Here we go again - banking crisis 2.0?

robskinner said:
You thinking about Leeson? The one who brought down Bearings
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toshj said:
Not especially - seeing how profitable and well-shored JP Morgan are. Trading losses happen all the time and aren't reported upon. Same with private equity and M&A deals that lose a fortune. It's part and parcel of investment banking. If this was to happen to La Caixa, Banca IMI or Straumur, then yes, it would add to the banking crisis, however a large institution such at JP Morgan can absorb such losses.
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Don't say I didn't tell you, get ready.
 
singularity said:
Don't say I didn't tell you, get ready.
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Lols.

I'm quite sure exposure to structured real estate assets has been significantly narrowed over the past few years, and the majority of the investment banks have made significant efforts to minimise their exposure to Greek, Portuguese, Spanish, Italian and Irish debt.

In fact, the majority of the banks' investment banking activity have returned to profit recently.

Of course, governments and economies may collapse in certain countries and have catastrophic effects on certain currencies, but this doesn't really have too much to do with JP Morgan making a loss on trading CDS...
 
toshj said:
Not especially - seeing how profitable and well-shored JP Morgan are. Trading losses happen all the time and aren't reported upon. Same with private equity and M&A deals that lose a fortune. It's part and parcel of investment banking. If this was to happen to La Caixa, Banca IMI or Straumur, then yes, it would add to the banking crisis, however a large institution such at JP Morgan can absorb such losses.
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Amazing how quickly people forget Lehman Brothers. Being big means you take bigger risks, which is fine unless things go wrong, and profitable companies can still go bankrupt. I hope you're right about JP Morgan, but their CEO's comments about "more to come" are concerning to say the least.
 
toshj said:
Lols.

I'm quite sure exposure to structured real estate assets has been significantly narrowed over the past few years, and the majority of the investment banks have made significant efforts to minimise their exposure to Greek, Portuguese, Spanish, Italian and Irish debt.

In fact, the majority of the banks' investment banking activity have returned to profit recently.

Of course, governments and economies may collapse in certain countries and have catastrophic effects on certain currencies, but this doesn't really have too much to do with JP Morgan making a loss on trading CDS...
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No it's worse and been transferred to sovereign etc

Get ready, those who are not paying attention will lose out, for most it is way too late anyway,


If you can't see it coming, you must be living in a cave.
 
scorza said:
Amazing how quickly people forget Lehman Brothers. Being big means you take bigger risks, which is fine unless things go wrong, and profitable companies can still go bankrupt. I hope you're right about JP Morgan, but their CEO's comments about "more to come" are concerning to say the least.
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I'd regard his comments about more to come being down to how badly this situation was handled in the press last week. They were overly defensive, verging on abrasive, and served to do no good whatsoever.

JP Morgan are a far bigger institution than Lehman Brothers were, as Lehman were one of the few remaining true investment banks, and had so little to fall back on when their liquidity dried up. JP Morgan are absolutely huge, and similarly to the likes of Citigroup or HSBC, can quite easily absorb those loses.

Obviously when the CDS contracts expire there will certainly be a dip in the market, but again it was nothing like the CDS products being traded on Lehman names. Ironically, given the focus on high yield and distressed debt sincve 2008, the Lehman, Icelandic and other similar distressed assets have allowed certain non-banks (brokers, hedge funds/credit opportunity funds, and other boutiques) to create wholly profitable businesses and therefore creating jobs and revenue streams for hundreds of people!
 
toshj said:
I'd regard his comments about more to come being down to how badly this situation was handled in the press last week. They were overly defensive, verging on abrasive, and served to do no good whatsoever.

JP Morgan are a far bigger institution than Lehman Brothers were, as Lehman were one of the few remaining true investment banks, and had so little to fall back on when their liquidity dried up. JP Morgan are absolutely huge, and similarly to the likes of Citigroup or HSBC, can quite easily absorb those loses.

Obviously when the CDS contracts expire there will certainly be a dip in the market, but again it was nothing like the CDS products being traded on Lehman names. Ironically, given the focus on high yield and distressed debt sincve 2008, the Lehman, Icelandic and other similar distressed assets have allowed certain non-banks (brokers, hedge funds/credit opportunity funds, and other boutiques) to create wholly profitable businesses and therefore creating jobs and revenue streams for hundreds of people!
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Didn't Citigroup have to be bailed out by the US government? and indeed Bank of America. That's the problem with companies like JP Morgan, they are too big to fail and therefore need to be broken up or regulated.

http://www.bbc.co.uk/news/business-18039744

JP Morgan's credit rating has been downgraded by Fitch's as a result of this loss. The SEC has launched an investigation in JP Morgan's accounting practices also.
 
singularity said:
Tbh, it's too complex to explain here, safe to say, the uk is toast though along with a lot of Europe.
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scorza said:
Didn't Citigroup have to be bailed out by the US government? and indeed Bank of America. That's the problem with companies like JP Morgan, they are too big to fail and therefore need to be broken up or regulated.

http://www.bbc.co.uk/news/business-18039744

JP Morgan's credit rating has been downgraded by Fitch's as a result of this loss. The SEC has launched an investigation in JP Morgan's accounting practices also.
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Yes, Citigroup were bailed out - bad example for me to use, however if their loss was $2bio then they certainly wouldn't have to be bailed out. Additionally, Citi were caught up in the massive fallout of an underlying asset failing, as were the rest of the investment banks. They certainly weren't caught out due to a single traders efforts within the CDS market. They're two very different activities.

Don't get me wrong, I'm certainly not saying that these types of trading losses are acceptable or dismissable, I'm simply saying that referring to a one off trading loss of $2bn is very different to the collapse of the entire structured credit or structured real estate market.
 
Skull said:
Yes in between writing his 10,000 posts he's a VP at Goldman Sachs so of course he knows.

Anyway, a quick glance at the figures for JP Morgan

Revenue US$ 89.660 billion (2011)[2]
Operating income US$ 26.749 billion (2011)[2]
Net income US$ 18.976 billion (2011)[2]
Total assets US$ 2.265 trillion (2011)[2]
Total equity US$ 183.573 billion (2011)[2]

shows that whilst $2bn is clearly a hefty chunk of cash, it won't "break the bank", as it were.

Banking crisis 2.no
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Fantastic post. Really posts the numbers in context.
 
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