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| Re: JP Morgan Chase Execs Vaporize $2B (941258) | |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Tue May 15 18:30:56 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Easy on Mon May 14 10:36:07 2012. Is it really as simple as that? Were they as exposed in home lending and the secondary market as US banks?Good question. Does Canada have the equivalent of a Fannie Mae or Freddie Mac? Canada also has a big trade surplus with the US. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Train Dude on Tue May 15 18:32:51 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Fred G on Tue May 15 06:00:51 2012. No, as Charles so excellently pointed out, it was clearly a bipartisan effort and signed of on by a democratic president and approved by his advisers. JayZee's repeated attempts to demonize the right was what I referred to as spin. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Tue May 15 18:43:22 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Tue May 15 07:10:39 2012. The credit markets are not nearly as frozen as they were during the crash. Remember that short term borrowing is used to pay all kinds of things in otherwise healthy businesses, including payroll and bills. That short term borrowing was frozen solid during the crash. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Tue May 15 18:47:16 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 12:12:39 2012. I believe what the government did was to guarantee at least some of the mountains of crap derivatives the banks still had. That way the balance sheets would look like they still had something of value on them. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Tue May 15 19:01:38 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Tue May 15 09:57:41 2012. I'd be more inclined to believe that both are.IMO they both are, to different degrees and in somewhat different ways. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Tue May 15 19:27:24 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Spider-Pig on Mon May 14 12:51:01 2012. You could also break the banks up into smaller units like Standard Oil.Trouble is, so much of their value was locked up in crappy securities that breaking them up would not have come close to covering the losses. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Fred G on Tue May 15 19:39:15 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Train Dude on Tue May 15 18:32:51 2012. I referred to the post you responded to, in which JayZee stated that the Gramm-Leach bill was written and sponsored by Republicans. There wasn't any spin there as it was true.your pal, Fred |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Tue May 15 19:44:00 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Tue May 15 12:07:46 2012. In my industry, reinsurance, there are no bailouts. You simply don't place risk with anyone who you don't think can pay the loss -- and even if someone can pay the specific loss you don't over-expose yourself to any one name on an aggregation of losses.But in reinsurance, what is the benefit for taking that risk? Does it outweigh the penalties? In the financial industry, the rewards can be huge for successful bets, instantly turning the traders into multi-millionaires. When you're on a roll, with most of your decisions coming up gold, it isn't too difficult to start believing you have the Midas touch. Until, of course, it all comes crashing down. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Train Dude on Tue May 15 19:44:26 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Fred G on Tue May 15 19:39:15 2012. JayZee repeatedly tries to demonize the right. Regardless of who authored the bill, it had bipartisan support in the senate and the house. JayZee certainly crafted his post to avoid giving that impression. He also deliberately failed to mention that a democratic president and his economic advisers also supported the bill. That's where the spin comes in. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Fred G on Tue May 15 19:47:18 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by 3-9 on Tue May 15 18:43:22 2012. exactly.your pal, Fred |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Tue May 15 19:58:27 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by SelkirkTMO on Tue May 15 18:29:31 2012. Don't forget the libruls :-). |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Fred G on Tue May 15 20:31:29 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Train Dude on Tue May 15 19:44:26 2012. Ok, I see where you're coming from.your pal, Fred |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Chris R16/R2730 on Tue May 15 20:34:24 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by AEM-7AC #901 on Mon May 14 20:27:10 2012. Sometimes the cure has some nasty side effects. I've stated this elsewhere, behavior like this will continue if these institutions think the government will bail them out every time they screw up. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Henry R32 #3730 on Tue May 15 22:47:21 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Tue May 15 07:10:39 2012. And the low interest rates from the Fed directly translate to the low interest rates every *responsible* American with an actual savings account has been stuck with. If the banks can get cheap money by the millions from the Fed why should they care if you take your puny $100,000 life savings and shove it in your mattress? These low interest rates directly reward those who cannot live within their means and punish those who do... |
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Re: JP Morgan Chase Execs Vaporize $2B |
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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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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Dan Lawrence on Wed May 16 11:39:25 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Chris R16/R2730 on Mon May 14 12:51:24 2012. I suspect if Romney gets elected you will see this happen again with a mega bank like JP Morgan Chase. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Stephen Bauman on Wed May 16 12:58:39 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Mon May 14 17:24:39 2012. 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.Let's say firm A was the low bidder but because of your risk thresholds you chose firm B. Let's further assume that firm B does not want to assume all the risk from your firm, so it sold part of the contract to firm C. Likewise, firm C sells part of the contract to firm D, etc. Eventually, firm Z sells part of the contract to firm A because unlike your firm its threshold has not been exceeded. Let's further assume that a black swan is sighted. Firm A goes bankrupt. This in turn forces firms, Z, Y, X,.., C and B into bankruptcy. Your firm will not collect from firm B because firm A went bankrupt even thought you avoided placing a contract with it. This is in essence systemic risk. Lehman was firm A and AIG was firm B. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Charles G on Wed May 16 14:42:10 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Stephen Bauman on Wed May 16 12:58:39 2012. Been there, done that. London Market Spiral (LMX) -- late 1980's and early 1990's. We were well ahead of the investment banks on the subject of being stupid. Between LMX (progressive churn leading to systemic bankruptcy -- took down Lloyd's of London) and the Unicover Workers Comp scam/scandal in the 1998-2000 era (progressive churn of business with intermediaries taking fee income out of risk premium with each successive churn leading to massive losses though fewer bankruptcies), we've seen it all before.With those two as history, you manage not only the risk, but also the length of the payment tail and require collateralization beyond certain thresholds. The industry requires counterparties to be transparent about their financials. If a firm doesn't retain enough of the risk it takes on or is just too highly leveraged in other ways then you don't cede business to it. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Wed May 16 14:50:21 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Wed May 16 02:56:22 2012. 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. Unfortunately, there is extremely heavy lobbying to stop regulation which would prevent this sort of risk-building. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by Charles G on Wed May 16 15:05:04 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by 3-9 on Wed May 16 14:50:21 2012. I don't think it can be regulated. You have to remove the backstop. Firms build up unmanaged risk now because somebody else's money is at stake.The only way to regulate it is to allow the industry to self-regulate it (and not through the use of models!). The culture in the banks is to hide everything from regulators and even their own shareholders. All kinds of actions which would be considered fraud by any other type of company or person are considered normal everyday activity in banking. The biggest problem we have is that all the Wall Street flunkies who are posing as the Obama economic team are convinced that the financial well-being of their pals back on the Street is the number one concern to our economy. Whether that's because they are stupid or because they are protecting their bosses donor base or because they are trying to ensure their own career opportunities after their government gigs are up isn't clear. To be entirely fair, the Bush flunkies before them were no better or wiser on this subject. I pick on the Obama administration now because they are the ones in power. |
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Re: JP Morgan Chase Execs Vaporize $2B |
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Posted by 3-9 on Wed May 16 20:16:32 2012, in response to Re: JP Morgan Chase Execs Vaporize $2B, posted by Charles G on Wed May 16 15:05:04 2012. I think it can be regulated, or Wall St wouldn't be lobbying so much to punch the new financial regulations full of holes.You say that the answer is to self-regulate, but it comes back to my original argument that in the financial industry, the rewards for winning are so great that people are willing to take that risk (not unlike when the lottery jackpot is huge, people buy more tickets, even though the chances have not improved). To top it off, coming back to your analogy, they know that if they build a big enough nuclear bomb, chances are, the government will bail them out, because the bomb's explosion will be much more destructive than the bailout. It would help if it was their money on the line, like you said, but since the big banks are publicly traded, how much of it is really theirs, bailout or not? |
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