A little JP Morgan nugget or two to ponder over coffee

http://ftalphaville.ft.com/blog/2012/06/13/1040881/hypothetical-illustrative-example-of-the-orderly-liquidation-of-jpmorgan-chase/

“Hypothetical, illustrative example of the orderly liquidation of JPMorgan Chase”

Posted by Cardiff Garcia on Jun 13 01:36.

The FT’s Tom Braithwaite has the goods:

In March, Gregory Baer, deputy general counsel, presented a plan to policymakers and bankers to show the results of a hypothetical $50bn loss. It showed the bank would fail, shareholders would be wiped out and Jamie Dimon, chief executive, would be fired. …

In the doomsday scenario set out by Mr Baer, a $50bn loss would trigger “a run on the bank” – with $375bn of funding, including bank deposits, draining away.

The government would then step in and mark down the bank’s assets, leading to an additional $150bn loss. Shareholders would be wiped out but senior creditors would be transferred to a new bridge company that allows “critical activities [to] continue to operate smoothly”. Their debt would be restructured into equity.

The bank might require $200bn of temporary government funding, though the bridge company would return to the private sector and New JPMorgan would raise $200bn in the private markets to repay the government loan, the plan says.

And click below to open the presentation itself (pdf):

and speaking of strictly hypothetical 50 billion dollar losses.....



http://ftalphaville.ft.com/blog/2012/06/13/1041061/jamie-dimons-cio-hindsight-live/

Jamie Dimon’s CIO hindsight – Live!

Posted by Joseph Cotterill on Jun 13 10:48.

In hindsight, CIO’s traders did not have the requisite understanding of the risks they took…

JPMorgan’s chief executive Jamie Dimon is up before the US Senate Committee on Banking, Housing and Urban Affairs on Wednesday, to discuss “A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?”. (Here’s the testimony Jamie prepared earlier.)

We’ll be following along.

Join FT Alphaville for a special session of US Markets Live on Wednesday — we’ll be covering the hearing from its opening at 10am New York time, 3pm London time, offering a blow-by-blow account of the London Whale circus in room SD-G50 of the Dirksen Senate Office Building.

Alongside Cardiff and Joseph in New York, we’ll be joined by the FT’s Financial and Regulatory correspondent in Washington, Shahien Nasiripour.

See you there!