A big bank lost $2b in synthetic hedge! Gambling must stop!
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If no body stop this gambling the whole world will have to provide zero interest money to the rich. The mainstream people will earn no interest for their savings perpetually as they do not have any other options that their richer brethrens have.
It is ridiculous to claim that it is a hedge and yet it lost US$2bn in 6 weeks. This is certainly not a pure hedge. There is no panic in the mkts during this period if not I doubt the lost is just this amount. Vix remains more or less unchanged during this period.
Please join me in asking for either jail term for those who cause crisis or separate banks from gambling. How can a bank just apologise for its stupid trade and get away to the next trade.
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the next big shifter will be hedge fund, for they will bring a lot more banks down, when this catastrophe comes , there is likelyhood of banks being wiped out, there is so many hidden dangers fund that lurks in all sorts of investment.
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you mean JP Morgan Chase?
here's the sad part..
they were NOT gambling.. they were making a hedge just like they should to minimise losses... only thing is that the Whale took the wrong position instead...
basic mistake.. basic error...
showed a lack of oversight and a lack of counterchecking...
whatever it is, it was not gambling...
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whats new? they make money and they get hugh remuneration. they make a mistake and the whole world suffer the consequences. arent banking the best job in the world?
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most of the time they make big money and nobody say anything? ppl should also complain when they make so much money...
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What's new?
Temasek lost billions, taxpayer's money.
No need to answer to anybody.
Beat backside and continue to do other blunders.
So, what's new?
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Why cannot find this topic on the speaker's corner.
Any way, risk control has been around for decades and the problem is such huge losses occurred in quick succession since 07/08. How to accept from industry maned by the cream of the talents. Why hedging must use synthetics? And when use synthetics and can get too complex - still must use - I suspect because there is a desire to make tons of money by speculating the movements of these underlining instruments that made up of the synthetics. And the movement for the past 6 weeks is so little - so the loss is not due to large market movements but rather huge synthetic positions. It is more of lack of understanding than an outright error I suspect.
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Originally posted by Gohhock:
Why cannot find this topic on the speaker's corner.
Any way, risk control has been around for decades and the problem is such huge losses occurred in quick succession since 07/08. How to accept from industry maned by the cream of the talents. Why hedging must use synthetics? And when use synthetics and can get too complex - still must use - I suspect because there is a desire to make tons of money by speculating the movements of these underlining instruments that made up of the synthetics. And the movement for the past 6 weeks is so little - so the loss is not due to large market movements but rather huge synthetic positions. It is more of lack of understanding than an outright error I suspect.
because this is not political..
not everything is political...
and you seem to refuse to believe that this time, it is not about gambling.. rather, it is just a stupid mistake by some guy they nicknamed The Whale or The London Whale who made a mistake...
instead of hedging the funds, he ended up doubling the risk by erroneously taking the opposite position...
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Originally posted by Gohhock:
Why cannot find this topic on the speaker's corner.
Any way, risk control has been around for decades and the problem is such huge losses occurred in quick succession since 07/08. How to accept from industry maned by the cream of the talents. Why hedging must use synthetics? And when use synthetics and can get too complex - still must use - I suspect because there is a desire to make tons of money by speculating the movements of these underlining instruments that made up of the synthetics. And the movement for the past 6 weeks is so little - so the loss is not due to large market movements but rather huge synthetic positions. It is more of lack of understanding than an outright error I suspect.
You know what's hedging...and how it was supposed to work right.......
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Please lah politics never solve problems lah - if not there will never be same old problems keep popping up. Last month the ceo still defending his cio saying they are smart hedging and I believe their results shows that their office contribute a large portion of the co's overall profit - if I did not remember wrongly. I cannot understand that it is just one stupid error instead of buy they go and sell or vice versa. This only people like me can do it alone without a seasoned top bank lah! In his press release, I heard ceo saying in hindsight it was wrong - means they could not understand the synthetics fully and yet want to kay kiang because of greed. How can hedging make so much money? It is usually a smaller cost to insurance against non-operational loss. It must be a combination of hedging and speculation.
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in other words, if a guy walking across the road gets hit by a truck, it's a political issue for you..
right...
we know where you stand now
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Beware investments too good to be true
Esoteric products may be unregulated so buyers have no legal recourse.
Investors now have access to smorgasbord of investment products. Gone are the days when equities and bonds were the main tools by which investors could grow their money.A large variety of investment products ranging from straightforward "vanilla" products to complex derivatives catering to the sophisticated investor are easily available.
But as interest rates sink to all-time lows, many of the investments traded on recognised exchanges are also failing to deliver satisfactory returns.
Investors are being tempted by much more esoteric investments that range from land banking, wine and gold-dealing, to even livestock. These are very attractive investments which promise returns that can be as high as 30 per cent or more.
But these returns clearly come with heightened risks.
Most, if not all, of these alternative investment products are unregulated.
Unlike unit trusts and other regulated financial investments, which can be sold only by licensed financial advisers, brokers who deal with such alternative investments are not.
Similarly the marketing materials for regulated products are subject to stringent regulation such as the font size of disclaimers and fine print details.
Consumers find themselves on shaky ground should the investment company go bust.
For example, when 1,400 investors were left in the lurch by local land banking firm Profitable Plots, there was little recourse for investors as the company was not regulated by any specific statute.
The firm did not come under the Financial Advisers Act, for example which is legislation that gives the Monetary Authority of Singapore (MAS) regulatory powers over such advisers.
Neither does land banking come directly under the Securities and Futures Act as the investors are holding a direct interest in small plots of land which they hope to sell en bloc at a later price, as opposed to them acquiring securities related to the land.
MAS has long held the stand that it strongly encourages consumers to deal only with regulated entities. A list of these firms can be found on their website. For those who choose not to heed the advice, the old adage of "buyer beware" applies.
What the MAS does do is maintain an Investor Alert List which names unregulated persons who, based on information received by MAS, may have been wrongly perceived as being licensed or authorised by MAS.
When the list was first put out in 2004, the MAS said that this was to provide an "early warning" to consumers that if they dealt with these unregulated entities, they would not be protected by the MAS.
Potential investors will have to protect themselves by conducting the requisite background checks on the companies or investment schemes in question.
But during this period of low interest rates, many investors cannot help but be drawn to the attractive returns dangled by these investments. Should more regulation be put in place before another large collapse occurs?
Investor watchdog Securities Investors Association of Singapore (Sias), is one party that has called for the regulation of such investments.
Mr David Gerald, president of Sias, said: "Currently, there are sufficient laws to protect investors from mis-selling or fraud, but the MAS needs to intervene in the case of complicated products which may not be easily understood by the regular investor."
Certainly, not everything can or should be regulated. To do so would be to place a huge administrative burden on the agencies involved. There is also an inherent tension between allowing consumers free choice, and protecting the mostly unwitting among the general public from being cheated.
But more can be done.
Singapore could take a leaf from the books of countries such as United Kingdom, and regularly review the scope of its regulation and consider extending it if necessary.
Since 2000, collective investment schemes - including land banking - have been defined as a regulated activity under their Financial Services and Markets Act 2000.
Under the Act, anyone who operates a collective investment scheme will have to be an authorised person, unless he is specifically exempt by legislation.
An agreement made in contravention of the Act will be unenforceable, and monies paid to a person flouting this rule can be recovered on top of compensation in respect of losses incurred.
Mr Justin Ong, asset management partner at PricewaterhouseCoopers, also noted the vastly different legal culture and landscape between Singapore and the United States, for instance. In the US, individuals are generally more litigious, and they can also rely on a very comprehensive and robust set of consumer protection laws to take action against the investment scheme operators,
Where regulation is not feasible, perhaps the Government could give more "legal teeth" to consumer watchdog Consumers Association of Singapore (Case) in the case of these unregulated investments. Case currently has limited powers to demand restitution from companies in respect of complaints on alternative investments.
Such grounds could include the omission of material information, misrepresentation, misleading information, or taking advantage of persons of unsound mind.
But it always takes two to tango, and the onus should remain on the customer to do as much homework as possible before making any investment decision.
The discerning consumer should turn away from products he does not fully understand, or whichseem too good to be true.
Failing that, he will have only himself to blame, and have to grin and bear the consequences if he ends up poorer.
Prime Commentary, The Straits Times, Friday, May 11 2012, Pg A2
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in other words, if a guy walking across the road gets hit by a truck, it's a political issue for you..Yah you have just demonstrated that a person can hide behind simple errors get away with killing a person by driving. We only punish reckless drivers killing others by jail and fine ony.
right...
we know where you stand nowMy stand is if banks want to engage in speculations to earn more incomes, then law must be enacted to jail those operatives and executives responsible once bailouts by the public are required. Otherwise, the banks must only engage in traditional banking functions only and have separate corporate entities to do speculations. It is obvious especially from the cream to know the advantage of big speculation to earn big income and when huge losses occur just socialise the losses.
Following a recent research report that more rich than poor tends to think it is ok to lie and trick in order win competition, one aust radio stn tried a game to check this out. The stn will at certain time take 2 callers in as winners. Each will receive $500 if both does not steal the other's $500. If one steals and the other doesn't then the one who steals get $1000. If both steal then the radio stn does not to give any prize ie both get nothing. Every sets of players all want to steal and so the radio stn does not have to pay a single cent to confirm the outcome - any body would want to steal to win even though they might actually letting off the radio stn. Only when both want to share then they could benefit from the prize given by the radio. This is just a small prize but when talkiing about billions surely law must be enacted to correct this.because the word is doing great injustice to the mainstream - having zero interest in their bank accounts for years and have no alternative investment because they do not have big enough some to have that alternative investments. They also have no pay or little pay increase for years if they are still lucky to hold on to their jobs. All these sufferings just for some select few who want to keep breaking earning records in easy way!
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funny, wen u were instil tat there is no place for no.2 so wat do u expect ?
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You can go protest outside wall street.
I support you.
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Mr "Gohhock", just as the news acticle above suggested, if you feel that the bank had cause you to lose your investment or whatever, I recommend that you write to Monetary Authority Of Singapore (MAS) to address your issue to them.
Otherwise if you might considered bring the "bank" issue to mediacorp shows like Frontline : [email protected] or Moneyweek : [email protected] if you want to seek important "attention", trust me, no "miracle" will happen if you keep posting here.
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Huge Jewish banks like JP Morgan are bigger than the US Govt......................they're all major shareholders of the Federal Reserve...................
they're running America................
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JPMorgan suffers $2.5b loss on trading blunders
New York: JPMorgan Chase, which emerged from the global financial crisis as the biggest US bank, has revealed a stunning US$2 billion (S$2.5 billion) trading loss after an “egregious” failure in a unit managing risk.
The bank’s chief investment office, run by Ms Ina Drew, 55 took flawed positions on synthetic credit securities that remain volatile and may cost an additional US$1 billion this quarter or next, chief executive Jamie Dimon told analysts on Thursday evening.
“There are many errors, sloppiness and bad judgement,” Mr Dimon said. “These were egregious mistakes. They were self-inflicted.”
The shock disclosure sent stock markets across the globe lower.
Asian shares slumped yesterday, with Singapore stocks falling almost 1 per cent, while South Korea’s Kospi index was down 1.4 per cent, and Hong Kong’s Hang Seng ended 1.3 per cent lower.
Sentiment in Asia was also dampened by signs of slowing growth in China.
Mr Dimon accepted responsibility and apologised. “”These were grievous mistakes, they were self-inflicted, we were accountable and we happened to violate our own standards and principles by how we want to operate the company. This is not how we want to run a business,” he said at a news conference.“We will admit it, we will learn from it, we will fix it, and we will move on.”
Ms Drew, the woman at the centre of this latest financial mess, was described by one colleague as “scary-smart”, and “all about risk-taking”.
While the losses originated from the unit’s London team that reports to Ms Drew in New York, more than one trader was said to be responsible.
One trader in particular, Mr Bruno Iksi, once likened himself to Jesus who could “walk on water”. Rival traders called him “the London Whale” or “Voldermort” for the massive trades that roiled financial markets last month.
Bloomberg
The Straits Times, Saturday, May 12,2012Trading loss stains Dimon
$2.5 debacle damages influential CEO’s reputation and influence.
New York – Days before revelations of JPMorgan Chase’s US$2 billion (S$2.5 billion) trading loss rocked Wall Street, the company’s always-confident chief executive Jamie Dimon was his usual exuberant self.
When the bosses of six of the largest banks gathered at the Federal Reserve Bank of New York in Manhattan to meet a top Fed governor, the others used the underground garage. Mr Dimon came and went through the front door, and even chatted with a reporter.
It was a stance familiar to Mr Dimon. He had steered his bank successfully through the financial crisis, and was known as Wall Street’s best risk manager, not to mention the most influential banker in the country when it came to writing new regulations in Washington.
He was so well regarded by the White House administration that the former chief of staff Rahm Emanuel was even tapped to appear at the bank’s board meeting back in 2009 before the appearance was scuttled.
Now through, Mr Dimon’s reputation and possibly his influence have been cut down to size.
The trading loss is a rare misstep by a man who prides himself on having his finger on the pulse of his 270.000 employee company, and it suggests his vaunted confidence edged towards hubris.
Mr Dimon said in an interview on Friday that he got a call from the company’s chef risk officer about the trading problem late last month.
“Of course I was angry,” he said. “I said, ‘Stop, let’s learn and get other people involved.’”
“We were meeting constantly. Believe me, for the past couple of weeks, it was the primary thing going on in my world.”
In a statement, Representative Barney Frank said JPMorgan “has lost, in this one set of transactions, five times the amount it claims financial regulation is costing it”. And that reality may cost Mr Dimon in Washington.
He has been marshalling the firm’s considerable resources to help sway the regulators who are writing many of the rules in the Dodd-Frank banking reform Bill passed in 2010. So far this year, JP Morgan has spent US$1.92 million on lobbying. In 2010, it topped the industry in lobbying dollars with US$7.41 million.
Mr Dimon has also been a frequent visitor to Washington to further his case to lawmakers. According to the Sunlight Foundation Reporting Group, he has made 10 visits to regulators over the past two years to discuss Dodd-Frank, principally at the Treasury Department.
Known as a blunt executive not afraid to raise his voice, Mr Dimon has been one of the few bankers who still commanded respect from analysts and investors as well as regulators. He routinely grills executives to make sure they are prepared for a variety of contingencies.
He was also known for warning how dangerous one misstep could be. In April 2007, just as the first sign were emerging of what would become the sub-prime mortgage crisis, Mr Dimon had a message for 200 new managing directors assembled at the company’s headquarters in Manhattan.
“One deal doesn’t make or break us,” he said, according to one banker who was present. “But the implications of one bad deal on our franchise are significant.”
Now Mr Dimon, a skilled master of relations with the media , is having to do some fancy footwork. He taped a segment on NBC ‘S Meet The Press last Wednesday, one day before he revealed the disastrous trade. On Friday, he went back to apologise again for the losses. In recent days, he has been characteristically blunt but contrite.
“We never said we never make mistakes,” Mr Dimon added on Friday. “Hopefully, the smaller the better, but this one is not so small.”
AP
Haunting Words
JPMorgan Chase’s chef executive Jamie Dimon has, since the 2008 financial crisis, argued against excessive regulation that could potentially limit economic growth. Some of Mr Dimon’s comments have come back to haunt him, after the bank said last Thursday that it had lost at least US$2 billion (S$2.5 billion) from a failed hedging strategy.
Bogged down by rules
“We must not let regulatory reform and requirements create excessive bureaucracy and unnecessary permanent costs.
“But the result of financial reform has not been intelligent design. Simplicity, clarity and speed would be better for the system and better for the economy.”Mr Dimon’s March 30, 2012 letter to shareholders
Think long term
“Short-term profit means nada If you asked me to increase profit by 50 per cent next year, I could do it. Take a little more risk. But that wouldn’t be in the longer-term interest of customers, employees and communities as well as shareholders.”
On a panel at the World Economic Forum in Davos, Switzerland, in January 2012
Look back in anger
“Has anyone bothered to study the cumulative effect of all these things? And do you have a fear, like I do, that when we look back and look at them all, that they will be a reason it took so long that our banks, our credit, our businesses and most importantly, job creation, started going again.”
On tighter banking regulation in an unusual confrontation with Federal Reserve chairman Ben Bernanke at a June, 2011 conference in Atlanta, Georgia
Analysis
There’s more to CEO’S clueless remarks
New York – Could JPMorgan Chase’s chief executive officer really be as clueless as he sounds?
Last month, after Bloomberg News broke the news that the company’s chef investment office had, in essence, become a ticking time bomb, Mr Jamie Dimon called the press coverage’s “a complete tempest in a teapot”.That explanation no longer works. Last Friday, he changed tack.
While he refused to give any meaningful details on how losses on the investment office’s “synthetic credit portfolio” had reached US$2 billion (S$2.5 billion) so far this quarter, he more than made up for that in assigning blame – to himself and JPMorgan employees.
“There are many errors, sloppiness and bad judgement,” he said, as JPMorgan’s stock sank in after-hours trading. “These were egregious mistakes. They were self-inflicted.”
Mr Dimon called himself and his colleagues “stupid”. But these is more to it than that.
Either he misled the public about the gravity of the festering trades during the bank’s first-quarter earnings call last month. Or he did not know what was happening inside the bowels of his own bank.
History tells us the latter is the norm for Wall Street bosses, though it is hard to say which is worse.
It is not often that a huge company calls an emergency teleconference at short notice to discuss an intra-quarter trading loss that is equivalent to only 1 per cent of shareholder equity. So when a Deutsche Bank AG stock analyst named Matt O’Connor asked Mr Dimon why disclose it at all, the answer was bound to be revealing.
“It could get worse, and it’s going to go on for a little bit unfortunately,” Mr Dimon replied. The meaning was clear. Worse could mean disastrous.
It is conceivable that Mr Dimon did not understand the details of the trades, and simply declined to discuss them rather than admit this.
The reason the world learnt last month of JPMorgan’s “London Whale” bets on the credit markets to begin with is that they had become so big – with as much as US$100 billion riding on one side of a single transaction – that the bank’s trades were moving, and maybe even distorting, the market.
Some of the bank’s counterparts were so upset about this that they started complaining to journalists. They seem to have discerned the broad outlines of the trading positions a while ago.
Now they are squeezing the bank for maximum gain, while JPMorgan is trying to unwind the trades without losing its skin.
JPMorgan can delay coming clean with the basic facts, though they probably will come out eventually. Some United States congressional committee is bound to subpoena its trading records.
There is only one conclusion to draw from all this: Mr Dimon must know he has a lot more explaining to do.
Bloomberg.
‘London Whale’ took big bets below the surface
London – Mr Bruno Iksil was dubbed the “London Whale” in credit markets due to the size of the trading positions he took, but for years he stayed well below the surface, avoiding detection.
Now, the French-born JPMorgan trader has been dragged from the anonymity of the trading floor into the eye of a very public storm over a US$2 billion (S$2.5 billion) trading loss at the US investment bank where he worked in a little-known group called the Chef Investment Office (CIO).
Mr Iksil’s friends, colleagues and fellow traders describe an unassuming man, a far cry from the brash image normally associated with traders staking huge bets in fast-moving financial markets, including derivatives.
“He’s a really nice bloke. A quiet bloke. He’s not an arrogant trader, he’s quite the opposite. He’s very charming,” one former colleague at JPMorgan said of Mr Iksil, whom he said is married with “a couple of kids”.
Mr Iksil, who graduated in engineering in 1991 from the Ecole Centrale in Paris, looks older than he is, seldom wears a suit and, according to his former colleagues, lives outside central London.
“He’s a balding chap with grey and dark hair. I’d say he’s in his 40s,” the ex-colleague said, adding that there are not many young traders in CIO, a relatively isolated group where everybody is in their 30s and 40s.
“Nobody wears suits in CIO. You don’t meet clients face to face,” he added.
There have been no suggestions that Mr Iksil’s activities were in any way irregular, but over a period of years he and his team amassed a book of bets estimated by some to be US$100 billion.
When these became public, opportunistic hedge funds could not resist trading against the “Whale”. As markets moved against him, whispers of Mr Iksil’s enormous latent losses circulated, ultimately undermining JPMorgan’s reputation as the canniest risk-manager in global finance.
But for all the talk of the “Whale”, the handful of London-based bankers and traders who have done business with him say they know little about the man behind the trades.
“Everone knows The Whale, whenever there was a big move in CDS markets, you knew it was the Whale,” one hedge fund manager said, adding that Mr Iksil managed to maintain “a very low profile”, out of kilter with his big influence on the multi-trillion dollar credit default swaps market.
Mr Iksil’s friends are upset that the trader is being thrust into the limelight.
“I am not happy with the way Bruno has been singled out. His name has been mentioned because in the last few years – 2008, 2009, 2010 – he delivered excellent results for the bank,” a friend who is also a former colleague said.
“His understanding of the markets, his technical skill, mean he has become someone with real credibility. Although he is in some ways in the centre of the world, at JPMorgan in London, he is pretty detached and does not have a culture of money,” his friends added.
Senior traders and dealers describe Mr Iksil as a “bright guy”, who was faithfully executing strategies demanded by the bank’s risk management model but who may have simply misjudged the amount of liquidity in the markets.
Reuters
Prime, jP morgan scandal, The Sunday Times, May 13, 2012 Pg 12
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JPMorgan hit with shareholders lawsuit over loss NEW YORK: US fund manager Saratoga Capital Management, filed a class-action lawsuit against JPMorgan Chase Wednesday after the nation's largest bank lost more than $2 billion in derivatives trading. The suit accuses the bank; Jamie Dimon, chief executive and chairman; and Douglas Braunstein, chief financial officer, of fraudulently hiding massive derivatives bets that resulted in the huge loss. "This action arises out of the materially false and misleading statements and omissions" that Dimon and Braunstein made in an April 13 earnings conference call with investors, Saratoga said in its court filing. The suit said the economic loss suffered by the plaintiffs was "a direct result of defendants' fraudulent scheme to artificially inflate the price of JPMorgan common stock and the subsequent significant decline in the value of JPMorgan common stock when defendants' prior misrepresentations and other fraudulent conduct were revealed." JPMorgan shares fell nearly 11 percent between the announcement of the loss late Thursday and the end of trade Tuesday. "We are actually suing on behalf of one of our mutual fund portfolios," said Saratoga chairman and chief executive Bruce Ventimiglia, in an email to AFP. "We're asking the judge to certify the action as a class action on behalf of all shareholders who purchased the stock," he said. Saratoga Advantage Trust -- Financial Services Portfolio filed the lawsuit in the US district court in New York. The suit focused on the conference call, in which Dimon and Braunstein downplayed news reports the Wall Street was betting massive amounts in risky trading. Dimon called the reports a "complete tempest in a teapot." But on Thursday after the stock markets closed, JPMorgan Chase disclosed it had lost $2 billion in complex derivatives trading in the six weeks from April 1, and said there was a possibility of another $1 billion in related losses by the end of June. On Wednesday, JPMorgan shares closed down another 2.6 percent, at $35.46. -AFP/ac ==== they give out super rewards for good performance. its high time they make these people pay for big losses.
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Yah, with the mainstream not backing action to seek fair treatment from the top 0.5%, the
outlook for the mainstream's future is going to be dimmer and dimmer. When I see buffaloes often win if they gang up against lions and yet they do not know how to do that consistently to protect themselves, I felt very sad for them. However, it is even so ridiculous that intelligient mainstream cannot stay united against the top 0.5% and there is no hope at all. For time since memorial, the mainstream people are so gullible to be fooled by the top 0.5% hitting on wrong issues like immigrants, competition in schools, etc and not worry about this very big issue that cause the rich poor divide to keep galloping wider!
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JPMorgan to replace investment chief
Bank scrambles to stem ire after disclosure of $2.5b loss
New York: Stung by a huge trading loss, JPMorgan Chase will replace its chief investment officer, one of the top women on Wall Street, in an effort to stem the ire that the bank faces from regulators and investors.It is the first departure since Mr Jamie Dimon, the bank’s chef executive, disclosed the stunning US$2 billion (S$2.5 billion) loss on Thursday.
JPMorgan said Ms Ina Drew, 55, will retire after 30 years at the firm.
Mr Matt Zames, head of global fixed income in the investment bank, will succeed Ms Drew as chief investment officer, the bank said yesterday in a statement.
The huge scope of the complex credit bet caught senior bank officials off-guard when it began to sour last month, and has set off renewed regulatory scrutiny of the industry. Mr Dimon has largely sidestepped blame for the loss, although he has offered numerous apologies for the blunder – the biggest of his eight-year tenure at the nation’s largest bank.
The statement did not mention two traders who worked for Ms Drew, who are also expected to leave shortly. One news report said the entire staff of the bank’s London investment office is at risk of dismissal.
Mr Zames was hired by JPMorgan from Credit Suisse First Boston in 2004 to run trading in treasuries, agencies and interest-rate swaps and options.
In 2009, Mr Zames and Daniel Pinto were picked to run fixed income. Under Mr Zames and Mr Pinto, JPMorgan has become the top bank globally in fixed-income trading.
Mr Zames previously worked at hedge fund Long-Term Capital Management LP, which collapsed in 1998.
Ms Drew’s exit is a precipitous fall for a trusted lieutenant of Mr Dimon. Last year, she earned about US$14 million, making her the bank’s fourth-highest-paid officer. From her desk in Manhattan, she oversaw the London office that assembled the trade, a growing unit overseeing a portfolio of nearly US$400 billion.
A skilled trader who once said she relished a crisis, Ms Drew became a liability for the firm. The announcement of the trading loss caused JPMorgan’s shares to plunge 9.3 per cent on Friday. It is unclear what type of severance package Ms Drew will receive.
Mr Dimon, who will face shareholders at the company’s annual meeting today, has been on a public campaign of contrition in recent days.
Famously confident and even cocky, he repeated his apologies in a broadcast on Sunday of NBC’s Meet The Press.
“We made a terrible,egregious mistake and there’s almost no excuse for it,” Mr Dimon said, adding that the bank was “sloppy” and “stupid”. He also acknowledged that the timing of the loss was a gift for advocates of more stringent regulation.
“It’s not surprising that officials there are taking the fall, but this is one of the fastest movements I have seen,” said analyst Michael Mayo, with Credit Agricole Securities in New York. “Mr Dimon get an ‘A’ for moving to stem the wrath of regulators, but an ‘F’ for not finding the problem in the first place.”
With the furore intensifying, former JPMorgan executives said, Ms Drew was clearly feeling pressure to step down.
Executives said that within the last several months, Ms Drew told traders at the bank’s chef investment office to execute trades meant to shield the bank from the turmoil in Europe.
But when the market tides abruptly shifted recently, Ms Drew’s instructions to traders to trim what had become a gigantic bet came too late to avoid racking up losses that could eventually exceed the current US$2 billion estimate.
Besides Ms Drew, Mr Achilles Macris, a top JPMorgan official in London, is expected to depart, as is senior London trader Javier Martin-Artajo.
Also under scrutiny is another of Ms Drew’s subordinates Bruno Iksil, a trader in London who was nicknamed “the London whale” as the positions he took were so large they distorted credit prices.
New York Times, BloombergBanks trend fine line in trading
New York: When JPMorgan Chase revealed its US$2 billion (S$2.5 billion) trading loss last week, it looked as through the big Wall Street banks were up to their old tricks, using their government-backed funds to make risky trades in a misguided effort to improve their profits.But even banks that focus mainly on good, old-fashioned lending do their fair share of high-stakes trading.
While few other banks, if any, pursue the complex strategies that led to JPMorgan’s losses, many traditional lenders regularly buy and sell securities, and make bet with derivatives, as part of their core operations. Financial firms say such activities allow them to earn a basic return on the deposits they collect and to offset balance sheet risks.
These practices are creating a headache for regulators who are trying to devise new rules to prevent another financial crisis.
Regulators are finalising the so-called Volcker Rule, which would ban banks from making speculative bets with their own money. But they face a basic problem: What is proprietary trading?
Such activities are easy to spot when financial firms run independent trading units devoted to making profits. But regulators find it harder to tell when other activities – like market-making and portfolio hedging – cross the line. So far, regulators do not seem too concerned that the JPMorgan blowup will have broader ramifications on the banking system. The Financial Stability Oversight Council, the panel set up in the wake of the crisis to identify and respond to threats to the banking sectors, is not planning a special meeting to discuss JPMorgan, said a source.
Big banks, even those with little presence on Wall Street, contend that their trading activities are part of prudent risk-management. Without the ability to invest in bonds and other securities, companies argue that they would not be able to make loans or extend credit as easily.
While large part of the available-for-sale bonds is in instruments deemed safe, like Treasurys, the securities can produce big trading gains, especially if their purchases are well-timed.
JPMorgan said its US$2billion loss stemmed from a hedge related to its available-for-sales securities. Specifically, the bank was using a relatively new type of credit derivative that mostly trades off exchange in opaque markets.
After the JPMorgan losses, some analysts say banks could deliver more nasty surprises as they build up big positions in bonds and derivatives, especially if the economy remains weak and interest rates do not behave as banks expect.
“The biggest issue for the next five years in banking is how banks manage their balance sheets in such unprecedented times,” said analyst Mike Mayo.
New York Times
prime,news, The Straits Times,Tuesday, May 15, 2012, Pg A14 -
That 2 billion is now 3 billion btw... and that guy who made the bet is infamously known as the London Whale... it's a insulting name because it means you're a big fat idiot with loads of cash to be sucked dry...
In case you're feeling bad for JP Morgan, there's no need to be... after losing 3 billion, they still have another 3 billion profits to go...
And also they still trying to stop the bleeding, because that 3 billion is still ongoing slowly towards 4 billion... and they can't stop just like that because the bet is so big that there's not enough people on the other side of the market to absorb the bet with.
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In case you're feeling bad for that trader who made such massive losses for JP Morgan, there's no need to feel bad, he makes millions of dollars and still richer than majority of people =)