Comments on: JPMorgan may tip Wall Street’s hand on ploys to beat Volcker Mon, 31 Oct 2016 15:40:16 +0000 hourly 1 By: kafantaris Mon, 14 May 2012 18:15:59 +0000 The derivative hedging game played by JPMorgan Chase is no different than that played by AIG in 2008.
Yet, Jamie Dimon tells us that Chase had merely “made a terrible, egregious mistake.”
He might as well have said that Chase was wrong in raising in a game of poker, when it would have been more prudent and folded. But why was Chase busy gambling in the first place — right after our economic meltdown, and while fighting government regulation?
One answer is because Chase could bear the gambling losses.
That’s right. With $2 trillion at hand, Chase can yawn when $3 billion goes down the tube.
Nonetheless, Dimon tells us that he sees no problem with the government dismantling big failing banks. This is nice to know because the government should start dismantling big banks before they fail — and before they have another chance to take us down with them.
The important lesson then from this Chase episode is not that stringent regulations are needed to reign in on derivatives, but that banks big enough to take huge hits standing up are ripe enough for us to chop down to size.