Imagine this:Your bank holds $81 trillion dollars worth of derivatives which is 40% of all the derivatives held by all the banks. Actually this is not a fairy tale. JP Morgan Chase (NYSE: JPM) does own this staggering pile of derivatives. What those derivatives contain in the way to toxic assets is a mystery because all of these transactions are "off the books."
Now enter the government that wants to regulate the derivatives market and force more transparency in reporting transactions, which heretofore have been kept secret. One of the proposals is to have each transaction go through a clearing house so that there would be a visible record of the securities and the players.
As you might well guess, this does not sit well with Jamie Dimon, CEO of JP Morgan. He has started playing hardball with the government saying that since the bank paid back the TARP monies that he should be left alone to wheel his deals like he always has. We must remind Mr. Dimon that it was reckless speculation and leverage in derivatives that brought down our financial system.
Obviously the government cannot stand by and do nothing. The American people are hurting with almost 10% unemployed due to the financial debacle. Mr. Dimon must recognize this and accept the fact that there will be regulation, if not outright elimination of derivatives. The world will survive without Mr. Dimon's wheeling and dealing.
As a footnote, JP Morgan is expected to show earnings of just 4 cents per share in the last quarter, according to analysts surveyed by Thomson Reuters. 4 cents per share is hardly a bully pulpit.
Should derivatives be eliminated?
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Reader Comments (Page 1 of 1)
7-15-2009 @ 10:33PM
william lindblad said...
Dimon is just a small part of a small group that has wrecked havoc upon ours, and the world economic system. It is quite interesting that GM's Wagoner went and those more responsible for his predicament stayed. C'est la vie sums it all up. It would appear that we have an oligarcy running the show and the biblical word avarice in command. If you review the credit/credit card market it would do Huxley proud, however this is not the brave new world that he imagined. In fact, it is one hell of a big complicated mess.
This is not a case for more regulation - it is a case of getting those in charge of this function to actually do their jobs!
7-16-2009 @ 10:36AM
Jill said...
Derivatives, when implemented in a responsible fashion, protects a company from interest rate risk. Jamie Dimon is known for getting into the numbers to make sure they are used properly, that is, to hedge real assets. Problems arise when they are used for speculative purposes without real assets on the books.
The government should not blindly prohibit derivatives, but rather include comprehensive examinations to make sure they are used properly.
8-03-2009 @ 11:38AM
Kyle Krol said...
Corruption??? Moles??? The Hidden TRUTH....
Jamie Dimon planted "moles" in Wamu??? JPMorgan committed corporate fraud???
http://www.kccllc.net/documents/0812229/0812229090501000000000002.pdf
Wamu's claims against JPMorgan/Chase;
http://wmish.com/doc/gov/0603/JPM_V_WMI_-_ANSWER.PDF
http://wamustory.com
wamuqd.com
wamu-shareholders-resources.com/wamued.html
wamuequity.org/history.html