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Presenting JPM's Uber-Prop Trading Desk: Meet The SIO Inside The CIO
Remember when Jamie Dimon told the world the CIO stories were a "tempest in a teapot" during the firm's Q1 conference call the very same day we accused the CIO of being the world's biggest prop desk (aside from the Fed of course) and that the JP Morgan was merely "hedging" its positions? It appears that just like Vegas, it's the lie that keeps on giving. Because as it turns out in addition to being a massive undisclosed loss leader courtesy of 'unlimited downside' CDS pair trades (anyone remember DB employee Boaz Weinstein?) which have yet to be unwound, and which may have a total book loss of up to or over $31.5 billion as explained before, that was merely the tip of the prop-trading iceberg. The WSJ reports: "The JPM unit whose wrong-way bets on corporate credit cost the bank more than $2 billion includes a group that has invested in financially challenged companies, including LightSquared Inc., the wireless broadband provider that this month filed for Chapter 11 bankruptcy protection. The group within the CIO doing the distressed equity investing is known as the Special Investments Group. Whether it should be part of the CIO in the future is something that Matt Zames, who was put in charge of the CIO this month after the losses were disclosed, is evaluating, according to a person familiar with the bank. He is also examining whether the bank should keep some of these investments, the person said... The Special Investments Group last year took a $150 million stake in closely held LightSquared, in a deal that J.P. Morgan lost money on, according to a person familiar with the bank."
But, but, surely they were hedging their offsetting position in er, uhm, non-satellite, telegraph stocks? In yet other words, an SIO within the CIO... once again Wall Street's only value added shines through - baffle them with acronym-based bullshit. And of course, everyone is busy hedging, hedging, the firm's other positions... Or not: as these are pure play directional prop bets. And all are funded by, you guessed it, your deposit dollars. Which one day will go boom, when JPM suffers a loss so large that not even the Fed bails them out any more (Jon Corzine anyone?).
Shockingly, the lies do not stop here:
A J.P. Morgan spokeswoman said the Special Investments Group is funded by J.P. Morgan's holding company and not by bank deposits insured by the Federal Deposit Insurance Corp. The activities "are funded with company-issued debt and equity," the spokeswoman said.
Oh wait, so fungible electronic dollars have a tag on them saying they come from a deposit account or from debt issuance? That's odd - we were not aware of that. One learns something every day.
One also learns details about what could be an uber-prop desk not from a regulatory filing but from... LinkedIn?
The goal of the Special Investments Group, according to a LinkedIn post from an employee, Ian Rice, is to invest $1 billion a year "in a broad range of industries and geographies." Another employee of the group, Craig Fountain, said on his LinkedIn page that the group "seeks to take controlling stakes in companies J.P. Morgan has lent money to and are experiencing some degree of financial distress." Messrs. Rice and Fountain didn't return calls seeking comment.
As for what is in the filings we get yet another batch of lies:
J.P. Morgan regulatory filings say the CIO is among the units "responsible for measuring, monitoring, reporting and managing the firm's liquidity, interest rate and foreign exchange risk, and other structural risks." Last month, the bank's chief financial officer, Doug Braunstein, said on a call with reporters, "When we put a dollar to work we want to do so prudently and invest it in safe, smart and good-returning assets, and that is the job of CIO." Mr. Dimon said on the same call, "We are very conservative."
"Conservative" as in buying stakes in bankrupt satellite telephony providers? Got it.
Yet the irony that tops it all off:
What J.P. Morgan appears to be doing with its Special Investments Group—putting holding-company money behind a specific company—wouldn't be barred by the Volcker rule even if it is a risky bet, said Arthur Wilmarth, a law professor at George Washington University. He said the practice is known as "merchant banking."
"Volcker crimps down on private-equity funds, but merchant banking is still out there," Mr. Wilmarth said. "Do I think that's a good idea? No. I don't think banks are good at it."
In other words, there is nothing that can be done?
Wrong - here is the solution so simple, that we can see how every brilliant regulator, politician and banker has not come up with it:
CAP BANK POSITION PROFITS, EITHER FLOW OR PROP, AT 5%.
Bailed out banks want to put capital at risk? Fine - treat them like utilities. Which means a cap on any upside: no semantics, no prop vs flow distinction, just cap all positions: which will make the Upside/Downside calculation so much simpler for all bank portfolio managers.
Oh, and when they blow up next time, no bail outs. Ever again.
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JPM needs to relocate to Macau. It is nothing but the worlds largest casino.
Exactly. They lever interest rate swaps to appear as if US bonds are selling, control commodity prices, and steal from the public. When the Fed wakes up to the fact that this entire economy cannot be stoked ala Greenspan puts anymore and needs a reset, they won't use JPM anymore and JPM will topple overnight.
Nah, JPM owns a part of the Fed, probably a big part. Jamie sits on the Board of the NYFed. JPMorgan will only fail if and when we kill the Federal Reserve bank (or they commit suicide).
Goldman Sachs owns the world (via sovereign debt positions and holding positions of power) and JP Morgan owns everything in it (via commodity positions) and the Federal Reserve owns them (and other TBTF banks). JP Morgan, via Blythe Masters group now controls the prices of almost all significant comoodities (food, energy). Are they happy? Nah, they now want to move Copper into the same place as Gold and Silver in terms of an ETF (paper market) that they can use to manipulate the physical copper market - they'll probably be allowed to do it.
It will take the people to stand and kill these banks, that's the only way it will happen. If they aren't stopped soon they'll be charging us for the air we breath, every road will be a toll road (via electronics), no growing your own food, no hoarding cash or precious metals, it goes on and on. Ron Paul is the only politican that really understands this.
This thing is a whole lot bigger than every body realizes right now, which is why the silence from the Jaimester.
Nothing but silence, that's not good.
I could tell you things that would make you grab a pitchfork right now...
FUCK the banksters!!
In 2010, Jamie Dimon might have had an idea of his banks’ decline in the face of the crisis facing the global economy. The banking system had already collapsed, only to be spared by guaranteed indemnification on the backs of future generations.
JPMorgan is not the sole Wall Street bank to begin militarizing its operations. Numerous Wall Street banks have purchased US firearms and ammunition manufacturers, as well as transnational mercenary firms. The consolidation has been done quietly.
Wall Streets banks acquired private security firms via private equity firms. The buying spree includes US ammo and gun manufacturers, uniforms, silencers and an army of mercenaries
http://silvervigilante.com
Maybe if they can separate and label enough departments, next time they really get hammered they can say "Oh, no no no no, JP MORGAN isn't bankrupt, THAT GUY sitting in that chair right there just went bankrupt." Hey, it's worked for Donald Trump.
CAP BANK POSITIONS PROFITS, EITHER FLOW OR PROP, AT 5%
That is not solution, just more stupid regulation that ZH would hate.
The only solution is to get rod of the FDIC and FED
And the Dow goes green!
Laws has beating expectations all the way down.
Boilermaker has SURPRISE!
Cdad has epic rants.
The Tsar has pointless and BULLISH!
I need my own catchphrase to describe the asinine nature of US equities.
You've had some good ones.
"I ain't got all day! Let's get this show on the road!"
"I agree with Devo! Lets whip it good!"
"Get red bitch!"
Aw schucks, I'm flattered!
I'm thinking...
ES stick save, that'll move the chains!
There was a bit of a save off the lows...
fungibility tags: b/c real dogs ain't fungible?
They aren't any smarter than anyone else. In fact, a retard could do it.
Light Squared, what a cool name! :slobber: Me wants sum!
I'd go further and say just to bust up the banks-- make them like true to utility form and lend and limit their abilities to invest and those who want to gamble do so with money they can raise. It'd be interesting to see just how successful they'd be without their syndicate like influence over the markets. All this is a moot point if we are to rely on our current banking committee in government.
Fuck it let's think about redesigning that committee while we're at it.
Wait a minute! Are these the same TPTB that some folks around here think know all?
LOL!
Cap them? Seriously? I have a better solution....let he fuckers fail when they make a stupid bet. That will keep them from doing stupid shit. I find it hard to believe that the Hedge is calling for more regulation that won't be followed.
That makes WAY too much sense to be viable.
No it won't. By that time they will have already sucked all the money out of the company in salaries/bonuses/options/fees. The only people gettin screwed will be the depositors and investors -- the bankers will be living it up on their private islands.
If they hadn't started this too big to fail shit in 98 with LTCM most of these bets would never have been made. When the banks can make a bet with the knowledge that uncle sam will bail them out they are going to make stupid bets. Regulation does nothing but make the big bigger and sqeezes out the little guy.
Ave you read creature from Jekyll Island? Awesome book! It says the name of the game is bailout! It started befor LTCM.
Some examples in the book are Lockheed, Chrysler (first time), Penn Central etc.
If you haven't read it, I recommend it.
Yes I have. I actually keep that book by the bed for reference too. I remember the Chrysler bail out. My dad worked for Chrysler and we would watch all the hearings on TV. Dad of course wanted them to be bailed out, it never made sense to me why they should be bailed out if they couldn't manage their company.
It makes sense if you don't think about it.
+1
Must read for everyone.
From Creature from Jekyll Island:
Marriner Eccles was the Governor of the Federal Reserve System in 1941. On September 30 of that year, Eccles was asked to give testimony before the House Committee on Banking and Currency. The purpose of the hearing was to obtain information regarding the role of the Federal Reserve in creating conditions that led to the depression of the 1930s. Congressman Wright Patman, who was Chairman of that committee, asked how the Fed got the money to purchase two billion dollars worth of government bonds in 1933. This is the exchange that followed.
It must be realized that, while money may represent an asset to selected individuals, when it is considered as an aggregate of the total money supply, it is not an asset at all. A man who borrows $1,000 may think that he has increased his financial position by that amount but he has not. His $1,000 cash asset is offset by his $1,000 loan liability, and his net position is zero. Bank accounts are exactly the same on a larger scale. Add up all the bank accounts in the nation, and it would be easy to assume that all that money represents a gigantic pool of assets which support the economy. Yet, every bit of this money is owed by someone. Some will owe nothing. Others will owe many times what they possess. All added together, the national balance is zero. What we think is money is but a grand illusion. The reality is debt.
Not to worry, all losses will come from earnings... um, customer deposits... no, I mean earnings. Earnings, dammit, earnings!
look at WMT US Walmart it prints the Walmart-Omen . LZ WMT approaching Lakehurst
See the very negative Market Reaction in the SPX the last time, WMT hit new all time highs in 2008 . . .
here are two fine, recent articles dealing w/ the jpMorgue:
This is actually non-news. The SPECIAL SITUATIONS GROUP of all banks is the team in charge of working out bank investments that have gone badly. Essentially it is the the workout department. It's not exactly distress investing, because the group does not originate those loans and equity stakes. Their portfolio is handed to them by the Credit Committee.
It would be news if the the Special Situations Group actually originated deals. Then it would be acting as a distressed credit hedge fund.
My guess for light-squared is that JPM must have lent money to Falcone for the transaction, and that credit has now converted into an equity stake.
I realize ZeroHedge is mostly a place for traders, but this is actually pretty basic as far as banking goes.
Hmm:
Odd use of the verb "to invest" instead of "to service." Must be a typo.
Hmmmm:
So Tyler, are you really giving cred to a LinkedIn post &/or advertisement [that's what profiles are, advertisements] ... Really? Some TBTF dip shit, who lives in a liars den, is suddenly going to tell the truth on his LinkedIn profile or post...
Really? In the immortal words of Col. Jessup, Please tell me that you've got something more....
IMO, there's no such thing as an investment, only speculation. That aside, I think the TBTF cabal should be taken down, hard. But SIG's/SIO's in TBTFs are "investing" even if they are not as asserted originating/initiating the relationship if they are allocating more capital to the Retarded Situation.
Perversion of BS via perversion never fixes perversion, it only ends up creating more perversion.
Oh come on now, anyone can see this is a perfect hedge for a massive short position in silver.
the losses at JPMorgue now that their derivatives position has cracked are potentially limitless and exponential. USgov and SEC could have papered over this loss with the usual shenanigans, but now after the implosion of their derivatives anchor at MFGlobal the derivatives black hole is now sucking down its flagship. losses are already escalating. http://news.goldseek.com/GoldenJackass/1337803200.php
Jon Corzine anyone?
I hear he has volunteered to help JPM manage their sovereign bond book (something about using more leverage) if their legal department will pick up his case pro bono.
Look, the banksters are lying scum. But here's the thing.
The Banksters are PROTECTED by POLITICIANS who are NOT bought off by the Banksters but are PROTECTED by VOTERS who ARE BOUGHT OFF with entitlement promises.
The ONLY WAY Banksters can provide a cut of the take back to politicians is because the VOTERS are BOUGHT AND PAID FOR by elect politicians who steal money from others via taxes.
If VOTERS stopped voting for politicians who run on the PRINCIPAL OF STEALING from one person to pay off another voter, and voted for PRINCIPLES and not thieves, ALL OF THIS banksters/wall street BS would stop.
NO ONE has a Right to take the capital of another to benefit themselves. HEALTH CARE, RETIREMENT, EDUCATION, AND ALL THE OTHER ENTITLEMENT "rights" are LIES SOLD BY POLITICIANS TO BUY VOTES.
Why should a politician not engage in EXACLTY THE SAME BEHAVIOR and methods of stealing AS THE VOTER WHO ELECTED THEM ENGAGES IN VIA THEIR VOTE?
Politicians DO NOT RESPECT OR CARE ABOUT THE VOTERS BECAUSE THE VOTERS ACT LIKE THIEVES.
If you really believe in your fellow "regular/non-bankster" American, that they won't leave you and your family starving in the street, that their Charity is great..... Well then stop VOTING LIKE A THIEF AND VOTE THE PRINCIPALS YOU CLAIM.
Robin Hood stole from the rich who had stolen from regular men.
Voting to take, via taxation, someone's money to give to another is NOT Robin Hood behavior, IT IS STEALING FROM ANOTHER.
Taxes for police, fire & military to PROTECT ALL is NOT stealing.
Taxing so Johnny can get a college degree in ANY BS area of interest IS STEALING. But selfish-stupid-arrogant Westerner's won't understand the distinction until Johnny wants to study Beastiality & Snuf, and have the taxpayer pay for the movies to be made so he can "study" them.
Wake up 99%! YOU ARE THE THIEVES BEING BOUGHT OFF BY THE POLITICIANS. YOU ARE THE BANKSTERS PROTECTORS.
That's crap, bankers own the politicians. It's as simple as that.
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