NYT: J P Morgan Sought Loophole on Risky Trading!

Old_Skeet

The Loophole … Portfolio Hedging vs. Security Hedging has become the issue as portfolio hedging still leaves wide room for the proprietary trading desk to operate. And, the Volcker Rule was first designed to restrict this type activity and limit it to security hedging only ... but, it seems "some how" a modification or an interpretation took place that would allow for portfolio hedging in addition to the other.

According to the article, J P Morgan's take was to allow for portfolio hedging. Seems Congress will now have to revist this to see if this is so.

The article is linked below for those that wish to read how J P Morgan hoodwinked Congress.

http://www.nytimes.com/2012/05/12/business/jpmorgan-chase-fought-rule-on-risky-trading.html?_r=1&partner=rss&emc=rss

Have a good weekend.

Skeeter

Old_Skeet

More on the subject ... The Big Picture: Understanding J P Morgan's Loss, and Why More Might Be Coming by James Bianco. It's linked below.

http://www.ritholtz.com/blog/2012/05/understanding-j-p-morgans-loss-and-why-more-might-be-coming/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+TheBigPicture+(The+Big+Picture)

Notice in the comments of the link ... Is this a make MF Global whole move? Just get it done move. Makes one wonder ... Does it not?

Skeeter

Sven

Excellent article. As more details surfaced leading to the $2 bilion loss, JPM apparently is NOT hedging for risk management. Please see Bloomberg interview below.

http://www.bloomberg.com/video/92465009/

Wonder what is more to come next? Clearly, the current embodiment of Dodd-Frank specifically allows hedging and market-making transactions.

Hogan

No matter what Congress does anything short of restoring Glass-Stegall will be eroded by the banks lobbying Congress. Think about it every year both chambers and the president need to comprimise. More or less each body gets to have 1/3 of its wish list and each year the banks can walk into the leadership offices of the leaders of Congress and demand little nuggets that reduce their tax burden or regulations every single year--it doesn't matter about party either--they will always be in the mix--that is just the way it is. Let's say congress enacts stringent clawbacks--slowly methodically their lobbyists will in that final Congressional comprimise each year erode the clawbacks to such an an extent that taxpayers are again subsidizing the banks risks while the management of the banks get to walk away from their junk they dumped on the taxpayers and the heirs don't have to work for 3 or 4 generations.

We need a solid wall with no room for interpretation for a return of Glass-Stegall or stringent clawbacks that can survive a withering assault from lobbyists.

Sven

Reply to @Hogan: I couldn't agree more. Here is an informative interview with Peter Coy and Steve Bilitz on current bank regulations and Dodd-Frank Act. Restoring Glass-Stegall Act is unlikely. What Sheila Bair (former chairwoman FDIC chairman) proposed to split up the trading arm from the banking arm make most sense in order the depositors are protected from the risky trading activity. The end result will be ... going from "too big to fail" to "too small to care" if they blow themselves up.

http://www.bloomberg.com/video/92516179/

Will Congress has the spine to stand up to the lobbyists?

Old_Skeet

Reply to @Skeeter:

A third post with more on the subject from Zerohedge ...

http://www.zerohedge.com/news/guest-post-can-banking-regulation-prevent-stupidity?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+zerohedge/feed+(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+zero)

and, another ...

http://www.zerohedge.com/news/what-was-not-said-during-jamie-dimons-media-pr-campaign?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+zerohedge/feed+(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+zero)

Skeeter