Paul Gigot is the Wall Street Journal's editorial page editor. The pols are after my favorite banker. Listen to to his commentary last May 14th on the political assault on J.P Morgan CEO Jamie Dimon and regulatory failure.
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It is clear from Gigot's comments and the fact that the loss that Dimon is responsible for to his JP Morgan Chase shareholders is now much, much larger than the $2 billion initially mentioned, are huge problems. This loss may be more than three times larger. The fact that the banks in particular and the financial industry in general are key players in creating these problems are a big reason why the current economic malaise shows no signs of ending.
The new LIBOR scandal and the fact that the fed/Geithner knew about this roughly five years ago and did nothing is another indicator of the rampant Wall Street problems that underlie the economic fault lines in this country. The obfuscating rug of Frank'nDodd legal bilge that was added to cover the Wall St. scandals has simply been a way for Washington to claim "victory," while it was business as usual for the TBTF (too big to fail) banks on Wall Street. TBTF institutions continue to rule. Read Gasparino's "Bought and Paid For," for a recap of how this has been working the last few years or Michael Lewis' "The Big Short," that goes back to the housing collapse engineered by Washington and what were thought to be TBTF Wall St. insitutions like Lehman and Bear Stearns.
"The Big Short" is a great book and fun to read. Gillian Tett's "Fool's Gold" is an excellent complement.
Gasparino's "Bought and Paid For" sounds high on gossip, but misses the real problem: how TARP meant the banks were put in a position of having to do Obama's bidding rather than the other way around. The unnamed co-conspirators in the housing crisis are Alan Greenspan, Ben Bernanke, and the other Fed governors.
The affair of the London Whale now looks like costing $5 billion roughly 20% of JPM's 2012 profit before the hit leaving maybe an 11% ROE. I bought more JPM on the news.
Dimon admits taking his eye off the treasury ball when Ina Drew's charges were risking with stockholders' money while trying to hedge their European credit risk. Might the implementation of Dodd-Frank distracted him?
Bruno Michel Iksil got himself into a bear trap as I see it: big bets in illiquid markets leave you very vulnerable to trades who know you have to unwind the trade. Even if he was only hedging (interestingly the Chief Investment Office had produce a couple of billion dollars of profits over the previous few years), basis risk will kill you in thin markets. thee are limits to the ability of derivatives to enable hedging.
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