JP Morgan announces a $2 billion loss in the derivatives market. What may sound like everyday news from Wall Street actually gives us a glimpse into the bizarre world of the US banking cartel. JP Morgan manages derivatives that are twice the dollar value of the bank's entire capitalization, and the derivatives market itself, estimated at $700 trillion, is 10 times larger than the GDP of the planet Earth.
Major banks make incredibly huge gambles in this market with no fear of loss, because the government says they are too big to fail, so their losses are passed on to taxpayers. This $2 billion loss allows us to see the whole scam in just one event.
Wake Up America!
Ever wonder why getting a $200,000 mortgage in Kansas is so tough?
Because that is not where the biggest banks make their big money.
Yesterday’s news from JP Morgan Chase of a $2 billion trading loss makes clear how banks – those still too big to fail – make their real money.
The story of this $100 billion dollar bet by a shadowy trading
operation gone “egregiously” wrong, in the words of the firm’s CEO,
sounds very 2007/08.
A small unit of JP Morgan virtually no one knows called CIO was
placing huge derivative bets. These enormous bets were at twice the
risk the company said they were just a few weeks ago. (How very
AIG-like.)
The London-based JP Morgan trader implicated in this is nicknamed
”The Whale” or “Voldemort” from Harry Potter. The group he runs had
$350 billion of securities as of the end of last year, according to the
Wall Street Journal. That’s nearly twice the market cap of the bank
itself, the largest in the U.S. “Voldemort” reportedly made $100
million last year.
A few weeks ago his division’s bets caused such concern that The Wall
Street Journal had the story on its front page, noting how the trades
were making the debt market nervous. In reaction, CEO Jamie Dimon said
the worries were a “tempest in a teapot.”
This gets back to the topic no one wants to talk about, and possibly
no one understands. Synthetic derivatives – Credit Default Swaps.
There is a $700 trillion derivatives market, that is 10x larger
than the GDP of the planet earth. How is such a large market
possible? Just like “Voldemort” did not have the $100 billion he bet
with, there is no actual money to back this $700 trillion market.
No one we have spoken to over the years has explained how this is possible.
Which gets us back to where we began… JP Morgan has unlimited access
to virtually free money from the Fed… They could loan it out to the
middle class (of course they do some of that) but they can take that
free money and make huge, incomprehensible bets in the hopes of huge
profits – multimillion dollar bonuses and if it’s all just a house of
cards, it’s OK because they are too big to fail.
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