JPM Was Speculating with $350 Billion of Other Peoples Money
The worst revelation about JP Morgan is that it was using $350 billion of its customer deposits, insured by Uncle Sam, to speculate in illiquid credit default swap indexes-- that may or may not have been part of a hedging operation that may or may not be outlawed by the Dodd-Frank legislation/ The next worst revelation was the misrepresentations of the extent of the bank's losses from January to May, 2012. I imagine the FBI will be trying to pin that act of fudging the numbers on someone, perhaps Ms. Ina Drew, who blamed the whole infernal mess on traders in London who, like herself, are no longer employed by JPM.( the Senate report found a work sheet showing that over 5 days a loss of over $400 million was avoided) The next eyebrow raising revelation was the cavalier manner in which the bank's risk control standards were violated several hundred times while the $6.2 billion losses was being run up. Okay, the market saw the whole thing as no more than " a tempest in a teapot." The loss of $6.2 billion was a mere 2% of the $350 billion in the Corporate Investment Account. The Synthetic Credit Portfolio of over $150 billion in early 2012 was a mere smidgeon of the bank's normal overall derivatives book that in nominal terms is valued on the books at some many tens of trillions of dollars. Yes, many trillions quite dwarfs the outrage over the loss of $6.2 billion. Lastly, there's the matter of JPM common shares, which before Friday's drop, had risen higher than the peak price set in October, 2007. It's quite difficult to see the government bringing any criminal case against the House of Morgan-- after Attorney General Holder clearly ruled out such a move against any major bank in the interests of avoiding another 2008 meltdown. More likely is a civil action brought by the SEC involving a quite sizable fine-- without obligation of fessing up to breaking the law. That's the way America works.