Friday, May 11, 2012

Jamie Dimon Misrepresented “London Whale” Risks, Admits to $2+ Billion Loss Plus Risk Management Black Eye

Jamie Dimon Misrepresented “London Whale” Risks, Admits to $2+ Billion Loss Plus Risk Management Black Eye


Jamie Dimon Misrepresented “London Whale” Risks, Admits to $2+ Billion Loss Plus Risk Management Black Eye

As readers likely know by now, Jamie Dimon hastily arranged an after hours conference call today, in which he admitted to $2 billion in losses in the last six weeks from a trade by the “London Whale”, Bruno Michel Iksil in the bank’s Chief Investment Office, with as much as another potential $1 billion in losses in the offing. The position was a hedge involving credit default swaps, a product in which the firm has touted its expertise (a recent display occurring in a Frontline program we shredded).
Bloomberg reported on the story in early April, noting that Iskil’s postions were so large that he was driving prices. This is generally a sign of a basic failure in risk management. You never want to take a bet too large in a market if you might want or need to exit quickly, and highly leveraged firms in general are not in a great position to ride out adverse price moves, even if they believe the trade will work out in the end. This same mistake felled LTCM and Amaranth. Even more telling, Dimon made clear this trade was not a hot idea to begin with, repeatedly calling it poorly conceived, poorly executed, and not sufficiently monitored (update: Felix Salmon says he believe the trade was a cash-basis trade).
So much for JP Morgan’s vaunted risk acumen. As we’ve noted, one of the big reasons it wasn’t as badly hit in the crisis was that it took big CDS losses in 2005 on the Delphi bankruptcy (yes this is a rumor, but it is as pretty widespread rumor, and the sources are credible). The bank got cautious just as the subprime market was entering its toxic phase. So JP Morgan may have dodged the bullet at least in part by getting a wake-up call earlier than its peers.
But other issues seems even more important. First is that Dimon consistently misrepresented the seriousness of the exposures as soon as the press was onto it. Both Bloomberg and the Wall Street Journal were digging, and Dimon was dismissive, calling the concerns a “tempest in a teapot”. JPM shares are down over 5% in aftermarket trading. The CEO misled investors, but no one seems to care much about niceties like accurate and timely disclosure these days. This is the disclosure in the first quarter 10Q:

Wednesday, May 9, 2012

Chase bank faking it?

May 7, 2012 Here is great story from foreclosure defense nationwide regarding chase bank, link to story is below article. The nonsense and outright lies perpetrated by the banks just keeps getting more and more unbelieveable. This latest example is laughable out loud. Numerous homeowners around the United States have been sending us correspondence from Chase Home Finance (which merged into JPMorgan Chase some time ago) and attorneys representing Chase stating that “Chase is committed to helping homeowners remain in their homes”. These letters have been sent in connection with threatened foreclosure proceedings, and with information as to (purported) loan modification through HUD. The result is disturbingly the same: the “offer” from Chase is a loan “modification” where the new payment is larger than the monthly payment sought to be reduced by modification. As Chase has actual knowledge that the homeowner cannot even make the current monthly payment, Chase is obviously intentionally setting up the homeowner for a loan modification “offer” which Chase knows must be declined as economically impossible. To add insult to the injury, the Chase loan mod program is known as “Once and Done”, meaning that if a loan mod offer is rejected that Chase will not make any further loan modification efforts, and will commence foreclosure proceedings. Chase also has a record, as do other banks, of claiming that a trial mod payment was “not received timely” resulting in a default being declared when in fact the homeowner has proof that the payment was received timely if not before the due date. Again, more evidence of Chase’s intentional manufacturing of fraudulent defaults for the purpose of furthering fraudulent foreclosures. So there you have it: if you don’t agree to pay Chase more money which Chase knows up front that you cannot afford, there is no loan mod, and you proceed to foreclosure. Obviously this is Chase’s intended result, purposefully structured so that it can tell the Government that “well, we attempted to work with the homeowner, but the homeowner rejected our offer…”, knowing full well that the alleged “modification” was not made in good faith and knowing what the only consequence will be. More “good public relations” from Chase and Mr. Dimon. Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com http://foreclosuredefensenationwide.com/?p=438