Meet Wall Street's Gatekeeper To Hell: JPMorgan

One name comes up again and again when we look back at critical tipping points in the financial system. Whether it is Lehman, WaMu, MFGlobal, or more recently Knight Capital's implosion, the house-of-Dimon is tied directly, in one way or another, to creating the crisis or offering 'help' to fix it. As the WSJ notes, the Knight CEO Thomas Joyce reached out "we're looking for help" and sure enough JPMorgan were more than happy to help (with just the right amount of vigorish of course) especially given their 'complicated' relationship with Knight (and MFGlobal) at the time of distress. Sure enough, after playing hardball for 2 days, they agree terms and Knight is saved (for now) but once again the bank-that-didn't-need-TARP fixes another tempest-in-a-teapot as the squid and the whale battle for global interconnected dominance.

WSJ: Knight Put Fate In Familiar Hands

For two days, J.P. Morgan remained on the sidelines while Knight turned to others for short-term financing to get through the week.


Knight and J.P. Morgan discussed the availability of a $200-million revolver, the term for a credit line that can be drawn and repaid so long as the borrower meets certain conditions. At the helm was J.P. Morgan, along with half a dozen other banks.


Knight's situation was precarious. It was relying on short-term funding, with circumstances changing too quickly to focus on accessing the facility before the weekend. On the morning of Aug. 3, Knight executives were still lining up funds until before the market opened.


"We needed to get through Friday in order to get to the weekend," Mr. Joyce told the Journal in an Aug. 6 interview.


In a stream of calls over several days to Mr. Hernandez and Michael Cavanagh, co-chief executive of J.P. Morgan's corporate and investment bank, other prospective lenders gained comfort, say people involved in the discussions. J.P. Morgan executives made it known they considered Knight's assets valuable enough to offset banks' losses even if the firm folded, the people say.


On that Friday at around 4:30 p.m., Knight officials contacted J.P. Morgan and said the brokerage intended to draw down the entire $200 million available through a revolving line of credit. On Monday morning, an exhausted Mr. Joyce called Mr. Hernandez to express his gratitude, say people familiar with the conversation. Knight was still alive.