Category Archives: Regulations and regulators

Satyajit Das: Topiary Lessons – JP Morgan’s US $2 Billion Loss

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010). Jointly posted with Roubini Global Economics

Having benefitted from risk management failures of others such as investment bank Bear Stearns and hedge fund Amaranth, JP Morgan (“JPM”) appears to have made an “egregious” and “self inflicted” hedging error. The bank would have done well to reflect on John Donne’s meditation: “send not to know for whom the bell tolls it tolls for thee”.

Europe’s Black Cygnets Grow

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2012/04/europes-lunatics-rise/“>MacroBusiness.

And so the black cygnets scuttle from the shadows again.

Over the weekend, Angela Merkel’s Christian Democrats suffered an 8.3% swing in North Rhine-Westphalia as the Social democrats (SDP) and the Greens garnered a majority. Although this is only a state election, called after the previous SDP led minority government was unable to get approval for its budget, North Rhine-Westphalia is the country’s most popular state and seen the bellwether for national government. Of note is the fact that the SDP-Greens coalition governed Germany under Chancellor Gerhard Schröder from 1998 to 2005. Although this is as much about state politics and personalities, especially the SDP leader Hannelore Kraft, the flow-on effects at a national level from such a large turn around are very obvious:

Michael Olenick: WhaleMu – JP Morgan’s Next Surprise?

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

In an admittedly strange twist of timing JP Morgan, the same JP Morgan that just announced a surprise $2 billion loss caused by the “London Whale,” became the first and only of 26 banks disclosing subprime investor data to flip me the digital bird, refusing access to the public loan-level performance data for their Washington Mutual loans.

Occupy the SEC to Jamie Dimon: We Told You So

By Occupy the SEC

Jamie Dimon’s plan to enfeeble the Dodd-Frank reforms, specifically the Volcker rule, has blown up spectacularly.

JP Morgan Loss Bomb Confirms That It’s Time to Kill VaR

One of the amusing bits of the hastily arranged JP Morgan conference call on its $2 billion and growing “hedge” losses and related first quarter earning release was the way the heretofore loud and proud bank was revealed to have feet of clay on the risk management front.

Mirable Dictu! Moody’s to Adjust Bank Ratings Downward for Regulatory Arbitrage

It’s hard to imagine anyone will take tough-sounding stances by ratings agencies seriously, but Moody’s, in a chat with the Financial Times, says it has (finally) taken notice of how banks play games with regulatory capital requirements.

Jamie Dimon Misrepresented “London Whale” Risks, Admits to $2+ Billion Loss Plus Risk Management Black Eye

As readers likely know by now, Jamie Dimon hastily arranged an after hours conference call today, in which he admitted to $2 billion in losses in the last six weeks from a trade by the “London Whale”, Bruno Michel Iksil in the bank’s Chief Investment Office, with as much as another potential $1 billion in losses in the offing.

Quelle Surprise! Fed Defends Incompetent Bank Management Against Investors

Reader Hecht pointed out a new piece by Steven Davidoff at the New York Times’ Dealbook, illustrating the lengths to which the Fed will go to defend incumbent bank managements.

More on Frontline’s Astonishing Whitewash of the Crisis

As readers may know, a recent post, “Frontline’s Astonishing Whitewash of the Crisis,”discussed the first half of the Frontline series, “Money, Power & Wall Street.” Producers Mike Wiser and Martin Smith sent a letter taking issue with this review, and I made an exception to my usual practice and posted their missive.

The major dispute is over whether their series lets the financial services industry off too lightly.

Economists, Liquidity Mongers and the Banker Assault on Financial Reform

This has been a bad stretch for advocates of financial reform – and therefore for the economy as a whole. One after the other, new financial regulations contained in the Dodd-Frank law are being gutted or delayed by regulators and Congress, while the bankers – escorted by a phalanx of paid economists, lawyers and lobbyists – are squealing “wee, wee, wee” all the way home.

Satyajit Das: The European Debt Crisis Redux

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010). Jointly posted with Roubini Global Economics

The half-life of solutions to Europe’s debt problem is getting ever shorter.

Recent hopes have relied on the ostensible success of the European Central Bank’s (“ECB”) LTRO – Long Term Refinancing Operation, more appropriately termed the Lourdes Treatment and Resuscitation Option.