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Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Wed May 16 02:56:22 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by 3-9 on Tue May 15 19:44:00 2012.

You answered your own question. In the financial industry, there are no penalties for excessive risk -- because they have a backstop of somebody else's money.

In reinsurance and other risk industries where you don't have bailout protection, the firms create huge personal penalties for massive risk taking. We manage and distribute underwriting authority so that the total risk capacity distributed doesn't threaten the company.

If somebody writes a risk that is beyond their level or scope of authority, they are terminated. There is almost no discussion beyond confirming that we had clearly set forth what their limits were. It doesn't matter whether the risk actually hits or not, or even if we can buy protection to mitigate that risk.

In the financial industry today, outsized risk taking is fully accepted unless the risk goes bad. It is exactly that kind of thinking -- "when you're on a roll..." -- that gamblers use. I don't see government's role being to stake gamblers.

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