This post follows previous posts on similar subjects on Insurance Claims and Issues Web Log on May 14, 2012 and on May 15, 2012, and on Insurance Claims and Bad Faith Law Blog on May 15, 2012.
When the Great Recession started, Wall Streeters said that they had no idea that loss could follow risk. They attempted to make us believe flimsy excuses along the lines of "Who knew?" Or, "It was a perfect storm," or "a black swan," something that is so far out of the realm of human experience that they just could not anticipate it.
They were wrong. We know now that not only did they anticipate it, they did not care so long as they made money for themselves.
Now we read recent newspaper reports that JPMorgan Chase has lost Billions of Dollars trading in credit derivatives, particularly Credit Default Swaps, the same instruments that nearly brought down the house or, more accurately, definitely brought on the Great Recession.
At first JPMorgan announced that its losses were $2 Billion. Now JPMorgan is announcing that the losses are $3 Billion, with more to come. And JPMorgan representatives are eerily echoing the false excuses of the first days of the Great Recession. 'Who knew?' 'No-one could have anticipated this loss,' and so on.
These things were not true in late 2007. They are not true in the Spring of 2012, either.
The office of JPMorgan from which the announced losses are originating is a huge clue. JPMorgan Chase turned its Risk Management office into a profit center. Anyone who looked at the fact that profits were being generated by Risk Managers should have known, in fact almost certainly did know, that something was glaringly, terribly wrong at Diamond Jamie's place. See Jessica Silver-Greenberg and Ben Protess, "Bank Regulators Under Scrutiny in JPMorgan Loss / Risk Was Played Down / No Overseers Assigned to Investment Unit That Lost Billions" p. A1, col. 6 (New York Times Nat'l ed., Saturday, May 26, 2012): "But JPMorgan's office, with a portfolio of nearly $400 billion, had become a profit center that made large bets and recorded $5 billion in profit over the three years through 2011."
Those who have eyes to see with, let them see, and ears to hear with, let them hear. It is not truthful to claim that you could not see something that was so unusual it had to have been seen, or that you could not hear what everyone else could hear including that there was a whole lot of shakin' goin' on at JPMorgan even before Billions of Dollars in losses arrived at the door.
P.S. on so-called regulation by the Wall Street-controlled OFFICE OF THE COMPTROLLER OF THE CURRENCY, which has jurisdiction over the activities in question at JPMorgan:
"The Office of the Comptroller of the Currency has also faced scrutiny about whether it is too cozy with the banks it oversees." Id.
Duh. What was your first clue?
Please Read The Disclaimer.
Comments