Massive derivatives loss at JPMorgan fuels calls to tighten Wall Street regulation

Newark Star-Ledger ^ | Saturday, May 12, 2012, 8:05 PM | Ed Beeson

[Fee]

It is call no bailout and jail time if separate customer accounts are raided to pay for the losses. Note of caution, JPM losses are probably larger, CEO are known to float a lower number out to test public reaction to their stock price. Bottom line for JPM statement is they brought all these swaps and the financial instruments are losing value (2 billion) and they cannot get a buyer for them (meaning additional losses added to the 2 billion already loss as time goes on). What is ominous is the five large US banks met with the Fed Reserve a month ago, and possibly JPM losses were discussed, or the other four banks with JPM are caught in the same scheme and are informing the Fed Reserve for a potential bailout vs bank collapse scenario. See how the markets react on Monday morning as they analyze the situation over the weekend.

[M-cubed]

bring back the Glass-Steagall Act!

[nc28205]

>>>government-backed firms

>>That's the first problem right there, until you fix that there's no point even discussing the regulatory situation.

Yes, if we could get rid of the socialist notion of federal deposit insurance, then bank failures would be of less concern to the governement and they wouldn't have to step in to back these firms.

[Woodman]

Here is how they will respond:

The person, persons who created the hedge strategy will be asked to leave or let go with a sweet severance package.

They will lay off an additional 10% of their support staff of which 10% will be front office, 15% will be back office, and 75% will be IT.

In IT for every 10 people they lay off, they will bring in 2 domestic consultants (probably H1’s) and will spend half their savings on outsourcing.

The Outsourcers will provide approximately 15 people for that money.

Net/Net in IT they will end up with 17 people off their payroll for every 10 they cut, save a little money from their budget, and get a less expensive system of software designed to monitor their trading for this kind of risk.

Problem is either the software or their risk model will be flawed and they will lose $4 billion next time around. Then the cycle will begin again. It's like the song that never ends and is most likely what got them here in the first place.