Tuesday, May 15, 2012
You knew this would come out
The latest revelation in the Great JPM Hedge Failure is that there were warning signs that there was trouble ahead. Nevertheless the Big Fools said to push on.
In the years leading up to JPMorgan Chase’s $2 billion trading loss, risk managers and some senior investment bankers raised concerns that the bank was making increasingly large investments involving complex trades that were hard to understand. But even as the size of the bets climbed steadily, these former employees say, their concerns about the dangers were ignored or dismissed.But when all was said and done, the Imperial Dimon knew better, at least until his servants failed him.
An increased appetite for such trades had the approval of the upper echelons of the bank, including Jamie Dimon, the chief executive, current and former employees said.
Initially, this led to sharply higher investing profits, but they said it also contributed to the bank’s lowering its guard.
“There was a lopsided situation, between really risky positions and relatively weaker risk managers,” said a former trader with the chief investment office, the JPMorgan unit that suffered the recent loss. The trader and other former employees spoke on the condition of anonymity because of the nature of the investigations into the trading losses.
Instead, the bank maintains that the losses were largely the fault of the chief investment office. Overall tolerance for risky trading did not increase, current executives said, just the scale of the office’s activities because of the bank’s acquisition of Washington Mutual in 2008 and its more risky credit portfolio.
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Hey, if we had never heard about it, it wouldn't have happened Republican logic Q.E.D.
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