re: Should Jamie Dimon Resign?

Congress overspends the federal budget by 5,000 billion dollars in 3 1/2 years. No worries.

A bank loses 2 billion dollars on an investment position (but will still make a couple billion dollars profit for the quarter) and we need congressional hearings on it.

Go figure.....

quote:

---

I think the big banks may be too big to manage.

---

I agree with this. I think the bigger a financial institution is, the smaller the amount of leverage they can reasonably handle/keep track of.

I wouldn't say linear either. I wouldnt even put a money amount on it. The money amount will vary market to market. The trader was simply over leveraged in the particular market he was in and got caught with his pants down. The deal with the too big to fail guys is they have more individual departments than the management team can keep track of. I think this was the case with Chase.

quote:

---

Should Jamie Dimon Resign?

---

No.

quote:

---

NC_Tigah

---

I was kinda waiting to see if there was anyone out there who though he should. I guess their only reason could be if they truly thought it was prop trading and would have violated the Volker Rule.

As I understand it, the Volcker Rule does not go into effect until 2014 (maybe 2015?).

quote:

---

As I understand it, the Volcker Rule does not go into effect until 2014 (maybe 2015?).

---

The Volcker Rule takes effect this July, but banks have until July 2014 to fully wind down all the activities not allowed by the rule. However, the 2014 date will probably be pushed back a year or two.

I didn't make myself clear though. I meant more whether they would have been in violation of Volcker if it were already in effect.

Should Jamie Dimon resign?

ABSOLUTELY NOT. This country needs him. I firmly believe that Dimon and others behind the scene help save this country in 2008.

The problem right now is ZIRP is forcing banks to reach for profit and they are taking on risk. There is speculation about the position that produced these losses. The only information (about the position) out there is from the hedge funds who took the other side.

Everyone writing about the loss is speculating, but this is interesting speculation. "Wolf" is a trader who I have been reading for several years.

quote:

---

However, there is another part to the story that may bring to light the real reason for this strange trade. JPM may have bought protection in 5yr series 9 (maturing Dec2012) and sold 10yr series 9 (maturingDec2017) to protect the bank against credit spread jump to default risk. It is effectively a flattener and the bank may have bought more short term protection vs selling long term protection to reduce the cost of the hedge. This is probably a legacy position from 2007/2008. However, as the hedge runs down to its maturity, the credit curve of IG9 steepens and it would have hurt. Furthermore, the delta between the short risk and long risk trade would have shifted dramatically as the short risk trade approached maturity. Add the illiquidity of the off-the-run indices and JPM would have faced an unwinding nightmare. (I know because I faced some of the said nightmare in 2009 on a tiny position in off-the-run indices). And in all likelihood, Mr Iskil probably tried to keep the 10yr IG9 spread suppressed by offering in the market to protect his p/l. At US$100b, it is a position that cannot be exited in the markets, especially when the index is trading at a discount to the underlying credits. And when every hedge fund smells blood in the water. This is one reason why I personally hate trading indices.

---

Wolf in the Wilds

You realize that was last quarter and this happened in the current quarter yeah? and that net income is by definition after tax? Theres no such thing as "net income before tax."

quote:

---

Theres no such thing as "net income before tax."

---

Except perhaps in the case of enacted retroactive tax policy?