Saturday, May 12, 2012

JP Morgan ( and how much does Goldman have by way of losses sitting hidden away on their books ) looking at losses of perhaps 18 - 20 billio just from the Whale's trades - what about their other derivative positions ? BTW , J P Morgan's Investment Banking Division breaks ranks by saying they made senior management including Jamie Dimon aware the Chief Investment Office was taking on risks it didn't understand and that they weren't properly managing their positions - and when that division was handling asset as large as 350 billion , that is a major error ! Candidates to walk the plank seem to be Ina Drew , Axhilles Macris and Bruno Iksil. Adding to the mess , it seems the trades ( whether due to size of position or nature of the trade ) are going to be difficult to get out of - so as the market continues to move against them , they are stuck and forced to try to ride this out.

http://www.cjr.org/the_audit/bloomberg_on_how_a_european_ai.php

( Note how the risk now being shown as real at JPM was spotted way back in november - and if JPM has a problem , one can extrapolate that GS , C and BAC also have credit default swap issues as well as the big banks were massive sellers of CDS on the PIIGS . )


Bloomberg on How a European AIG Would Hit the U.S.

Big U.S. banks are upping their exposure to Europe by selling credit-default swaps
By Ryan Chittum
TAGS: , , , , 
Bloomberg News has an important report on how sovereign defaults in Europe could infect the U.S. banking system via ye olde credit-default swap market.
Yalman Onaran reports that the too-big-to-fail U.S. banks are ratcheting up their exposure to a collapse of the PIIGS by selling credit-default swaps to investors trying to insure against a default. Such insurance (most of which is CDS issued by the top U.S. banks) rose to more than half a trillion dollars by this summer, up nearly 20 percent in six months.
The banks say that they’ve hedged their bets and taken on collateral. But we heard similar things back in 2008. Then AIG happened:
Similar hedging strategies almost failed in 2008 when American International Group Inc. couldn’t pay insurance on mortgage debt. While banks that sold protection on European sovereign debt have so far bet the right way, a plan announced yesterday by Greek Prime Minister George Papandreou to hold a referendum on the latest bailout package sent markets reeling and cast doubt on the ability of his country to avert default.
In other words: JPMorgan Chase, Goldman Sachs, and the like are betting that Europe thinks the consequences of triggering CDS would be so bad that they won’t consider allowing a hard default. So the banks are writing a lot more CDS on the likelihood of this indirect bailout, which has the side benefit of making the potential contagion from a default that much worse, which makes it less likely that Europe will allow a default. Moral hazard, indeed.
There’s no indication that there’s an AIG out there that’s the ultimate dumping ground for the risk taken on here, but there wasn’t back in 2008, either. Bloomberg notes that banks don’t have to disclose their counterparties.
JPMorgan CEO Jamie Dimon, 55, said last month that the New York-based bank hedges its exposure to European sovereign debt through contracts with lenders in other countries, including Germany and France.
You can see how this might be a problem, right? Insure people against European catastrophe and then insure your insurance with European banks. What could go wrong? Bloomberg says the Dexia bailout was similar to the AIG backdoor bailout:
The bailout of Dexia SA by Belgium and France last month resembled AIG’s rescue…

The two countries agreed to aid Dexia on Oct. 9, assuring creditors — including holders of CDS and other derivatives counterparties — they would be paid in full, the same way AIG’s were after the U.S. takeover. Goldman Sachs and Morgan Stanley (MS) were among the lender’s biggest trading partners, the New York Times reported on Oct. 23, citing people it didn’t identify.
Meantime, the banks are reporting their exposure is far lower than it ultimately may be due to counterparty risk, Bloomberg reports.
As for Greece, one of the most glaring aspects of Eurozone rescue plans has been how they’re designed to avoid triggering CDS:
European leaders are doing everything they can not to trigger the default clauses in CDS contracts to avoid putting the banking system at risk.
How bizarre is the CDS market? Here you have an insurance product ostensibly designed to disperse risk and make the system safer. But you can’t actually use this insurance, which banks nevertheless make a fortune selling, because it’s considered so risky that authorities will do everything they can to avoid activating it.
Onaran gets at the ultimate problem with this quote from a small investment bank:
“Risk isn’t going to evaporate through these trades,” Cannon said. “The big problem with all these gross exposures is counterparty risk. When the CDS is triggered due to default, will those counterparties be standing? If everybody is buying from each other, who’s ultimately going to pay for the losses?”
I’d like to think that banks have at least learned some lessons in the last four years. But I wouldn’t insure a bet on it.



http://sherriequestioningall.blogspot.com/2012/05/bernanke-weds-51012-in-speech-at-bank.html


Bernanke - Thurs. 5/10/12 in speech at Bank Structure Conference "Banks are in Great Shape, Crisis is over, good liquidity." *Dimon & Blankfein met with Bernanke earlier in week - JPM losses around 18 Billion.



I have information from a "source" that both Dimon and Blankfein met with Bernanke earlier this week.   The same source is saying the real losses for JPM is 5 times at least the amount stated, they have said it is actually around 18 Billion in losses.   This source is real and is connected in financials.  We will eventually see if the source is correct regarding the real loss amount, eventually coming out.

So that means Bernanke knew what was about to go down with JP Morgan from his meeting with Dimon earlier in the week.   But Blankfein (Goldman Sachs) met with Bernanke also. So........... does that mean Goldman Sach is in just as much trouble as JP Morgan and their losses?

I wrote this morning how JP Morgan coming out about the losses on a Thursday night after market close was a Real Red Flag to me!  

Bernanke also made a speech yesterday (5/10/12) at the conference for Banking Structure and Competition in Chicago. 

Bernanke lied through his teeth in this speech he made yesterday.  From saying the banks are in good shape to saying they are not "betting" as much.  The facts are the banks have hedged more on derivatives than they have ever before.  There is more gambling going on than there was in 2008!   Here is just one article about it and the 600 Trillion Derivatives in bets by the top 4 Wall Street banks which include JP Morgan and Goldman Sachs. 


From the Federal Reserve site itself, here is a portion of that speech that Bernanke made:

 The first part of my remarks will highlight the significant progress that has been made over the past several years toward restoring the banking system to good health.


The State of the Banking System
Since the financial crisis, banks have made considerable progress in repairing their balance sheets and building capital. Risk-based capital and leverage ratios for banks of all sizes have improved materially and are significantly above their previous highs. Importantly, the 19 largest banking institutions that participated in the 2009 stress tests, as well as the two subsequent Comprehensive Capital Analysis and Review (CCAR) processes, have considerably more and better-quality capital than a few years ago.Indeed, those firms have increased their Tier 1 common equity, the best buffer against future losses, by more than $300 billion since 2009, to nearly $760 billion.
The latest CCAR, conducted earlier this year, demonstrated that most of the 19 firms would likely have sufficient capital to withstand a period of intense economic and financial stress and still be able to lend to households and businesses.


The Federal Reserve takes seriously its responsibility to ensure that supervisory actions to protect banks' safety and soundness do not unintentionally constrain lending to creditworthy borrowers, and we have taken a variety of steps to address these concerns. For example, we have issued guidance to supervisors stressing the importance of taking a balanced approach to supervision and of promptly upgrading a bank's supervisory rating when warranted by a sustainable improvement in its condition and risk management.


Conclusion
To sum up, conditions in the banking system--and the financial sector more broadly--have improved significantly in the past few years. Banks have strengthened their capital and liquidity positions. The economic recovery has facilitated the rebuilding of capital and helped improve the quality of the loans and other assets on banks' balance sheets. Nonetheless, banks still have more to do to restore their health and adapt to the post-crisis regulatory and economic environment. As the recovery gains greater traction, increasing both the demand for credit and the creditworthiness of potential borrowers, a financially stronger banking system will be well positioned to expand its lending. Improving credit conditions will in turn help create a more robust economy.
 When Bernanke was speaking yesterday he knew what was about to be released in news from JP Morgan.  Also Jamie Dimon did an interview with "Meet the Press" on Wednesday night for the Sunday show.  He did not mention what was about to happen.  The image on the right is from a previous Dimon interview with CNBC.

Since Goldman Sach's - Blankfein met with Bernanke too this week, then they must have a big problem too, I would guess.

Remember JP Morgan is the one who got the money from MF Global when they went down and they got all the gold from the clients of MF Global.  They were allowed to steal the 1.2+ Billion dollars directly from the clients of MF Global.   Of course the government has been allowing all of this to go on without holding anyone accountable.

I did just find that Chilton of the CFTC has said "The hammer must come down."  But we have been hearing that for years now.  The "Silver Manipulation" investigation has been going on by the CFTC for about 3 years too, yet nothing has been done about the obvious manipulation.  He came out and made a similar statement last November with the MF Global Bankruptcy, but it was all talk and no action.  I don't believe him this time either, that a "hammer will come down."

CNBC has that "regulators" were already looking into JP Morgan trades before yesterday.  Again this would be the CFTC and they are covering their butts for sitting on their hands and allowing it all.

So, watch Goldman Sachs the more "protected" bank than even JP Morgan.  Remember all those at the Fed and who control the Treasury and the countries in Europe were all Goldman Sachs people at one point.   Why did Blankfein have to meet with Bernanke this week, along with Dimon?


Seriously the Best Picture there is!  Shows the relationship between Bernanke and Dimon!  By WilliamBanzi7.

I would love to insert it here but I don't know how to reach him to get permission to. 


http://www.businessinsider.com/this-is-clearly-going-to-cost-jpmorgan-much-more-than-2-billion-2012-5

JPMorgan announced a $2 billion loss Friday. When compared to its market cap and other indicators, that goes Ouch!, but not much more. However, there’s more going on. The bank has refused to state where in its operations the loss was incurred. For good reason perhaps: the positions that caused the loss are still rumored to be open.
The main problem JPMorgan may be facing, and the 8% loss in pre-market trading may be a sign players are on to this, is that we probably already know where the loss is. A few weeks ago, the financial sphere was full of stories about the London Whale, a JPM trader in London named Bruno Michel Iksil, who had taken such massive - synthetic - derivative (gambling) positions in a 125 company index that they were moving the market itself.

Back then, some hedge funds took counter positions just for the sheer fact that he had bet so much; they figured he couldn't last forever on all trades. The underlying notion was he was long a bunch of companies; well, not a lot has gone well in the markets lately. And if you have overweight derivative positions in one direction (in this case credit default swaps) , you can make a killing or you can get punished fast and furious. He did the latter.
And since the bank allegedly - for now - can’t close the positions (they would move the market against JPM's positions, so JPM's doomed if they do and damned if they don't), there may be a whole lot more to come. A wounded whale oozing blood, and with sharks circling all around it. Given the above, the final tally may be many times higher than the $2 billion announced. After all, everybody knows where the harpoon entered the whale.
Jamie Dimon may have to sweet talk like he's never done before, and he may have to pay some considerable sums here and there as well just to keep the sharks at bay.
Then again, Jamie Dimon knows that JPMorgan is too big to fail, and will be bailed out, so how worried does he really need to be?
Well, perhaps for his own job. Large investors like gamblers that win; they have no patience with losers. It’s a shark eat shark world in the end. Hard to see how Dimon can get out of this with his carefully groomed profile intact, even if the loss is limited.


and...


http://online.wsj.com/article/SB10001424052702304070304577398490966089810.html


By DAN FITZPATRICK, ROBIN SIDEL and DAVID ENRICH

J.P. Morgan Chase JPM -9.28% & Co. told traders several months ago to make bets aimed at shielding the bank from the market fallout of Europe's deepening mess. But instead of shrinking the risk, their complicated bets backfired into losses of as much as $200 million a day in late April and early May, people familiar with the situation said.
The Securities and Exchange Commission has begun reviewing J.P. Morgan Chase's disclosures related to its $2 billion trading loss. Jean Eaglesham has details on The News Hub. Photo: Reuters.
Regulators in the U.S. and U.K. are examining what went wrong, who is responsible and whether J.P. Morgan should have told investors about the losses sooner, according to people familiar with the matter.
While attention has focused on large positions taken by a trader nicknamed "the London whale," he and other traders were carrying out instructions from a bank executive, these people said.
[jpmorganp1]

The J.P. Morgan Loss

Related

Earlier

The instructions were to find a way to reduce the bank's exposure to positions in the credit markets that had grown too large. But some of the trades they made didn't work, culminating in the company's announcement Thursday of more than $2 billion in losses.
The trading losses reverberated Friday, as J.P. Morgan shares fell 9.3%, or $3.78, to $36.96 in New York Stock Exchange composite trading at 4 p.m., erasing $14.4 billion in stock-market value. It was the biggest decline since August, and trading volume soared to its highest level since at least 1984, according to FactSet Research Systems. The stock fall subtracted nearly 30 points from the Dow Jones Industrial Average, which fell 34.44 points to 12820.60.
After the end of regular trading, Fitch Ratings cut its credit rating on J.P. Morgan to A-plus from double A-minus. The rating firm cited "potential reputational risk and risk governance issues." Standard & Poor's said it might downgrade the bank.
J.P. Morgan declined to comment Friday. "We should not let this detract from what we are here for—to serve our customers," Chairman and Chief Executive James Dimon wrote in a memo sent to the bank's 270,000 employees on Thursday evening. On Friday, some workers in the sprawling bank's consumer operations told each other they were baffled by the complex missteps that occurred in the firm's Chief Investment Office.
Some executives said privately Friday that a cleanup will have to include holding people accountable. According to people familiar with the matter, attention is focused on Ina Drew, J.P. Morgan's investment chief, who reports to Mr. Dimon. Ms. Drew, who earned $15.5 million last year, is the executive who instructed traders to reduce the bank's risk.
Others under scrutiny, the people said, include Bruno Michel Iksil, the trader nicknamed the London whale, for the large positions he took that roiled a corner of the credit market. Also under scrutiny is one of Mr. Iksil's bosses, Achilles Macris. Mr. Macris is in charge of the chief investment office's Europe operations and reports to Ms. Drew.
Through a bank spokesman, Ms. Drew, Mr. Macris and Mr. Iksil declined to comment.
Ms. Drew's office manages the bank's money with the goals of gaining a return above J.P. Morgan's cost of capital and of hedging some of the bank's exposures. It is housed inside the bank's corporate unit, one of seven business segments within J.P. Morgan Chase.
As bank officials sought in recent weeks to identify the scope of the problems in her business, Ms. Drew tried to play down the issues, said one London-based executive.
The trading losses—$2.3 billion, according to a person close to the bank—accumulated over just 15 days in late April and early May, or an average of $153 million a day. The chief investment office managed a securities portfolio worth about $374 billion.
Behind the losses: unusual movements in the relationships between various derivative indexes focused on investment-grade and junk-bond corporate debt, both in the U.S. and Europe, according to someone close to the matter. The moves may have been due in part to hedge funds taking the other side of J.P. Morgan's trades.
There were smaller losses during the first quarter that alarmed some within J.P. Morgan, but executives were reassured when measures of risk settled back down. The executives would later discover that those measurements were flawed.
After The Wall Street Journal reported April 5 on the large positions being taken by Mr. Iksil, top executives, including Mr. Dimon, participated in a review of trading positions. They knew there might be losses market movements but were satisfied about the strategy, said people close to the bank.
But the week after the bank's April 13 first-quarter earnings call, concern mounted when losses started to balloon to as much as $200 million a day. Several teams were assigned to review the positions, and they discovered the trading mistakes. These ranged from errors in how the bank hedged an existing hedge to how it offset the size of an existing trade that served to protect the bank, said people familiar with the situation.
To employees in London, where J.P. Morgan's businesses are spread across at least three buildings, signs of trouble surfaced at the start of May. J.P. Morgan Chief Risk Officer John Hogan and investment bank head Jes Staley arrived from the U.S. and started twice-a-day meetings. Joining them was Daniel Pinto, who is in charge of Europe for J.P. Morgan's investment bank.
In New York, the board met several times in the past few weeks to discuss the snafu and how to deal with it. There were no discussions about removing Mr. Dimon as CEO, said a person familiar with the discussions, but the events raised new questions within the bank about why better controls weren't in place.

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Mean Street host Evan Newmark calls on WSJ's Francesco Guerrera and Dennis Berman to answer the question 'will Wall Street ever learn?' in light of the J.P. Morgan $2 billion trading loss. Photo: AFP/Getty Images.
WSJ's Robin Sidel and Liz Rappaport visit Mean Street to examine how J.P. Morgan CEO Jamie Dimon had been built up in recent years to hero-like status by the media. Photo: AP.
WSJ.com 'Intelligent Investor' columnist Jason Zweig pulls up a chair on Mean Street to explain how J.P. Morgan violated a simply rule in its $2 billion trading loss: You must not fool yourself. Photo: Reuters.
One trader estimated more than a dozen hedge funds and banks profited by taking the other side of J.P. Morgan's trades. Firms such as BlueMountain Capital Management LLC and BlueCrest Capital Management LP each scored gains of about $30 million, according to people familiar with the matter. The firms declined to comment.
Regulatory inquiries into the bets include a review by the Securities and Exchange Commission, according to a person familiar with the matter. The informal inquiry is focused on whether the loss was disclosed to investors at a sufficiently early stage.There are no firm guidelines on when projected trading losses become "material" to investors and therefore need to be disclosed.
Some lawmakers said Friday the trading blowup reinforced the need for tougher financial regulations, with some of the fiercest criticism aimed at Mr. Dimon. He has been one of the loudest foes of certain rules imposed since the financial crisis.
"J.P. Morgan Chase, entirely without any help from the government, has lost, in this one set of transactions, five times the amount they claim financial regulation is costing them," said Rep. Barney Frank (D., Mass.), former chairman of the House Financial Services Committee and a co-sponsor of the Dodd-Frank financial-overhaul law of 2010.





http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9261366/JP-Morgans-2bn-loss-was-an-accident-waiting-to-happen.html


Harry Wilson
By , and Richard Blackden
11:30PM BST 11 May 2012
Comments190 Comments
Staff from the bank’s investment banking arm privately told the management - including chief executive Jamie Dimon - that the bank’s Chief Investment Office (CIO) was an “accident waiting to happen”.
Bill Winters, the former co-chief executive of JP Morgan’s investment banking division, is understood to have been among senior staff at the bank who made clear their concerns about the risks being taken by the CIO.
Mr Winters and other staff from the investment bank raised their worries, saying the unit did not fully understand the risks it was taking and was not properly managing its positions.
In a further blow on Friday night, JP Morgan's credit rating was cut one notch by Fitch, while S&P lowered the bank's outlook to negative from stable.
JP Morgan shocked the market on Thursday evening with its disclosure that it had made a net loss in the past six weeks of $800m as a result of $2bn of trading losses from the CIO. Mr Dimon apologised for what he described as a “grievous mistake” and said it was the result of “errors, sloppiness and bad judgment”. Shares in the bank dropped 9.3pc on Friday in the wake of the revelations, wiping $14.4bn off the company's market value.
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