Aziz goes straight to the heart of the problem with bailing out anybody. The moral hazard created with JP Morgan has set them up to think they can just break the rules without repercussion. JPM knows that they are too big to fail and can suffer losses like this because the Fed or the Feds will bail them out. So they break laws and rules without the hint of regard. If JPM is acting like this, you better believe others are too. The bailouts of 2008 didn’t fix ANYTHING and they only exacerbated a problem. The only thing accomplished was buying enough time for highly connected people to get out of the system and hand the bag off to others… primarily taxpayers.
J.P Morgan Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an “egregious” failure in a unit managing risks, jeopardizing Wall Street banks’ efforts to loosen a federal ban on bets with their own money.
The firm’s chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday. Losses mounted as JPMorgan tried to mitigate transactions designed to hedge credit exposure.
Having listened to the conference call (I was roaring with laughter), Jamie Dimon sounded very defensive especially about one detail: that the CIO’s activities were solely in risk management, and that its bets were designed to hedge risk. Now, we all know very well that banks have been capable of turning “risk management” into a hugely risky business…
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