http://dealbreaker.com/2012/10/tim-geithner-to-finally-be-set-free/#more-88999

( And when will Turbo get " parole " granted by the Banksters ????

01 Oct 2012 at 4:34 PM

Tim Geithner To Finally Be Set Free?

By Bess Levin

“President Barack Obama’s senior advisers are confident Treasury Secretary Timothy F. Geithner will remain in his job even though he hasn’t made his intentions public, an administration official said. Geithner met recently with Vice President Joe Biden and laid out his reasons for wanting to leave the post. Biden outlined why it was vital that Geithner remain, said the official, who spoke on condition of anonymity because no announcement has been made.”-Bloomberg, August 5, 2011

“Mr. Obama and his chief of staff, William M. Daley, have been urging Mr. Geithner to stay, administration officials say, not only for continuity when the economy has weakened and to avoid an all-but-certain confirmation fight in the Senate over a successor, but also because Mr. Obama has developed a close rapport with Mr. Geithner…Especially in recent weeks, the issue has become a running joke, officials say: Mr. Geithner and Mr. Daley tease about the ankle bracelet that the White House makes him wear, or Mr. Geithner asks if Mr. Daley has yet read his resignation letter, to which Mr. Daley answers in unprintable language.”- New York Times, August 3, 2011

“Treasury Secretary Timothy F. Geithner, the last member of the Obama administration’s original economic team, said he doesn’t expect to remain in office if the president is re-elected. ‘[NERVOUS LAUGHTER] He’s not going to ask me to stay on, I’m pretty confident,’ Geithner said in an interview with Bloomberg Television yesterday in Charlotte, North Carolina. ‘I’m confident he’ll be president. But I’m also confident he’s going to have the privilege of having another secretary of the Treasury.[/NERVOUS LAUGHTER]‘”- Bloomberg, January 26, 2012

Earlier today, the Journal reported that “if re-elected, President Barack Obama is expected to move quickly in November to nominate a new Treasury secretary,” as his current one, Tim Geithner, “has made clear for more than a year that he plans to leave his post.” And while that must come as exciting news to TG, who’s been begging and pleading to be released for over a year now,” all we’re saying is: be careful. Don’t pack your bags just yet. You don’t know that this isn’t just all part of their long-running joke and you don’t want to give them the satisfaction of seeing the look on your face when they break it to you that you’re not going anywhere.

01 Oct 2012 at 5:57 PM

Make Him An Offer

By Bess Levin

http://www.zerohedge.com/news/2012-09-28/40-deutsche-bank-employees-injured-after-inhaling-dangerous-substance-schkeuditz-ger

40 Deutsche Bank Employees Injured After Inhaling "Dangerous" Substance In Schkeuditz, Germany

Submitted by Tyler Durden on 09/28/2012 09:35 -0400

Deutsche Bank

Germany

It appears banker popularity is low to quite low not only in the US but virtually everywhere. According to Lepizig-Fernsehen, a toxin alert has been issued at a Deutsche Bank branch in Schkeuditz, a suburb town of Leipzig, where 40 people have been "injured" after inhaling a white powdery substance delivered hours before, and which spread via the building's air conditioning system.

From LF:

On Friday afternoon marched forces of police and firefighters from the Deutsche Bank building in Schkeuditz. Around 40 people have been injured by inhaling a dangerous, but so far unknown substance.

The package with the white powder had been delivered in the hours before. With great probability the substance spread through the air conditioning throughout the building.

40 people were contaminated there, the entire office complex and an adjoining nursery were evacuated. More than 100 people were affected by the safeguards. The police and firefighters are having a large contingent on site to accommodate the investigation into the powder and its origin.

More as we see it.

and.....

http://www.infowars.com/cyber-attack-on-us-banks-is-an-obvious-false-flag/

Cyber Attack on US Banks is an Obvious False Flag

Eric Blair
Infowars.com
Sept 30, 2012

Over a month ago we featured an article titled The NWO Agenda Would Move Forward with This One Simple Act, which stated the one event that could accomplish all of the agenda’s goals in one shot would be “a false flag cyber attack on Western banking institutions that they can pin on Iran.”

Please watch this exact scenario unfold in this short ABC news clip from a few days ago:

With President Obama ready to sign an executive order to control the Internet in the name of cyber security, could it be more obvious that this “cyber attack” is a total set up? Especially since all versions of Internet control legislation have failed to pass in normal government channels bothdomesticallyand internationally.

Are we expected to believe that sophisticated Muslim hacktivists attacked US banks because they were angry about a movie that was produced in America? That’d be like attacking Afghanistan or Iraq after 15 Saudis supposedly attacked us, ohh wait…that did happen.

Is this really the best story they can come up with? It was so predictable that it makes it that much more laughable. But the motive being pinned on the pathetic anti-Muslim movie is the real kicker.

It’s sad to see Richard Clark in the video above actually take this seriously. Talk about an establishment sellout.

I call major bullshit on this story. It stinks to high heaven. What do you think?

and.....

http://occupycorporatism.com/cia-sponsored-cyber-attacks-to-legitimize-dhs-big-brother-control-grid/

CIA-Sponsored Cyber Attacks to Legitimize DHS Big Brother Control Grid

Susanne Posel Sep 30th, 2012 0 Comment

Susanne Posel
Occupy Corporatism
September 30, 2012

The US government-sponsored surveillance system is being built with the assistance of federal agencies, state and local law enforcement, telecommunications technology, websites, search engines, private sector corporations and data collection software. To justify the need for a cybersecurity legislation that will enable the US government to spy on every American citizen without purpose other than to create a totalitarian control grid, false flag attacks are incorrectly portrayed by the Obama administration in order to scare Congress into following tail behind this globalist puppet.

Back in March, DHS, the FBI and Obama administration officials demonstrated for Senators a fake take-down of US infrastructure to coerce them into supporting the Cybersecurity Act of 2012. The focus of the fake attacks were US banks, power grids and telecommunications systems.

When creating a corporate-surveillance grid, the work of the military-industrial complex, mainly the Department of Defense (DoD), who created the internet we know today and controls its direction with orders coming from the executive branch.

The Obama administration is circumventing the Congress with an executive order to create his own law concerning internet lockdown after the Cybersecurity Act of 2012 was voted down last month.

Obama is elevating the power of the Department of Homeland Security (DHS) with his executive order in draft form that will establish cybersecurity standards because the US power grids will be protected from attacks.

In 2011, the DHS claimed that American industry and power grids are vulnerable to attacks from hackers. They explained that foreign governments will infiltrate industrial infrastructure and cause havoc. Yet, it is the US and Israeli governments who have used cyber-attacks to terrorize Middle Eastern nations and their power grid infrastructure with Flame and Stuxnet.

According to Jay Carney, White House Press Secretary, Obama may just write an executive orderto ensure his cybersecurity agenda is implemented. “In the wake of Congressional inaction and Republican stall tactics, unfortunately, we will continue to be hamstrung by outdated and inadequate statutory authorities that the legislation would have fixed. Moving forward, the President is determined to do absolutely everything we can to better protects our nation against today’s cyber threats and we will do that.”

Caitlin Hayden, White House spokesperson, in regard to Obama writing an executive order to make sure that his designs for the internet are realized, said: “An executive order is one of a number of measures we’re considering as we look to implement the president’s direction to do absolutely everything we can to better protect our nation against today’s cyberthreats. We are not going to comment on ongoing internal deliberations.”

A leaked version of the executive order on cybersecurity reveals the creation of an “infrastructure cybersecurity council manned by the US Department of Homeland Security that will be staffed by members of the departments of defense, justice and commerce, and national intelligence office.”

Experts agree that the US power grids are rarely attacked or hacked into, yet the US government is using the general public’s ignorance against them for the sake of gaining social support for their ultimate Big Brother surveillance system. It is understood that “To start, these systems are rarely connected directly to the public internet. And that makes gaining access to grid-controlling networks a challenge for all but the most dedicated, motivated and skilled — nation-states, in other words.”

The National Security Agency (NSA) would have us believe that hackers are becoming “disruptive and destructive” which causes the ever present possibility of security breaches directed by nameless, faceless groups like Anonymous. The US government purveys the false flag of hackers somewhere out there, waiting in the shadows to attack and bring down our digital mediums.

On September 12th, the House of Representatives passed an extension of the Foreign Intelligence Surveillance Act (FISA) that give the US government allowance to spy on American communications in the name of discerning terrorist activity. This passage gives the NSA over-reaching power to conduct encompassing digital surveillance. According to Robert Litt, General Counsel of the Office of the Director of NSA, this capability is an “incredibly valuable source of foreign intelligence information that I think it’s fair to say has been critical to protecting our country over the last few years. I know of specific incidences both involving terrorist acts and involving other kinds of threats where we have been able to thwart them or gain significant insight into them as a result of this collection activity.”

FISA has allowed the US government to collect massive amounts of data on unsuspecting Americans. Opposition came from Senator Ron Wyden who explained: “My concern has long been that the challenge is to ensure that we are protecting the well-being of our people – and there are certainly threats overseas – while at the same time standing up for those extraordinarily important values of liberty, and that we strike the balance…And my concern is that there is a substantial amount of evidence that that balance is not being struck.”

Justification for the continued use of FISA is that these intrusions into American’s private communications are searching for the US government-sponsored terrorist faction known as al-Qaeda. David Kris, former top anti-terrorism attorney at the Justice Department, asserts that: “. . . an authorization targeting ‘al Qaeda’ – which is a non-U.S. person located abroad – could allow the government to wiretap any telephone that it believes will yield information from or about al Qaeda, either because the telephone is registered to a person whom the government believes is affiliated with al Qaeda, or because the government believes that the person communicates with others who are affiliated with al Qaeda, regardless of the location of the telephone.”

and.....

http://beforeitsnews.com/banksters/2012/09/high-alert-millions-of-bankers-cant-bank-online-bofa-blames-hackers-from-middle-east-bank-cyber-attacks-by-iran-black-monday-october-1-2012-2431952.html

High Alert! Millions Of Bankers Can't Bank Online. BofA Blames Hackers From Middle East. Bank Cyber Attacks By Iran? Black Monday October 1, 2012?

Friday, September 28, 2012 8:03

The financial and banking industries are on high alert tonight as a massive cyberattack continues, with potentially millions of customers of Bank of America, PNC and Wells Fargo finding themselves blocked from banking online.
“There is an elevated level of threat,” said Doug Johnson, a vice president and senior adviser of the American Bankers Association. “The threat level is now high.”
“This is twice as large as any flood we have ever seen,” said Dick Clarke, an ABC News consultant and former cybersecurity czar.
Sources told ABC News that the so-called denial of service attacks had been caused by hackers from the Middle East who had secretly transmitted signals commandeering thousands of computers worldwide.

http://abcnews.go.com/US/hackers-block-us-banks-online-service-bank-america/story?id=17343055#.UGWYNkXyaCM

A group of purported hackers in the Middle East has claimed credit for problems at the websites of both banks, citing the online video mocking the founder of Islam. One security source called that statement “a cover” for the Iranian government’s operations.
The attack is described by one source, a former U.S. official familiar with the attacks, as being “significant and ongoing” and looking to cause “functional and significant damage.” Also, one source suggested the attacks were in response to U.S. sanctions on Iranian banks.
Senior U.S. officials acknowledge that Iranian attacks have been the subject of intense interest by U.S. intelligence for several weeks. Last week, the Joint Chiefs of Staff’s Intelligence Directorate, known as J-2, confirmed continuing Iranian cyber attacks against U.S. financial institutions in a report described as “highly classified.”

and....

http://www.dailyfinance.com/2012/09/27/major-banks-hit-with-biggest-cyberattacks-in-history/

Major Banks Hit with Biggest Cyberattacks in History

By CNNMoney

Posted 3:36PM 09/27/12

Posted under: Company News, JP Morgan Chase, Bank of America, Wells Fargo & Co

By David Goldman

NEW YORK (CNNMoney) -- There's a good chance your bank's website was attacked over the past week.

Since Sept. 19, the websites of Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), U.S. Bank (USB) and PNC Bank (PNC) have all suffered day-long slowdowns and been sporadically unreachable for many customers. The attackers, who took aim at Bank of America first, went after their targets in sequence. Thursday's victim, PNC's website, was inaccessible at the time this article was published.

Security experts say the outages stem from one of the biggest cyberattacks they've ever seen. These "denial of service" attacks -- huge amounts of traffic directed at a website to make it crash -- were the largest ever recorded by a wide margin, according to two researchers.Banks get hit by cyberattackers all the time and typically have some of the best defenses against them. This time, they were outgunned.

"The volume of traffic sent to these sites is frankly unprecedented," said Dmitri Alperovitch, co-founder of CrowdStrike, a security firm that has been investigating the attacks. "It's 10 to 20 times the volume that we normally see, and twice the previous record for a denial of service attack."

To carry out the cyberattacks, the attackers got hold of thousands of high-powered application servers and pointed them all at the targeted banks. That overwhelmed Bank of America and Chase's Web servers on Sept. 19, Wells Fargo and U.S. Bank on Wednesday and PNC on Thursday. Fred Solomon, a spokesman for PNC, confirmed that a high volume of traffic on Thursday was affecting users' ability to access the website, but he declined to go into more detail.

Denial of service attacks are an effective but unsophisticated tool that doesn't involve any actual hacking. No data was stolen from the banks, and their transactional systems -- like their ATM networks -- remained unaffected. The aim of the attacks was simply to temporarily knock down the banks' public-facing websites.

To get hold of all the servers necessary to launch such huge attacks, the organizers needed to plan for months, Alperovitch said. The servers had to be compromised and linked together into a network called a "botnet."

That level of pre-planning is a deviation from the kinds of denial of service attacks launched at banks in the past by so-called "hacktivists." Typically, hacktivists use home PCs infected with malware to amass their botnets. Attacks on this scale would be impossible to carry out with home PCs -- users too frequently turn them off or disconnect them from the Internet.

The Islamist group Izz ad-Din al-Qassam Cyber Fighters publicly claimed responsibility for the attacks in what it called "Operation Ababil," but researchers are divided about how seriously to take their claims. The group has launched attacks in the past, but those have been far less coordinated than the recent batch.Sen. Joe Lieberman, an Independent from Connecticut, said in a C-SPAN interview on Wednesday that he believed the attacks were launched by Iran.

"I don't believe these were just hackers who were skilled enough to cause disruption of the websites," he said. "I think this was done by Iran ... and I believe it was a response to the increasingly strong economic sanctions that the United States and our European allies have put on Iranian financial institutions."

A call requesting comment from the Department of Homeland Security's cybersecurity office was not immediately returned.

A cybersecurity firm following the attacks also expressed doubt about the connections between the Cyber Fighters and the bank attacks. On social networks and chat forums, the group urged its followers to use a mobile "low orbit ion cannon" -- a software tool typically used by Anonymous and other hacktivist groups to direct a massive flood of traffic at a targeted site.

That tool was not used in the attack, according to Ronen Kenig, director of security products at cloud security firm Radware.

"Supporters of this group didn't join in the attack at all, or they joined in but didn't use that tool," said Kenig. "The attack used a botnet instead." He doesn't think the Cyber Fighters would have access to a botnet as advanced as the one used by the attackers.

But CrowdStrike's Alperovitch said he is "quite confident" the perpetrator was the Izz ad-Din al-Qassam Cyber Fighters, since they announced each attack well before it was carried out, and the attack wasn't that sophisticated -- it just took significant planning. PNC was the last target on the lists the Cyber Fighters have circulated, but more attacks could still be coming.

Both researchers agree that the controversial anti-Muslim YouTube video was not the initial impetus for the attacks, as the Cyber Fighters claimed in messages recruiting volunteers to join in. Before the video was even released, the group claimed responsibility for similar attacks.

"The video is simply an excuse," Alperovitch said. "It's a red herring."

and.....

Mega-Bank’s Plan to Steal Your Money and Blame Fake Muslim Cyber Attack

Susanne Posel Sep 27th, 2012 0 Comment

Susanne Posel
Occupy Corporatism
September 27, 2012

Senator and self-proclaimed Zionist Joseph Lieberman declared that it was Iran who cyber-attacked Bank of America and JPMorgan Chase in 2011 and began with more frequency this year. Lieberman, as the chairman of the Homeland Security and Government Affairs Committee states that the financial attack was spurned from the state-sponsored anti-Muslim film circulating the Middle East thanks to CIA-operatives al-Qaeda.

Lieberman explains: “I don’t believe these were just hackers. I believe this was done by Iran and the Qods force, which has its own developing cyber-attack capacity. And I believe it was in response to the increasingly strong economic sanctions that the United States and our European allies have put on Iranian financial institutions.”

The US government is planting the propaganda seed that according to “highly classified” documents provided by the Join Chiefs of Staff’s Intelligence Directorate confirm that Iranian hackers are committing cyber-attacks against US financial institutions.

This report assures that US mega-banks are a “valid target” of the Iranian “cyber army”. However, the attackers used a known forum that is utilized by the CIA-controlled Anonymous to issue threats and brag about their successes.

The timing of the newly formed “digital al-Qaeda” and their expressed anger over the US-produced anti-Muslim film are questionable considering how the US and Israeli government are setting the stage for a justified war with Iran. This fake hacker group is threatening other countries controlled by the Zionist regime, such as France, Germany and Britain. According to the false flag group: “The army was recently formed and we have started to work as a team after we used to work individually. The hacking operations are of course a response to the offence against the prophet, peace and blessing be upon him.”

Radware, a security firm, analyzed the attacks and concluded that the alleged Iranian nameless, faceless cyber army accused to attacking BoA and JPMorgan Chase did not conduct the attack.

This week, Wells Fargo & Co. upped their cybersecurity measures after being attacked by a nameless, faceless group calling themselves Cyber Fighters of Izz ad-din Al Qassam. Wells Fargo announced in a formal statement: “We apologize to customers who may be experiencing intermittent access issues to wellsfargo.com and online banking. We are working to quickly resolve this issue.”

Customer complaints included difficulty logging-in as well as pages not loading properly.

Cyber Fighters of Izz ad-din Al Qassam claimed that their attack was retaliatory for the anti-Muslim film produced by the US government.

According to House Representative Mike Rogers, the anti-Muslim film was released to cover the US government’s involvement in the bombing and death of US Ambassador J. Christopher Stevens at the hand of the CIA-sponsored al-Qaeda.

The film in question is actually a 14 minute trailer written, produced and directed by Sam Bacile, a.k.a. Nakoula Basseley Nakoula who is an FBI informant , an Israeli citizen and the pasty used by the Zionist regime in order to facilitate a manufactured revolt of fake Islamic tension in the Middle East.

Just as the false flag bomb threats called in by anonymous members of al-Qaeda earlier this month, this banking threat has the hall marks of a state-sponsored false flag to unnerve the American public, mask a planned implosion of the US economy through the ultimate theft of the banking cartels: the money deposited into private checking accounts by banking customers.

On August 9th the banks were given the legal authority to steal money from their customer’s private accounts just as Jon Corzine had with MF Global with the ruling on Sentinel Management Group.

Based on the ruling, regulatory systems such as the Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SPIC) will not insure customer funds, investments, depositors and retirees who hold accounts in banks. In fact, the FDIC has announced that beginning in January 2013, they will stop insuring all deposits. Of the estimated $1.6 trillion in deposits, and a measured 85-90% in the hands of the mega-banks, large depositors are expected to close their accounts due to the lack of security.

The money in deposits will be funneled through the US Treasury for short-term securities. It is expected that the US Treasury will offer negative interest rates and this combination will surely cause a run on the banks that will put Spain and Greece to shame.

By blaming Iran, the technocrats could initiate the shutdown of all domestic banking computer systems in order to “purge” the virus and reconfigure their systems. However this would be a false flag meant to pacify the public to avert mass panic. While the general public would fall for the cover story, the banking cartels would simply electronically transfer all customer funds from private checking accounts out to off-shore banks where they could not be touched and cover their tracks.

The American public, being told that Iran was to blame might not riot in the streets as we have seen in European countries of late. There would be total support for the war with Iran if this scheme could be pulled off. The technocrats could not only bankrupt America but also simultaneously stave off a social display and breakdown of society because the Iranians would be to blame.

The plan is perfect. All we have to do is not be fooled and use the recent riots in Spain as a barometer as to how we can take this country back from the Zionists and the banking cartels.

and let's not forget about JP Morgan......

The JP Morgan (JPM) trading blunder could result in a $100 billion loss, a contagion of its massive portfolio, and even the wipeout of its entire asset base. Even worse, these extremely risky and potentially-illegal actions on behalf of the CIO office and the "London Whale" could be the unexpected "shock" that breaks the market, derails the Fed's huge monetary stimulus, and sends us back into a global recession.

The JP Morgan Shock

The entire world has forgotten about or ignored what could be the upcoming "shock" that puts the global financial system in severe jeopardy. To make matters much, much worse - I don't think anyone even has a clue as to what is really happening. Investors, economists, financial powerhouses, top business executives, politicians, lawmakers, consumers, students, governments, and even central banks are completely confused. None of them are expecting what I will describe below.

There is one event that may ultimately solve the mystery of the global economy. This event would not only plunge the economy back into a deep recession and lose investors hundreds of billions of dollars, but it could bring about the collapse of some of the world's largest financial institutions and even render central bank stimulus and QE completely ineffective and futile. This event is by no means a guarantee; its probability is even likely under 5 percent. But this event has all the necessary ingredients to culminate into a major panic. Together with slowing global economies and an extremely unstable financial system, this could be the next Lehman Brothers.

This event is JP Morgan's huge trading mistake. The massive losses that were racked up starting in April and May 2012 are by no means over. What has been represented by JP Morgan as a trading mistake and "hedging" strategy with an initial estimated loss of $2 billion, was really a leveraged and speculative bet that could soon infect JP Morgan's entire portfolio and result in losses of $100 billion.

The Global Economy and Huge Underlying Risks

Most investors already know about the very weak economic growth, European financial crisis, Chinese slowdown, Middle East tensions, and dangerous Fed actions. All are huge threats and may drag the global economy into a double-dip recession. But most investors don't know if the fears are overblown; they don't know if central banks will be successful in boosting the economy; and they don't know the real risks out there. Most investors are either overly-optimistic, over-confident that they will be able to pull their money out quickly, following the crowd, or simply taking way too much risk unnecessarily. After a 115% + rally, and only 7% away from the all-time stock market highs, it's just not worth staying invested right now.

This was my warning to my friends on September 25, 2012:

Take your money out of stocks and gold NOW!!!

$SPY $GLD $AAPL $FB $GOOG $MCD $CAT $JPM

Way too much risk, stock market is only 7% away from the all-time highs (and the economy is nowhere near where it was), Apple has failed to stay above $700 and will potentially never make new highs ever again, Google might have just put in a top, Facebook continues to fail, China is slowing down tremendously and could enter recession, Europe has a financial crisis that is still unresolved, global growth and manufacturing is slowing (already at recession levels), massive debt could lead to financial collapse, the US Dollar is getting stronger, commodity prices are falling after over-speculation, oil prices failed to stay above $100 and signal a deflationary recession, and the Fed's actions have given investors too much confidence when they might not work at all.......Just not enough reward at all for the massive risk that you'd be taking.

All of the above reasons are absolutely enough to crush this market, but guess what? It could get even worse.

JP Morgan Loss

JP Morgan announced that its Chief Investment Office made a terrible trading error and lost $2 billion. The company said that the loss was due to a failed "hedging" and "protection" strategy and blamed it on trader Bruno Iksil, the "London Whale". At first, the company tried to deny or downplay these very negative rumors in order to prevent any panic. But by May 2012, losses of $2 billion were reported and the stock had lost a third of its value in two months, from early April to early June. On an emergency conference call, JP Morgan CEO Jamie Dimon announced that the strategy was "flawed, complex, poorly reviewed, poorly executed, and poorly monitored."

Jamie Dimon was called to testify in front of the Senate, and investigations were initiated by the Federal Reserve, the SEC, and the FBI. In July, the total loss was updated to $5.8 billion and the firm announced that they could total $9 billion under worst-case scenarios. But the problems have still not been solved! JP Morgan is still not out of the trade, and all of the investigations and testimonies have still not uncovered exactly what the trades were, how they resulted in such massive losses, and why such severe mistakes were not caught by top management.

It appears that the losses are still increasing and that JP Morgan is hiding a lot of important information. It is absolutely possible that a number of traders, risk managers, and even Jamie Dimon himself have engaged in illegal activities, misrepresented the real situation, and even lied to the public.

What's Really Happening?

The Trades

JP Morgan's full list of positions is still unknown (because it could affect their ability to sell out of losing trades), but a few very important bets have been revealed. So far, it appears that the big losses were the result of two trades (though others are likely still to be uncovered).

Trade #1 was a smart hedge betting against the global economy, by having bearish positions on junk bonds (JNK) - one of the riskiest asset classes most sensitive to the condition of the economy. This position was a very good hedge because JP Morgan needs to protect itself from a potential economic downturn. If the economy deteriorated and stocks fell, JP Morgan would at least make up some losses by profiting from these bearish bets.

Trade #2 is where the real trouble stems from. Instead of hedging through bearish positions, Trade #2 actually bets on continued economic strength. Trade #2 was a bet that investment-grade bonds will not default - that strong corporations will continue to be financially stable and be able to pay off all of their obligations. JP Morgan's bet was that credit markets would strengthen. To make matters even worse, Trade #2 was based on the position that 2012 should be protected but that 2013-2017 would be safe (buying CDS protection for 2012, selling CDS protection out to 2017). In other words, JP Morgan was now betting that investment grade bonds would not default from 2013 to 2017. Moreover, Trade #2 was much bigger than Trade #1.

How They Lost

The trades are highly dependent on the state of the economy. If conditions improved, JP Morgan would lose on its short position in junk bonds (because junk bonds would continue to gain) but would profit from its long position in investment-grade bonds (because these bonds would gain as well). And since Trade #2 was bigger than Trade #1, the gains on Trade #2 would offset the losses on Trade #1. Therefore, if the economy improved, JP Morgan would make a profit.

On the other hand, if economic conditions declined, JP Morgan would profit from its short position in junk bonds (which would be hard hit by a slowdown) but would lose on its long positions in investment-grade bonds (which would now be at greater risk of default). Because Trade #2 was much bigger than Trade #1, deteriorating economic conditions would result in a large loss.

JP Morgan's trades were a terrible "hedge" because they were much more geared for an improvement in economic conditions than for a deterioration. Therefore, when world financial markets fell into a slight panic over Europe's financial crisis and slowing global growth, JP Morgan lost billions of dollars on their trades. And it's not over.

Why They're Lying

There is a good chance that legal actions will soon follow. Not only did the Chief Investment Office make very serious trading errors and failed to oversee the trouble that was going on, but there is a fair possibility that a number of individuals in top-level management positions knew what was happening and failed to act. In fact, the CIO (Ina Drew), Chief Risk Officer (Irvin Goldman), and others have already been forced to resign. In my opinion, JP Morgan and a number of individual in high-level management have engaged in market manipulation, public misrepresentation, and conflicts of interest.

"Hedge." First, calling these botched trades a "hedge" is hugely misleading and even a lie; these trades were not "protection," but an outright bullish and speculative bet on a European resolution and strength of the credit markets. JP Morgan made a massive bet on improving economic conditions instead of rightfully protecting itself from the threats of a recession.

And I'm not the only one who thinks so:

Monday, May 21, 1:35 PM JPMorgan's CIO losses can't be described "in any way as a hedge," says hedge fund giant Michael Platt, whose BlueCrest capital was on the other side of the trade. "It's a trading loss. They deliberately put the positions on." "They're not out of those positions," he says and will face further losses if Europe continues to deteriorate.

Source: Seeking Alpha, Market Currents

Hiding Losses. Second, it appears that JP Morgan attempted to hide these losses from the public by either denying or minimizing early reports. Finally, when losses grew too large to hide, the company reported a $2 billion loss. Then, after investors had some time to digest the $2 billion loss reported in May, JP Morgan updated the loss to $5.8 billion in July.

Misrepresenting Financial Results. Third, it is possible that JP Morgan attempted to hide the losses and manipulate investors by retroactively updating financial results, after it misrepresented them more positively. On July 13, 2012, it announced that it had a $4.4 billion loss in the second quarter and a "recalculation" of first quarter results that resulted in a $1.4 billion loss. To me, it looks like JP Morgan pushed off announcing the losses until after first quarter results were announced, and then tried to quietly tuck some of those losses into Q1 only afterwards - when investors weren't paying much attention. To me, it looks like JP Morgan has been trying to cover up its mistakes.

Faulty Accounting and Valuation. Fourth, JP Morgan manipulated valuations and attempted to decrease the reported loss through faulty accounting standards - valuing thinly-traded positions as more marketable, failing to discount for illiquidity, using incorrect price estimates, and not updating changes in valuations (ZUCKERMAN, GREGORY; DAN FITZPATRICK (August 3, 2012). "J.P. Morgan 'Whale' Was Prodded Bank's Probe Concludes Trader's Boss Encouraged Boosting Values of Bets That Were Losing").
- Conflicts of Interest. Fifth, there are major conflicts of interest at JP Morgan. Not only is CEO Jamie Dimon a board member of the Federal Reserve Bank of NY (why is a top bank CEO so heavily influential on a government institution?), but the biggest campaign donor to many members on the Senate's banking committee - JP Morgan Chase. (Huffington Post, JP Morgan Chase and The Senate Banking Committee Are Best Friends).
- Pointing The Blame. Finally, even though JP Morgan has placed the blame on the "London Whale" and the Chief Investment Office, it is CEO Jamie Dimon who deserves a lot of the blame as well. It is the role of the CEO to oversee what goes on and even to sign off on financial documents that they are accurate (Sarbanes-Oxley). Dimon told lawmakers that the loss was an "isolated incident," but it is more likely that there is much more brewing under the surface.
Why It Could Get Much Worse

The $5.8 billion loss that has officially been announced is by no means the final count. Not only have we seen the loss rise from $2 billion to $4 billion to $5.8 billion, but JP Morgan still hasn't exited from its positions. There are a number of reasons why this loss could quickly spiral out of control.
- Still Not Out of Bets. The official announced losses are "only" $5.8 billion, but JP Morgan still hasn't exited from all of its risky positions. In fact, even though JP Morgan's losses have been estimated to be as much as $9 billion under worst case scenarios, this is according to JP Morgan's own internal report. Why should we believe what JP Morgan tells us? Obviously they underestimate their own losses.
Moreover, the company is holding positions in derivatives with a face value of $100 billion. Not only are these positions betting on the health of corporate debt and relying on improved economic conditions, but these positions are very illiquid. JP Morgan holds a major chunk of this market, and it's had a very hard time unloading its bets.
Unwinding these bets could put JP Morgan at tremendously high risk:

J.P. Morgan's decision to move slowly in unwinding the positions highlights a painful dilemma for the company and Chief Executive James Dimon: The bank can move slowly and risk being bled by small but regular losses over time, or it can attempt to close out the trades sooner but face potentially larger losses. Moving slowly also holds risks if the market turns sharply against the bank in the near term.

Source: WSJ: JP Morgan Struggles To Unwind Huge Bets

Catharsis Ours

Friday, September 28, 2012

Curious things going on with banks today.....dangerous substance ( Anthrax ? ) in Germany , more hacking attacks - this time Bank of America.....