a hedge for the loan, is further exposure to the risk that Boeing could default.  Yet, in a more complex manner, that’s exactly what happened here.

Let me put that in "other words" too:

If a bank lends promissory notes to, say Boeing, it accepts a rate, in return, more or less unrelated to its assessment of the risk involved in Boeing breaking their promises, which translates into a promised flow of promissory notes. To hedge that promise, a bank could swap promissory notes for promises from a counterparty that promises to make good on any shortfall in Boeing's willingness to keep up the flow of promissory notes, or in the event of Boeing simply telling the bank that it won't stick to its promises any longer at all. What is not a hedge for the promissory notes the bank gave to Boeing, is to ask Boeing again and again whether they are truly serious about keeping their promises.

Maybe I'm just too drunk and too stoned again to accept that after all these years there are still people that do not have the slightest idea of how this shit game has been working for the last 100(0) years although they pretend to do so. 

BTW, I will quit smoking haze and drinking booze tomorrow...I promise.

Mon, 05/14/2012 - 19:24 | 2425231 Freewheelin Franklin
Freewheelin Franklin's picture
His motives weren’t totally altruistic to be sure, but somewhere in his calculation that Chase would survive a separation of activities and emerge stronger than rival, Morgan Bank...

 

Wait wut? Are you trying to tell me that a large company was trying to use government regulation to create a competitive advantage?

 

SAY IT AIN'T SO!

Tue, 05/15/2012 - 00:34 | 2425876 BlackholeDivestment
BlackholeDivestment's picture

...oh, now I get why 

http://riskviews.wordpress.com/timeline-of-the-global-financial-crisis/

                    LiesMan loves the (mark of the beast) Dead,

                                           he enjoys the ride

                     http://www.youtube.com/watch?v=01AC4Y2E0t8 

                                         ...down the black hole 

           http://cache2.artprintimages.com/lrg/27/2722/56ZND00Z.jpg 

                                                   LMAO 

http://www.youtube.com/watch?v=06gsgZUe32s&feature=BFa&list=PL6D7022ADADB27DBE 

Tue, 05/15/2012 - 02:34 | 2426047 Sandmann
Sandmann's picture

Glass-Steagall never applied in London although the separation of Merchant Banks from Jobbers and Retail Banks made it less of a problem until 1986 when the Thatcher Government set about to circumvent Glass-Steagall with Big Bang. All the US houses piled into London to integrate full-service operations and the breach in Glass-Steagall had begun. London is simply the lax jurisdiction of choice and will water down every US regulation to attract  business so do all yopu want in the USA but before you do make a list of all the scams that have been undertaken in London

Tue, 05/15/2012 - 02:47 | 2426057 Watson
Watson's picture

>>>
...replacing Al Wiggins who shorted Chase stock in a network of fraud...
<<<

Are you sure this is fair to Al Wiggins?

My understanding was that Albert Wiggins (the then Chairman) was entitled to take loans from Chase. It was assumed, but not made part of the loan contract, that the loans would be for the purpose of buying Chase stock, to align Al's personal interest with that of Chase stockholders generally.

In fact, he used the loans to support borrowing Chase stock, which he sold short close to the market top, thereby making quite a lot of money.

To my knowledge, this was not fraud.

I also understand that after these events, when he eventually left the bank, he was voted a substantial pension for his services to the bank...

Tue, 05/15/2012 - 04:39 | 2426113 Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

'Losers Average Losers'

 

Paul Tudor Jones

Tue, 05/15/2012 - 05:30 | 2426116 jmc8888
jmc8888's picture

Regulation isn't zero sum, to think it is, is akin to the logical fallacies that David Berkowitz...err....Bernanke believes on a daily basis (hey a dog is more believable than a statistical model...signed SAM).  Glass-Steagall is the simple, yet oh so effective regulation that is needed, without which, is how they banksters piled everything together, bet to the hilt on worthless frauds whether they be MBS or any derivatives (beyond that which was to hedge physical delivery costs like Southwest Airlines and their fuel cost aka something real) that has brought the world to its collective knees of pointless austerity, lunatic money printing, outright fraud, moral hazard and unintended consequences.  Meanwhile the physical economy and human progress has stagnated and literally fallen off a cliff. At the same time this crowd is creating the seemingly inescapable problem that captured politicians need to solve they also luckily enough have the solution. 

While Glass-Steagall was removed it was also weakened in the preceding decades.  As a direct result of these changes and repeal, if you think of it being the enabling pathway for just about all the major crises since the S&L debacle in the 80's, you would get the idea of why an easy to understand, clearly set limits via correct and needed regulation ten or so pages long does the job needed that the monstrosity of Dodd-Frank can't achieve even 1 percent of.  Because it was indeed that.  The scale of the S&L crisis was only that small because Glass-Steagall was still in effect, just weakened.  Now that it's gone, you see what type of scale we got.

People make mistakes, people are greedy, etc, etc.  While this doesn't encompass all a human is at every second of every day, not having Glass-Steagall WAS the paving of the road to ruin Benny, Jaime, and Lloyd are now flying down enabled by their bought off and scared politicians.  Ever see a Maserati in the Baja 1000? You know why you don't, because it's impossible.  As is THIS sort of crisis, with Glass-Steagall.

No one is saying there aren't ups and downs. The point is, with Glass-Steagall you don't have contagion like Factor 8 and HIV given to everyone in the world, not just the hemophiliacs.  With Glass-Steagall, there is no threat to the MAD card, because it doesn't exist.  Without the MAD card, you don't get the entire incorrect response we've witnessed because there is no leverage and no apparent need for it.  You don't have a crisis where one trade can knock out a deposit base, insurance company, commercial lending, and investment bank.  You don't have a situation where all it takes is one HFT algo gone bad to trip this landmine, and since the comminglers comingled themselves, and not just within their own sphere but around the world.....you should get the idea.  None of this is possible with Glass-Steagall. 

You don't need to break it down, or say if only this or that.  Because it was ALL encompassed ALL, by removing Glass-Steagall.  There are lots of reasons the Titanic disaster played out like it did.  But the most important thing was not hitting the fucking iceberg. No hitty, no sinky.

Of course we haven't even talked about the unintended consequences.  Instead of all this funny money commingled in worthless shit, you get actual physical capital investment.  That's called real progress and what the capital markets are supposed to be there for. 

Glass-Steagall WAS the correct regulation.  It's also harder for the gov't to weasel out of doing their job, when any idiot can read 10 pages of simple and concrete limits.  So it's easier to hold politicians and regulatory agencies to account.  Sure it has to be enforced, but you make it so it's impossible NOT to enforce it.

It's so simple, the caveman's mongoloid hellen keller type sister could figure it out while playing with herself.   Only those blinded by bullshit ideology on one side or the other would disagree.  

As for the incorrect idea that if WE enact Glass-Steagall, everything would move elsewhere. That's about as stupid as licking dog shit to see if it's really an unwrapped snickers bar.  London is broke.  The whole world is broke. Capital markets worldwide commingled everything. 

This isn't a situation where the snowball is at the top of the mountain, it's at the bottom.  London and other markets ALREADY have these sorts of un-rules in place, thus there is no 'synergy' to be had with an idea that has already penetrated the crumbling economic world.

But wait there's more.  Even beyond this, has anyone bothered to think of WHAT happens to the bullshit arms of the banks (basically every single section of the TBTF that isn't the focus of deposit and commercial lending?) All the bets of worthless shit have no collateral.  Anyone think that the city can survive this?  Nope.  It would be one of two things. Either THEY immediately pass Glass-Steagall and seperate their toxic worthless parasites from their deposit and lending apparatus, or they are crushed.  If self preservation on such a grand scale captain obvious level isn't heeded, than they can get crushed by their ideology and once again we'll show the world how it's done like after WWII.  Thus once WE pass Glass-Steagall two things are certain.  One that other countries will be debating whether they should pass it, and two the ones that don't will be crushed under the weight of their own toxic nothings.  Maybe a couple will try to hyperinflate, but it would be so obvious that Weimar would immediately occur overnight (instead of a couple of years) that most countries as corrupt and captured as their politicians are, will choose the path of survival.  Because then we are no longer in such a MAD world, the sane part of the world would not be at risk. 

These entities are already broke, the only question is, do we let them drag everyone in the world down with them? So far that answer has been crazily, YES!

Glass-Steagall isn't the end all be all, but it is the cornerstone of a regulatory framework of a society that functions.  To be truly functioning other legislation needs to be passed that focuses on the proper construct of credit creation and more broadly the scientific focus of our educational system and business direction.  Instead of our bright minds coming up with pseudo science in a non-Glass-Steagall world to peddle bs, they'll have the opportunity to engage in real science that fosters a physical economic revival and overall human progress for profit.

But first, you need Glass-Steagall, and the precondition for this is to build up the support for it, and to get everyone that opposes it out of the way legally. 

Every day since the repeal of Glass-Steagall has been a day wasted in not getting it reinstated.  Every day since this crisis popped off has been a crime of stupidity against humanity that it hasn't been reinstated.  Captain obvious is getting tired flying around like a vulture over the carcasses after all these years.

Ten or so pages that work and you don't even need legal counsel to figure it out.....or many bills, each with hundreds of pages, that don't do squat and still allow all of this.  It really is that simple.  The big lie right in front of us that most have overlooked? Glass-Steagall. Case in point.

Finally one of the biggest reasons why this happened again, is because no one really pegged the exact reason for it, it was always made a bigger question and answer than it had to be.  That era focused on the big picture, including WWII, not the actual legislation.  From now on, once passed, everyone can simply say, Glass-Steagall is the rule to adhere to.  Video, audio, internet, even the statistical sophistry that 'legitimized' it and made us think we knew better have all been outed like a gay republican politician.  We now also have multiple experiences with this, with the same solution.  We have it figured out language wise.  We have it figured out number/mathematic wise.   Though it makes no sense to debate this aspect until AFTER we get through the crisis.  Winning the year 2100 doesn't end with winning 2012, it only begins with winning it.   With the first step of that process being....

1. Glass-Steagall

0. Awakening people to the obvious and legally ridding ourselves of all that stand in the way.  On all levels from local to state to national all the way and including our president. 

Tue, 05/15/2012 - 15:53 | 2428670 earleflorida
earleflorida's picture

As you have spoken, the once unheard esoteric [?] name of "The Glass-Steagall Act" mentioned in the MSM is coming to the fore with great exuberance. If it is to gain momentum, it is of our very charge to make it happen.     thankyou  jmc8888

:-)) 

Ps. fantastic comment

Tue, 05/15/2012 - 16:07 | 2428734 Youri Carma
Youri Carma's picture

Keiser Report: Countdown to Armageddon (E288) http://www.youtube.com/watch?v=Y2VhkQe3gQ0

In this episode, Max Keiser and co-host, Stacy Herbert have a field day dissecting Jamie Dimon's 'egregious, terrible mistake,'

the possible insider trading around those so-called mistake and what the Leveson Inquiry may tell us about the SEC's Mary Schapiro's 'focus' on these oh so egregious mistakes.

In the second half of the show Max talks to Nomi Prins, a former senior executive at Goldman Sachs and Bear Stearns, about the problems at JP Morgan's London trading desk.

Comment: http://maxkeiser.com/2012/05/15/kr288-keiser-report-countdown-to-armageddon

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