http://krugman.blogs.nytimes.com/2012/05/19/no-systemic-issues-here/
No Systemic Issues Here
No way, no how:
But of course, the fact that these risks are being taken by a too-big-to-fail institution, whose failure would cause a global crisis, which would therefore inevitably be bailed out if it got in big trouble, and which benefits from taxpayer-backed deposit insurance, is no cause for concern. None at all."
The unit at the centre of JPMorgan Chase’s $2bn trading loss has built up positions totalling more than $100bn in asset-backed securities and structured products – the complex, risky bonds at the centre of the financial crisis in 2008.Among other things, it appears to have taken more than half of the residential mortgage-backed securities issued in Britain over the past three years.
These holdings are in addition to those in credit derivatives which led to the losses and have mired the bank in regulatory investigations and criticism.
The unit, the chief investment office (CIO), has been the biggest buyer of European mortgage-backed bonds and other complex debt securities such as collateralised loan obligations in all markets for three years, more than a dozen senior traders and credit experts have told the Financial Times.
But of course, the fact that these risks are being taken by a too-big-to-fail institution, whose failure would cause a global crisis, which would therefore inevitably be bailed out if it got in big trouble, and which benefits from taxpayer-backed deposit insurance, is no cause for concern. None at all."
The link is to the Financial Times. A pay wall.
5/20/12
Telegraph:
Cracks are appearing in Europe's state-backed lenders
20 May 2012
| 129 Comments German pay deal offers eurozone hope
20 May 2012
| 12 Comments Multinationals sweep euros from accounts on daily basis
20 May 2012
| 96 Comments Pro-bailout parties could win majority in Greek elections
20 May 2012
| 15 Comments Greeks withdraw savings in national 'bank jog'
20 May 2012
| 1 Comment The most pro-European thing to do now is reject the euro
Those readers who have been berating me for years for even considering the possibility of a country leaving the euro have recently fallen silent. (You know who you are.)20 May 2012
| 73 Comments Obama: Europe must focus on jobs
US President Barack Obama, wrapping up the G8 summit hosted at Camp David, says the euro zone crisis is threatening the world economy, but welcomes Europe's new focus on jobs and growth as a potential remedy.20 May 2012
Osborne: rich eurozone nations must do more
The wealthiest eurozone nations must support the weaker, indebted nations such as Greece and Portugal or face the prospect of the currency union breaking up, the Chancellor has warned.20 May 2012
| 362 Comments France's Hollande to set out eurobond plans at summit
French President Francois Hollande said he will make proposals for eurobonds at an upcoming European summit as he outlined his ideas help ailing economies within the eurozone at the G8 summit.20 May 2012
| 29 Comments G8 Summit: World leaders push for Greece to stay in the eurozone
World leaders have thrown their weight behind Greece staying in the eurozone after a day of crisis talks at the G8 summit in Camp David.Guardian:
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Gallery (8 pictures), 20 May 2012: The meeting at Camp David wrapped up on Saturday, but it was not all hard work for the leaders. There was time for birthday cake, and the leaders watched the Bayern Munich v Chelsea final together
- 20 May 2012: There are four weeks to go before the Greek elections – and, it seems, even longer to wait before a German change of heart on bailing out lenders. But fearful markets, and hard-pressed electorates, may not be patient much longer 29 comments
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20 May 2012: William Keegan: The vast imbalances in trade, and yawning gaps in competitiveness, between European states will continue to cause problems whether they share a single currency or not 27 comments
- 20 May 2012: From France to Greece and Italy, voters are turning their backs on the old guard and austerity politics in favour of a new generation
29 comments - 20 May 2012: Andrew Rawnsley: Other leaders are being hypocritical when they shove all the responsibility for the euro crisis on to Angela Merkel
386 comments -
19 May 2012: US and France succeed in putting promotion of growth at top of communique despite Germany's resistance to stimulus package
- 19 May 2012: Barack Obama and David Cameron want German chancellor Angela Merkel to set out a clear path forward for Europe
http://www.nytimes.com/2012/05/21/world/europe/greek-crisis-poses-hard-choices-for-western-leaders.html?pagewanted=1&_r=1&hp
Lots of opinion. No facts.
http://www.nytimes.com/2012/05/21/opinion/dimons-deja-vu-debacle.html?ref=todayspaper
"Sometimes it’s hard to explain why we need strong financial regulation — especially in an era saturated with pro-business, pro-market propaganda. So we should always be grateful when someone makes the case for regulation more compelling and easier to understand. And this week, that means offering a special shout-out to two men: Jamie Dimon and Mitt Romney.
I’ll come back shortly to the troubles at JPMorgan Chase, the bank Mr. Dimon runs. First, however, let me talk about Mr. Romney, whose remarks about those troubles were so off-point that they constitute a teachable moment.
Here’s what the presumptive Republican presidential nominee said about JPMorgan’s $2 billion loss (which may actually have been $3 billion, or $5 billion, or more, but who’s counting?): “This was a loss to shareholders and owners of JPMorgan and that’s the way America works. Some people experienced a loss in this case because of a bad decision. By the way, there was someone who made a gain.”
What’s wrong with this statement? Well, suppose that someone — say, Jimmy Stewart in the movie “It’s a Wonderful Life” — runs a bank that takes in deposits and invests the money in various ways. And suppose that one of those investments is a risky bet on some complex financial instrument, with Mr. Potter, the evil plutocrat, on the other side.
If Jimmy Stewart’s bet pays off, we’re in Romneyworld: he’s made money, Mr. Potter has lost money, and that’s that. But suppose Jimmy Stewart loses his bet. If the bet was big enough, he no longer has enough assets to pay off his depositors. His bank collapses, probably in a chaotic bank run that takes down the whole town’s economy as collateral damage. Mr. Potter makes money on the deal, but so what?
The point is that it’s not O.K. for banks to take the kinds of risks that are acceptable for individuals, because when banks take on too much risk they put the whole economy in jeopardy — unless they can count on being bailed out. And the prospect of such bailouts, of course, only strengthens the case that banks shouldn’t be allowed to run wild, since they are in effect gambling with taxpayers’ money.
Incidentally, how is it possible that Mr. Romney doesn’t understand all of this? His whole candidacy is based on the claim that his experience at extracting money from troubled businesses means that he’ll know how to run the economy — yet whenever he talks about economic policy, he comes across as completely clueless.
Anyway, it goes without saying that Jamie Dimon is no Jimmy Stewart. But he has, in a way, been playing Jimmy Stewart on TV, posing as a responsible banker who knows how to manage risk — and therefore the point man in Wall Street’s fight to block any tightening of regulations despite the immense damage deregulated banks have already inflicted on our economy. Trust us, Mr. Dimon has in effect been saying, we’ve got this covered and it won’t happen again.
Now the truth is coming out. That multibillion-dollar loss wasn’t an isolated event; it was an accident waiting to happen. For even as Mr. Dimon was giving speeches about responsible banking, his own institution was heaping on the risk. “The unit at the center of JPMorgan’s $2 billion trading loss,” reports The Financial Times, “has built up positions totaling more than $100 billion in asset-backed securities and structured products — the complex, risky bonds at the center of the financial crisis in 2008. These holdings are in addition to those in credit derivatives which led to the losses.”
And what was going on as these positions were being accumulated? According to a fascinating report in Sunday’s Times, the reality behind JPMorgan’s facade of competence was a scene all too reminiscent of the behavior that brought down firms like A.I.G. in 2008: arrogant executives shouting down anyone who tried to question their activities, top management that didn’t ask questions as long as the money kept rolling in. It really is déjà vu all over again.
The point, again, is that an institution like JPMorgan — a too-big-to-fail bank, not to mention a bank whose deposits are already guaranteed by U.S. taxpayers — shouldn’t be engaged in this kind of speculative investment at all. And that’s why we need a return to much stronger financial regulation, stronger even than the Dodd-Frank regulations passed back in 2010.
Will we get that kind of regulation? Not if Mr. Romney wins, obviously; he wants to repeal Dodd-Frank, and in general has made it clear that he would do everything in his power to set us up for another financial crisis. Even if President Obama is re-elected, getting the kind of regulation we need will be an uphill struggle. But as Mr. Dimon’s debacle has just demonstrated, that struggle remains as necessary as ever."
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Greek Crisis Poses Unwanted Choices for Western Leaders
section A - page 10
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