Home · Maps · About

Home > OTChat

[ Post a New Response | Return to the Index ]

[1 2 3]

 

Page 1 of 3

Next Page >  

(941258)

view threaded

JP Morgan Chase Execs Vaporize $2B

Posted by JayZeeBMT on Mon May 14 09:03:43 2012

fiogf49gjkf0d
Occupy Wall Street may be loud and boisterous...but they ain't wrong. This kind of unsupervised greed is EXACTLY what OWS is crying about. Who pays for this mess? YOU do, the minute the bank goes running to the Fed to cover the loss. Recall that Obama gave Citibank one TRILLION dollars to keep it from going under, at the start of his term...just sayin'...

Post a New Response

(941261)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Easy on Mon May 14 09:37:19 2012, in response to JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 09:03:43 2012.

fiogf49gjkf0d
Instead of more regulation and bailing them out, how about less regulation and no more bail outs?

Post a New Response

(941269)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 10:08:08 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Easy on Mon May 14 09:37:19 2012.

fiogf49gjkf0d
Excellent idea. Only one catch. What happens when the one big bank that runs half the US economy goes belly up? The rest of us are out of work.

Reminder: the English speaking country that came through the Great Recession the best was Canada. They regulated and they didn't have to bail out.


Post a New Response

(941270)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Fred G on Mon May 14 10:12:02 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Easy on Mon May 14 09:37:19 2012.

fiogf49gjkf0d
Better regulation would greatly reduce the possibility of bailouts, if not eliminate the need. We were doing ok with the regs placed after the 1929 crash and not long after they were removed in the 90's look what we got.

your pal,
Fred

Post a New Response

(941276)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by dand124 on Mon May 14 10:26:59 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 10:08:08 2012.

fiogf49gjkf0d
bail the banks but hold the shareholders liable (get rid of limited liability for banks).

Post a New Response

(941279)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Easy on Mon May 14 10:36:07 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 10:08:08 2012.

fiogf49gjkf0d
Reminder: the English speaking country that came through the Great Recession the best was Canada. They regulated and they didn't have to bail out.

Is it really as simple as that? Were they as exposed in home lending and the secondary market as US banks? Was their government encouraging that to happen?

Post a New Response

(941281)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 10:37:59 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by dand124 on Mon May 14 10:26:59 2012.

fiogf49gjkf0d
get rid of limited liability for banks

So all banks would have to be general partnerships, not corporations? That would be infinitely more burdensome regulation than the Volcker Rule.




Post a New Response

(941282)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 10:39:03 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Easy on Mon May 14 10:36:07 2012.

fiogf49gjkf0d
It isn't home lending that crashed Lehman Brothers or AIG.


Post a New Response

(941283)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by dand124 on Mon May 14 10:40:40 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 10:37:59 2012.

fiogf49gjkf0d
no they'd be publicly traded corporations just like they are now but the shareholders would liable for any bailouts.

Post a New Response

(941284)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Easy on Mon May 14 10:45:28 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 10:39:03 2012.

fiogf49gjkf0d
What was the regulation that saved Canada's financial institutions that we needed to save ours?

Post a New Response

(941286)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 10:48:56 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by dand124 on Mon May 14 10:40:40 2012.

fiogf49gjkf0d
That's not the definition of a corporation.

But no matter. The plunge in the price of the stock of big banks if such a law went into effect would be so huge that they'd beg for the Volcker Rule instead. You'd wipe out trillions of dollars in shareholder value in a minute if you passed such a law.


Post a New Response

(941290)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 10:53:22 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Easy on Mon May 14 10:45:28 2012.

fiogf49gjkf0d
Just stuff about limiting exposure to risky investments. Nothing the US didn't have until the easing of regulation in the 1990s.

Post a New Response

(941295)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

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.

fiogf49gjkf0d
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.

Post a New Response

(941297)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 11:28:04 2012, in response to JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 09:03:43 2012.

fiogf49gjkf0d
Recall that Obama gave Citibank one TRILLION dollars to keep it from going under, at the start of his term...just sayin'...

Just sayin? More like "just fabricatin". I'd be curious to see your support for:

1. "Obama" giving Citibank anything.
2. The US government giving Citibank anything of value.
3. Bailout support anywhere near one TRILLION dollars to Citi.

Just askin...

Post a New Response

(941299)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 11:37:24 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 11:28:04 2012.

fiogf49gjkf0d
Line of credit maybe? Possibly still a vast exaggeration but different from a gift.

Post a New Response

(941300)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by JayZeeBMT on Mon May 14 11:39:46 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 11:28:04 2012.

fiogf49gjkf0d
I stand corrected. The Fed, under Obama, has so far subsidized the six largest US banks--Bank Of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, and JP Morgan Chase--borrowed almost half a trillion 'at peak periods', and between them, the Fed has set up rescue programs worth a total of $77 trillion.

Silly me, for thinking it was only a trillion. Now JPMorgan Chase has vaporized a couple billion of THAT, and they will come right back to YOUR paycheck to "recover the loss".

Post a New Response

(941303)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 11:42:40 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 11:39:46 2012.

fiogf49gjkf0d
???

If the maximum they borrowed at any given time was half a trillion, how was the rescue program worth more than half a trillion max?

If I loan you half a trillion dollars for a day on 154 separate days, I haven't loaned you 77 trillion, I've only loaned you half a trillion.

Also, any evidence that any of this hasn't been 100% paid back, except maybe for AIG?




Post a New Response

(941304)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by JayZeeBMT on Mon May 14 11:44:22 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 11:42:40 2012.

fiogf49gjkf0d
$77T in Fed commitments were still outstanding in 2009. Which bank(s) were able to service that much debt to completion in just three years?

Post a New Response

(941305)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Spider-Pig on Mon May 14 11:48:57 2012, in response to JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 09:03:43 2012.

fiogf49gjkf0d
You don't know how capitalism works, do you?

Post a New Response

(941308)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by JayZeeBMT on Mon May 14 11:54:29 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Spider-Pig on Mon May 14 11:48:57 2012.

fiogf49gjkf0d
I know how capitalism works. It's unsupervised capitalism that I take issue with.

Post a New Response

(941311)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Spider-Pig on Mon May 14 11:57:52 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 11:54:29 2012.

fiogf49gjkf0d
That $2 billion dollars was lost by someone, but gained by someone else.

Post a New Response

(941313)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 12:05:56 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 11:42:40 2012.

fiogf49gjkf0d
I think Bank of America may not be fully repaid yet.

Citibank has been repaid and the US Government realized a $12B gain on their investment. It is fair to argue whether $12B is sufficient return for the risk that was taken, but the fact is that a gain was realized.

Post a New Response

(941315)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 12:11:28 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 11:54:29 2012.

fiogf49gjkf0d
I know how capitalism works. It's unsupervised capitalism that I take issue with.

Capitalism is quite well supervised by the capital providers.

The problem occurs when the government wants to play the role of great protector. The model where banks are allowed to take massive risks with the government standing ready to step in if something goes wrong is destined to fail. For an administration where one of the mottoes was "Never let a good crisis go to waste", the decision not to bring "Too big to fail" to an end is one of President Obama's biggest failures.

Post a New Response

(941316)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 12:12:39 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 11:44:22 2012.

fiogf49gjkf0d
You don't understand the term commitments in this respect.

Post a New Response

(941317)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 12:16:20 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 12:11:28 2012.

fiogf49gjkf0d
But you can't bring "too big to fail" to an end by just warning big banks they won't be bailed out. They'll take the risks and if they fail they'll say "Bail us out or not, your choice" and the government will know what will happen if they don't.

Instead, you have to say "You can't take risks bigger than x". This is very complicated, but Canada did a good job of it.




Post a New Response

(941320)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Spider-Pig on Mon May 14 12:51:01 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 12:16:20 2012.

fiogf49gjkf0d
You could also break the banks up into smaller units like Standard Oil.

Post a New Response

(941321)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Chris R16/R2730 on Mon May 14 12:51:24 2012, in response to JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 09:03:43 2012.

fiogf49gjkf0d
Occupy Wall Street services a man who enables stuff like this to happen. Nothing has changed on Wall St, despite Obama telling you so. If JP goes under, weep for the economy, and congratulate President-Elect Romney.

Post a New Response

(941322)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Chris R16/R2730 on Mon May 14 12:53:38 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 11:39:46 2012.

fiogf49gjkf0d
So now you are against bailouts? Or just the ones you can't use politically?

This is the inevitable outcome of continued bailouts. Responsible management isn't mandated when Daddy Washington is there to bail you out of the mess you make every time. Want real change? Tell these people that if you screw it up, you're going bankrupt.

Post a New Response

(941328)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 13:02:59 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 12:53:38 2012.

fiogf49gjkf0d
This is the inevitable outcome of continued bailouts. Responsible management isn't mandated when Daddy Washington is there to bail you out of the mess you make every time.

The banks currently have the upper hand. Lehman Brothers didn't get balied out and the world economy came close to collapsing. Some financial institutions are a lot larger. The US government can bail them out if they fail or take their chances with a total disaster.

That's why we need effective rules that prevent banks from taking the chances that can lead to a bailout. The alternatives that have been suggested, like breaking them up or making shareholders personally liable, are far more draconian.



Post a New Response

(941330)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Chris R16/R2730 on Mon May 14 13:08:30 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 13:02:59 2012.

fiogf49gjkf0d
That's why we need effective rules that prevent banks from taking the chances that can lead to a bailout.

Said rules generally restrict the activity that leads to growth. The only effective way to stop irresponsible management is to make it clear that there is no way the government will clean up your mess. You make it, you drown in it. This policy will lead one or two big banks to test the theory, using the "too big to fail" strategy, but if the government sticks to it's guns, every other bank will learn a valuable lesson.

Post a New Response

(941346)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 13:29:48 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 13:08:30 2012.

fiogf49gjkf0d
This policy will lead one or two big banks to test the theory, using the "too big to fail" strategy, but if the government sticks to it's guns, every other bank will learn a valuable lesson.

When a bank is sitting on the economic equivalent of a hydrogen bomb, government can't stick to its guns. The Bush Administration tried valiantly with Lehman Brothers and we all paid the price. I don't blame them - it was worth a try. But they learned their lesson and did the right thing (ugh) with AIG and others.

The Lehman Brothers failure has unfortunately cost us all a lot more money than thr bailout did.




Post a New Response

(941347)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by SMAZ on Mon May 14 13:30:50 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 12:53:38 2012.

fiogf49gjkf0d
Tell these people that if you screw it up, you're going bankrupt.

These guys are gonna tell them that?

Now we know what "compassionate conservatism" really meant after all.






Post a New Response

(941348)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by SMAZ on Mon May 14 13:34:55 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 12:11:28 2012.

fiogf49gjkf0d
the decision not to bring "Too big to fail" to an end is one of President Obama's biggest failures.

False!

The 2010 law has put "too big to fail" to an end.

Financial institutions now must even submit their "final will and testament" in advance to the gov't even if healthy so that their assets can be disposed of in an orderly fashion if they fail or are on the brink of failure.

Post a New Response

(941358)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Sand Box John on Mon May 14 14:07:35 2012, in response to JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 09:03:43 2012.

fiogf49gjkf0d
The loss was the equivalent of one of these



to one of these



This might be real news if the loss was the equivalent of one of these



to one of these



Kind of put things into prospective doesn't it.

John in the sand box of Maryland's eastern shore.

Post a New Response

(941368)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Chris R16/R2730 on Mon May 14 14:19:26 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 12:11:28 2012.

fiogf49gjkf0d
Indeed.

And the person who blew all this money was British, not American.

Post a New Response

(941371)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 14:33:07 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 14:19:26 2012.

fiogf49gjkf0d
Which matters why?

Americans are Brits are equally capable of acting well and of acting like morons.


Post a New Response

(941372)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by JayZeeBMT on Mon May 14 14:34:04 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 12:53:38 2012.

fiogf49gjkf0d
It was YOUR boys, the GOP, that ended the protections against this kind of chicanery that FDR put in place, thereby setting the stage for things like the JP Morgan Chase mess to happen.

Post a New Response

(941381)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Fred G on Mon May 14 14:44:45 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 11:18:51 2012.

fiogf49gjkf0d
Thanks for the clarification, Charles.

your pal,
Fred

Post a New Response

(941382)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Spider-Pig on Mon May 14 14:47:57 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 11:18:51 2012.

fiogf49gjkf0d
Except for the last sentence which I don't know about and therefore can't comment on: EXCELLENT POST!

Post a New Response

(941389)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 14:58:15 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 14:19:26 2012.

fiogf49gjkf0d
He is actually a Frenchman living in London.

Post a New Response

(941393)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 15:07:41 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 12:16:20 2012.

fiogf49gjkf0d
I don't know much about Canadian bank regulation (though I do see their banks taking on some "courageous" insurance and reinsurance risk from time to time). The problem is that risk has become too hard to define empirically. I haven't seen it in print anywhere, but was told today that JPM's VAR (value at risk) calculation for the transactions in question was $63 Million. How you can lose $2 Billion when you supposedly have only $63 Million at risk strains the brains of mortal man.

My preference would be to split the banks into those which would be bailed out (i.e. those with FDIC protections), for which there would be heavy-handed regulation of the types of assets they could invest in and into investment banks for which there would be no bailouts and no regulation.

In addition to the investment banks own executives being incentivized to do a better job managing risk because there was no safety net, the counterparties would also demand better risk management (as well as limiting the amount of potential recoverable they have from any firm).

The models always assume that everyone pays what they owe. As the banking industry found out in 2008, that isn't always true. You need to limit your exposure to any one counterparty.

Post a New Response

(941399)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Fred G on Mon May 14 15:09:57 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 13:08:30 2012.

fiogf49gjkf0d
That works as long as the bank closure doesn't ripple into failed businesses all over the place due to lack of credit/capital. Then we have to take stock of what's going to harm the least people and go with that and we held our noses and bailed banks out.

your pal,
Fred

Post a New Response

(941400)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 15:10:01 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by SMAZ on Mon May 14 13:34:55 2012.

fiogf49gjkf0d
The 2010 law has put "too big to fail" to an end.

I think you are the only person who believes this.

Financial institutions now must even submit their "final will and testament" in advance to the gov't even if healthy so that their assets can be disposed of in an orderly fashion if they fail or are on the brink of failure.

This doesn't make any sense. An organization that fails -- by definition -- has more liabilities than it does assets. They don't call the shots on how the remaining assets are disposed of, the creditors and bankruptcy courts do.

Post a New Response

(941406)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by bingbong on Mon May 14 15:23:13 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Fred G on Mon May 14 15:09:57 2012.

fiogf49gjkf0d
Gotta do what ya gotta do, sometimes. IMO this isn't one of them. Let them absorb this loss. They should only be covered if they acquiesce to regulation, far stricter regulation than is currently occurring.

Post a New Response

(941408)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Train Dude on Mon May 14 15:44:14 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 10:08:08 2012.

fiogf49gjkf0d
"The rest of us" is getting smaller and smaller under o'bommer.

Post a New Response

(941409)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Train Dude on Mon May 14 15:47:53 2012, in response to JP Morgan Chase Execs Vaporize $2B, posted by JayZeeBMT on Mon May 14 09:03:43 2012.

fiogf49gjkf0d
The person (soon to be people) who made the bad investment that led to the $2 billion loss has been fired. It's too bad that you do not want to hold president o'bummer up to the same tough standard. Otherwise the dolt would be back to community organizing of free cheese distributions in Chicago.

Post a New Response

(941426)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by AlM on Mon May 14 16:45:49 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 15:07:41 2012.

fiogf49gjkf0d
How do you solve the nuclear bomb issue? You tell Citibank you won't bail them out if they get into trouble.

And then 2 years later they tell you that they are about to go under and default on $1 trillion worth of obligations to other banks.

Maybe you just seize them. But Republicans don't like that kind of talk, and without Republican support it can't happen.



Post a New Response

(941430)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by shiznit1987 on Mon May 14 17:11:29 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 12:53:38 2012.

fiogf49gjkf0d
The problem with the libertarian view on this is the very security and existance of the United States would be threatend. Tens of millions would lose jobs, local govenments would default and the Federal Government would be under tremendous pressure just to maintain basic services and military security. No money means no defense spending, BTW.

Average people look at these numbers and think it's all a game. It isn't. A major systemic crisis in one of the big boys would trigger a dominio that would stop financial transactions cold. Credit markets cease to exist and the very core mechanics of Capitalism would be in serious danger.

Zero regulation worked back in the robber baron days because when one bank blew up 10 more sprouted up the next day. We no longer have that kind of liquidity. Sure, you could argue that in time newer banks will form, but creative destruction takes time and it would only take days for the financial markets to totally freeze like a 1984 Apple PC.



Post a New Response

(941437)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Charles G on Mon May 14 17:24:39 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AlM on Mon May 14 16:45:49 2012.

fiogf49gjkf0d
Nuclear bombs never develop if firms know there are no bailouts coming.

In the case you describe, no other banks would allow themselves to have exposure to Citibank that could sink them.

The mistake people make is that they think if AIG hadn't been bailed out that the world would have come to an end. In reality, AIG simply would have told their creditors "I don't have the money" when asked to post collateral. At that point the creditors would have taken 80, 50 or 20 cents on the dollar and moved on.

Risk management isn't nearly as complicated as people make it out to be. When I buy protection for my portfolio, I look at how much exposure my firm already has to the firm I am buying from -- if it is beyond certain thresholds (based on the type of risk and protection being purchased), I have to buy from someone else -- even if that means paying a higher price.

It bears repeating -- if people know and understand that there is no bailout coming, they will absolutely change their behavior. Counterparty risk is a bitch, and the banks have never taken it seriously. If you do take it seriously, it is relatively easy to manage.


Post a New Response

(941438)

view threaded

Re: JP Morgan Chase Execs Vaporize $2B

Posted by Stephen Bauman on Mon May 14 17:26:00 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 15:07:41 2012.

fiogf49gjkf0d
My preference would be to split the banks into those which would be bailed out (i.e. those with FDIC protections), for which there would be heavy-handed regulation of the types of assets they could invest in and into investment banks for which there would be no bailouts and no regulation.

Bring back Glass-Steagal?

Post a New Response

[1 2 3]

 

Page 1 of 3

Next Page >  


[ Return to the Message Index ]