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| Re: JP Morgan Chase Execs Vaporize $2B (941295) | |||
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Charles G on Mon May 14 11:18:51 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Fred G on Mon May 14 10:12:02 2012. I don't think better regulation is the answer in this case. The team that took the loss was supposedly using "sophisticated" models designed to minimize the risk of loss. More than likely, the regulators would have endorsed this type of behavior.In reality, a $2B loss -- or even $3B or $10B -- is not solvency threatening to JPM. It is a complete embarrassment, for sure, and a massive failure of their risk management and risk controls. The only thing that will reign in excessive risk taking is the threat of death and insolvency. Once you take that away with the possibility of bailout, you lose all incentives to curb risk taking. Look at Goldman Sachs and the other investment banks. For years, when they operated as private partnerships they kept unbelievably tight grips on the risks they took. Once they sold themselves to the public, then somebody else's money was at stake and the risk went off the charts. Heads I win, tails you lose. "Better regulation" today consists of Basel III in banking and Solvency II in insurance. Both are over-reliant on models to keep risk under control. |
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