Jamie Dimon, the exalted ruler of the giant banking trading firm, JPMorganChase (NYSE: JPM), commanding a hefty trillion dollars balance sheet -- including my small fortune as a depositor at the local Chase branch in New Jersey -- seemed to make a lot of sense when he went public the other day to reveal that the largest of the remaining Wall Street banks through his legendary world oversight had managed to create a massive $2 billion trading loss. That was the good news. The bad news: It could really be more. Soon they could be talking about real money.
In a rare misstep, the financial wizard Dimon explained his bank’s London office managed to make a wrong bet in creating derivatives. “The wounds are self-inflicted,’ the widely respected, iconic mastermind declared, absolving himself of guilt, “and this is not how we want to do business in the future.”
Like Louis Renault, I was shocked (shocked!) that there was gambling going on with my money, hard earned by charging me $12 (Overdraft Protection Fee) for every risky strategy I use kiting a check before the money is available, and all the other outrageous rising fees, which I now learn are going toward betting the farm on the future.
If only I had gone to a school of banking -- instead of studying art history and cultural anthropology, as important as was my specialty in early Zuni civilization, tracing how they went from hunting buffalo to waiting on customers in gift shops -- I might have a greater understanding of the computer models and other complexities of this bet gone awry.
Not necessarily. I might have wound up at a JP Morgan trading desk.
As I gather, though, the problem was they made what Jamie Dimon called a stupid mistake, exceedingly stupid because they were betting European bonds would rise, while countries like Spain, Portugal, and Greece were on the brink of depression.
Why, even I would know, without going to that school of banking, you’d be better off going to the racetrack than betting on those Eurozone ponies.
All you had to do was read the London financial papers, watch the Wall Street TV shows, or look at the BBC and you’d know the situation was dire. It wasn't a hidden secret. So why did these geniuses at JP Morgan, as the custodians of my money, think they could make such a goofy bet?
Apparently, the “mistaken” strategy was approved by those senior genius know-it-alls, the risk committee of the bank. I bet a number of folks blew this year’s bonus.
I would have liked to be a fly in the office the days they decided to buy ever more European bonds, on the premise they would go up in value: “Oh, what are those extra zeros doing here?”
I think the undisputed leader of the Wall Street banking world has to revamp hiring practices, and only hire people who are literate enough to read the financial pages.
My confidence in my friendly bankers at JP Morgan is badly shaken. I don’t care if they think of themselves as the Masters of the Financial Universe and their belief in the almighty derivative prevails. As my sainted mother told me, it’s impossible to predict the future of what will go up or down. Not even God can do that with any regularity.
By the time this is all over, I wouldn't be surprised if some people at my bank’s London branch will be taking early retirement.