CEO Jamie Dimon of JPMorgan Chase (shown left) went public with a whale of tale today about how one of its investors, Bruno Michel Iksil, known as the “London Whale” lost $2 billion in bad bets on volatile synthetic credit securities. What is most striking about the story is that Dimon was the executive who led efforts to limit reforms by the Federal Reserve after the last financial scandal. Now he says “There were many errors, sloppiness and bad judgment . . . grievous mistakes, they were self-inflicted.” Sound familiar?
Iksil is also known as “Voldemort” because of the massive power he wielded. Dimon has worked hard to prevent reforms limiting or monitoring such risk-taking enterprises. This includes opposition to the Volcker rule and related reforms.
Now Dimon is expected to blame the whale rather than his own anti-reform position. It is not the first time that a mad leader personified his own failings:
“All that most maddens and torments; all that stirs up the lees of things; all truth with malice in it; all that cracks the sinews and cakes the brain; all the subtle demonisms of life and thought; all evil, to crazy Ahab, were visibly personified, and made practically assailable in Moby Dick. He piled upon the whale’s white hump the sum of all the general rage and hate felt by his whole race from Adam down; and then, as if his chest had been a mortar, he burst his hot heart’s shell upon it.”
– Moby Dick, Herman Melville
Dimon can save time on writing his own testimony and simply take this from Melville:
Towards thee I roll, thou all-destroying but unconquering whale; to the last I grapple with thee; from hell’s heart I stab at thee; for hate’s sake I spit my last breath at thee. Sink all coffins and all hearses to one common pool! and since neither can be mine, let me then tow to pieces, while still chasing thee, though tied to thee, thou damned whale!
He might however want to check what happened to Ahab in his final encounter with the whale.
Source: Time
Bron,
“I keep wondering what Krugman did to win a Noble Prize in economics.”
Maybe one day you’ll understand.Till then keep reading Rupert’s WSJ.
RNC Chairman Responds To JPMorgan’s Massive Loss By Saying ‘We Need Less’ Financial Regulation
By Travis Waldron on May 14, 2012
http://thinkprogress.org/economy/2012/05/14/483552/rnc-chairman-responds-to-jpmorgans-massive-loss-by-saying-we-need-less-financial-regulation/
from a Wall St. Journal Article by Gregory Zuckerman:
For a group of hedge funds and other traders, J.P. Morgan Chase & Co.’s sudden $2.3 billion trading loss means big profits, according to people familiar with the matter.
Firms such as BlueMountain Capital Management LLC and BlueCrest Capital Management LP each scored gains of about $30 million, according to people familiar with the matter. Representatives for the firms declined to comment.
One trader elsewhere estimated that well more than a dozen firms, including his, as well as traders at banks also profited by taking the other side of J.P. Morgan’s trades.
I keep wondering what Krugman did to win a Noble Prize in economics.
Elaine:
“Just to be clear, businessmen are human — although the lords of finance have a tendency to forget that — and they make money-losing mistakes all the time.”
Krugman seems to neglect or doesnt understand that people made money on the other side of that trade.
Why We Regulate
By PAUL KRUGMAN
Published: May 13, 2012
http://www.nytimes.com/2012/05/14/opinion/krugman-why-we-regulate.html?_r=1&partner=rssnyt&emc=rss
Excerpt:
One of the characters in the classic 1939 film “Stagecoach” is a banker named Gatewood who lectures his captive audience on the evils of big government, especially bank regulation — “As if we bankers don’t know how to run our own banks!” he exclaims. As the film progresses, we learn that Gatewood is in fact skipping town with a satchel full of embezzled cash.
As far as we know, Jamie Dimon, the chairman and C.E.O. of JPMorgan Chase, isn’t planning anything similar. He has, however, been fond of giving Gatewood-like speeches about how he and his colleagues know what they’re doing, and don’t need the government looking over their shoulders. So there’s a large heap of poetic justice — and a major policy lesson — in JPMorgan’s shock announcement that it somehow managed to lose $2 billion in a failed bit of financial wheeling-dealing.
Just to be clear, businessmen are human — although the lords of finance have a tendency to forget that — and they make money-losing mistakes all the time. That in itself is no reason for the government to get involved. But banks are special, because the risks they take are borne, in large part, by taxpayers and the economy as a whole. And what JPMorgan has just demonstrated is that even supposedly smart bankers must be sharply limited in the kinds of risk they’re allowed to take on.
Why, exactly, are banks special? Because history tells us that banking is and always has been subject to occasional destructive “panics,” which can wreak havoc with the economy as a whole. Current right-wing mythology has it that bad banking is always the result of government intervention, whether from the Federal Reserve or meddling liberals in Congress. In fact, however, Gilded Age America — a land with minimal government and no Fed — was subject to panics roughly once every six years. And some of these panics inflicted major economic losses.
So what can be done? In the 1930s, after the mother of all banking panics, we arrived at a workable solution, involving both guarantees and oversight. On one side, the scope for panic was limited via government-backed deposit insurance; on the other, banks were subject to regulations intended to keep them from abusing the privileged status they derived from deposit insurance, which is in effect a government guarantee of their debts. Most notably, banks with government-guaranteed deposits weren’t allowed to engage in the often risky speculation characteristic of investment banks like Lehman Brothers.
This system gave us half a century of relative financial stability. Eventually, however, the lessons of history were forgotten. New forms of banking without government guarantees proliferated, while both conventional and newfangled banks were allowed to take on ever-greater risks. Sure enough, we eventually suffered the 21st-century version of a Gilded Age banking panic, with terrible consequences.
It’s clear, then, that we need to restore the sorts of safeguards that gave us a couple of generations without major banking panics. It’s clear, that is, to everyone except bankers and the politicians they bankroll — for now that they have been bailed out, the bankers would of course like to go back to business as usual. Did I mention that Wall Street is giving vast sums to Mitt Romney, who has promised to repeal recent financial reforms?
Dimon Fortress Breached as Push From Hedging to Betting Blows Up
By Dawn Kopecki and Max Abelson – May 14, 2012
http://www.bloomberg.com/news/2012-05-14/dimon-fortress-breached-as-push-from-hedging-to-betting-blows-up.html