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To: ecrire who wrote (8590)5/10/2012 6:59:46 PM
From: SGJ
   of 13719
Lack of institutional control is probably the biggest risk right now for these megabanks. Too big to fail is also too big to manage.

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To: Brian Sullivan who wrote (8586)5/10/2012 7:01:48 PM
From: Keith Feral
1 Recommendation   of 13719

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To: Brian Sullivan who wrote (8588)5/10/2012 7:13:05 PM
From: Keith Feral
   of 13719
The guy would have been a genius if he were selling CDS products the past couple days - he should have waited for the sell in May to start selling CDS positions.

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To: ecrire who wrote (8590)5/10/2012 7:18:05 PM
From: John Koligman
   of 13719
Another reason we need strict government oversight of financial institutions. JPM and Dimon are 'supposed' to be the 'class act' in the banking group....


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To: ecrire who wrote (8590)5/10/2012 7:30:02 PM
From: Brian Sullivan
   of 13719
JPM Conference Call:

2:04 pm

Jamie Dimon has begun speaking.

J.P. Morgan is now forecasting an $800 million loss in the corporate segment in the second quarter.

J.P. Morgan has also decided that its "value-at-risk" model was inadequate and is going back to an older model.
Dimon says the strategy was "Flawed complex poorly reviewed poorly executed and poorly monitored."

From Dimon: "$2 billion trading loss on synthetic credit position."

Dimon calls trade: "flawed, complex, poorly reviewed."

Dimon calls it "sloppy" says "all appropriate" measures will be taken.

Dimon warns the bank could be facing $1 billion in losses on this.

Dimon says volatility will be high, will be risky for a couple of quarters.

Dimon says an incident like this is why you have a "fortress balance sheet." So that reference didn't take too long.

Dimon says capital positions under Basel III, the all important future rules, will fall to 8.2% of risk-weighted capital from 8.4%.

"These were egregious mistakes, they were self-inflicted."- Dimon

Dimon calls the mistakes "egregious" and "self inflicted" and takes blame as top management. "We will admit, we will learn from it, we will fix it and move on."

2:09 pm
Dimon is done speaking, will take a few questions.

Dimon: "Obviously we should have acted sooner."

Question: When did you catch it? When did you update regulators?

Dimon says there were "small" losses in the first quarter, and the $2 billion loss came in second quarter. "Obviously, that got our attention."

Dimon personally apologizes for meetings he had this week with analysts where he wasn't allowed to say anything.

Other banks are down in late trading also, while Dimon answers questions on the call. Goldman's down 2.6%, Morgan Stanley's down 3.5%, BofA's down 3.5%, Citi's down 3.4%, Wells is down 2%, AIG's down 2%.

CFO Doug Braunstein is apparently in the background of the call, though Dimon is handling mostly alone. Didn't even have an intro to this one.

JP Morgan, by the way, is down 5.2% at $38.61.

Dimon: "It could easily get worse this quarter" and next quarter could be volatile too. But says they won't update a lot.
    Dimon says that CIO has done a great job for a long while, but obviously this was a big mistake.

    Dimon officially apologizes to Guy Moszkowski of BofA. "I feel terrible" about meeting. Apparently the two had a chat this week.

    Question: why'd you have to do this synthetic credit in the first place?

    Dimon says original plan was to hedge the company in a "stress credit environment."

    In re-hedging, he says, they had a bad strategy, badly executed, that became too complex.

    Dimon says in response to a question that this shouldn't impact the bank's buyback or dividend policy.

    Dimon: "This doesn't violate the Volker Rule, but it violates the Dimon Principle"

    Moszkowski asks how easy it would be for JPM to exit this trade. Dimon declines answer.

    Question: Any Volcker ramifications?

    Dimon says the Volcker rule allows this kind of trading, but it violated the "Dimon principle."

    Dimon: "We acted a little too defensively" to press stories. (We'll take that as our apology, Jamie...)

    Question: was anybody else doing this kind of trade?

    Dimon says he doesn't know. "Just becase we were stupid doesn't mean everybody else was."

    Dimon: "I understand fully why you, or anyone else, would question us generally."

    Dimon says it is unfortunate that this will play into the hands of the supporters of the Volcker rule.

    2:25 pm

      Dimon might be getting more combative. Mike Mayo just asked him what, in hindsight, he should have watched more closely. "Trading losses," Dimon deadpans. Then adds "newspapers."

      Dimon: I am not sure how many times I can say this. It was a bad strategy, executed poorly.

      Dimon explains the CIO strategy's idea: "It has been on for a long time, it actually did quite was there to deliver a positive result in a credit-stressed environment."

      2:32 pm
      And Dimon has signed off.

      J.P. Morgan shares now down 6.5% to $38.05, showing Dimon apparently assuaged few, even with his honesty. Bank of America down 2.9%; Citigroup 3.9%; Goldman Sachs and Morgan Stanley off 2.8%.

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      To: Oblivious who wrote (8008)5/10/2012 7:47:50 PM
      From: Brian Sullivan
         of 13719
      Facebook IPO Said to Get Weaker-Than-Expected Demand
      By Serena Saitto, Jeffrey McCracken and Zijing Wu - May 10, 2012 4:24 PM PT

        Facebook Inc. (FB)’s initial public offering has so far generated lower-than-expected demand from institutional investors who are concerned about the company’s growth prospects, people with knowledge of the matter said.

        Some investors expressed reluctance after Facebook said on May 9 that advertising growth hasn’t kept pace with the increase in users, said the people, who asked not to be identified because the process is private. Facebook is also telling analysts that sales may not meet their most optimistic projections, two people said.

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        To: Brian Sullivan who wrote (8595)5/10/2012 8:00:10 PM
        From: John Koligman
           of 13719
        AIG's Cassano worked in their London office also. This sound familiar??? He has never been 'touched' in terms of any type of prosecution...

        The Man Who Crashed the World

        Almost a year after A.I.G.’s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what toppled the insurance giant. The author decides to ask the people involved—the silent, shell-shocked traders of the A.I.G. Financial Products unit—and finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the U.S. economy, and the global financial system to their knees.

        By Michael Lewis

        Joseph Cassano, former head of A.I.G.’s Financial Products unit, at London’s High Street Kensington subway station in June. From Bauer-Griffin.
        Six months ago, I received an odd phone call from a man named Jake DeSantis at A.I.G. Financial Products—the infamous unit of the doomed insurance company, staffed by expensively educated, highly paid traders, whose financial ineptitude is widely suspected of costing the U.S. taxpayer $182.5 billion and counting. At the time A.I.G. F.P.’s losses were reported, it became known that a handful of traders in this curious unit had sold trillions of dollars of credit-default swaps (essentially unregulated insurance policies) on piles of U.S. subprime mortgages, but its employees hadn’t yet become the leading examples of Wall Street greed. And so this was before Jake DeSantis and his colleagues found themselves suburban-Connecticut outcasts, before their first death threats, before the House of Representatives passed a bill because of them (taxing 90 percent of their large bonuses), before New York attorney general Andrew Cuomo announced he was going after their paychecks, and before Iowa senator Charles Grassley said that A.I.G.’s leaders should follow the Japanese example and “either do one of two things, resign or go commit suicide.”

        DeSantis turned out to be a friend of a friend. He’d called because he didn’t know anyone else “in the media.” As a type he was instantly recognizable: a “quant,” a numbers guy who was allowed to take financial risks because of his superior math skills, but who had no taste for company politics or public exposure. He’d grown up in the Midwest, the son of schoolteachers, and discovered Wall Street as a scholarship student at M.I.T. The previous seven years he’d spent running A.I.G. F.P.’s profitable stock-market-related trades. He wasn’t looking for me to write about him or about A.I.G. F.P. He just wanted to know why the public perception of what had happened inside his unit, and the larger company, was so different from the private perception of the people inside it, who actually knew what had happened.

        The idea that the employees of A.I.G. F.P. had conspired to maximize their short-term gains at the company’s longer-term expense, for instance. He and the other traders had been required to defer about half of their pay for years, and intertwine their long-term interests with their firm’s. The people who lost the most when A.I.G. F.P. went down were the employees of A.I.G. F.P.: DeSantis himself had just watched more than half of what he’d made over the previous nine years vanish. The incentive system at A.I.G. F.P., created in the mid-1990s, wasn’t the short-term-oriented racket that helped doom the Wall Street investment bank as we knew it. It was the very system that U.S. Treasury secretary Timothy Geithner, among others, had proposed as a solution to the problem of Wall Street pay.

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        To: Keith Feral who wrote (8593)5/10/2012 8:55:27 PM
        From: Elroy
           of 13719
        AGNC closes at an all time high. It has about six weeks until the next ex dividend date. I'll bet it gets up to $33 before then.

        It's at 1.1x book now, hard to see it going much above $33.

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        To: Keith Feral who wrote (8583)5/10/2012 9:32:45 PM
        From: robert b furman
           of 13719
        Hi Keith,

        I agree.

        An unneeded announcement from JPM on a Mark to mark loss and weaker guidance from Csco.

        Csco thinks that governments may not be such big buyers of gear with Austerity looming - now there is news.LOL

        Next week is options expiration.

        I wouldn't be surprised to see an island recersal recovering most of the opens loss with a lot of sideways whipping back and forth next week.

        May well be a time to buy,hold your nose and go fishing for a week.


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        To: ecrire who wrote (8590)5/10/2012 9:33:01 PM
        From: John Koligman
        1 Recommendation   of 13719
        Who are the worst rogue traders in history? From Jérôme Kerviel of Société Générale to Nick Leeson of Barings, we look at how unauthorised trading has cost major banks billions

        Alex Hawkes and Graeme Wearden, Thursday 15 September 2011 08.34 EDT

        Rogue trader Jérôme Kerviel was found guilty and sentenced to three years in prison. Photograph: Joel Saget/AFP/Getty Images

        Rogue traders are back in the headlines after UBS admitted on Thursday that "unauthorised trading" has cost the bank $2bn (£1.3bn).

        That may be enough to ensure UBS makes a loss for its third quarter, the bank said, but it will not top the list of the worst rogue traders in banking history.

        That title belongs to Jérôme Kerviel, who lost Société Générale a staggering £3.7bn in 2008.

        Société Générale – £3.7bn SocGen revealed in January 2008 that a rogue trader had lost the bank £3.7bn. The trader was swiftly named as Jérôme Kerviel, then 31 years old, who had been taking unauthorised positions on stock futures, the bank said.

        A subsequent court case suggested Kerviel had been betting €50bn of the bank's money on the trades. Kerviel said that the bank had turned a blind eye when his trades were turning a profit.

        Kerviel had worked in compliance, and bank bosses suggested he was adept at hiding his losses and bypassing checks.

        Kerviel was sentenced to three years in jail in October of last year, and told he must repay the money lost, a conviction which is currently subject to appeal.

        Coming in the midst of the banking crisis, the losses had surprisingly little impact on the market generally, with US losses from sub-prime mortgage lending dwarfing Kerviel's activities.

        Barings Bank – £827mThe most famous 'rogue trader' in history, Nick Leeson brought down one of the grandest names in British banking.

        Working in Barings' Singapore office, Leeson initially made large profits for the bank by dealing in derivatives and futures. But after running up losses, he hid his bad trades in a single account in 1992.

        These losses grew over several years, forcing him into a series of increasingly desperate but unsuccessful attempts to make the money back. Leeson finally fled in February 1995 after a bet that the Tokyo stock market would rise went badly wrong.

        Once the full scale of the losses became apparent, Barings was sold to Dutch bank ING for just £1.

        In the aftermath, Leeson's managers were criticised for giving him too much leeway. Crucially, he had been allowed to settle his own trades, letting him disguise his actions.

        In December 1995 Leeson was sentenced to six years imprisonment in Singapore, and was released in 1999. He subsequently ran Irish football club Galway United, and is now an after-dinner and conference speaker.

        Allied Irish Bank – £697mFriends and colleagues saw John Rusnak as a typical 'Mr Middle America', but the Baltimore-based trader was jailed after hiding trading losses of almost $700m (£355m).

        He was hired by Allfirst Financial, a division of Allied Irish Bank, in the mid-90s as a dealer on the foreign exchanges. Betting mainly on the Japanese yen, Rusnak used fictitious options contracts to hide his losses over several years.

        Some outsiders suspected that all was not well, with Goldman Sachs reportedly refusing to do business with Rusnak. But it took until 2002 before routine checks finally uncovered the true nature of the bank's exposure.

        By that stage, rather than sticking to his trading limit of $2.5m, Rusnak had secretly bet $7.5bn of AIB's money on the yen rising against the dollar.

        At his subsequent trial, prosecutors said he had created a false identity under the name David Russell and used an address in New York to send confirmations of false trades.

        Rusnak was jailed for seven-and-a-half years in a plea bargaining deal.

        Daiwa Bank – $1.1bnThe president of Japan's Daiwa Bank received a particularly nasty shock on 13 July 1995. Toshihide Iguchi, one of its senior US executives, confessed in a 30-page letter that he had lost $1.1bn through unauthorised bond trading.

        Like Leeson and Rusnak, Iguchi ran up the losses over several years. Having risen from the back offices to become a trader in 1984, a lack of segregation within his division meant he could hide his losses from his superiors while he tried, and failed, to trade back to profit.

        Following his confession, it emerged that he had conducted the cover-up for over a decade, falsifying some 30,000 trading slips.

        Having once been seen as the golden boy of the department, in 1996 he was jailed for four years and fined $2.6m.

        In court, he told the judge that his life was filled with guilt, fear and deception after 11 years trying to recover his losses.

        Interviewed in jail, Iguchi said he had seen his earlier actions as merely a violation of internal rules.

        "I think all traders have a tendency to fall into the same trap. You always have a way of recovering the loss", he told Time magazine.

        Daiwa was also penalised heavily. The Federal Reserve ordered it to end all of its operations in America, leading to a sale of most of its US assets in January 2006.

        Sumitomo Corporation – $2.6bnYasuo Hamanaka was jailed for eight years for fraud and forgery in 1997 after the one-time king of the copper market was found to have conducted rogue trading and fraud for more than a decade.

        At the height of his power, Hamanaka was said to control 5% of the global copper market. His off-the-book trades forced prices up and generated large profits for years, but ultimately cost Sumitomo $2.6bn when the scandal was uncovered.

        A year after his conviction, Sumitomo paid about $150m to settle claims from British and US regulators.

        In 1999, Merrill Lynch was fined a total of £16m for helping to finance a copper trading scandal. The London Metal Exchange said it had provided the finance to clients to undertake actions that it should have known was the basis of an attempt to manipulate the market

        Other major trading lossesAlthough actual fraud is rare, many other traders have run up huge losses simply through a bad call on the markets.

        These include Brian Hunter, an energy trader at hedge fund Amaranth. He had made large profits by speculating on natural gas prices, but ended up losing $6.6bn in 2006 after betting that the price of gas would rise. Unfortunately for him (but not for traders who took the opposite view), they plunged after a heatwave helped to slash the price of gas future contracts.

        And Morgan Stanley's oil trader David Redmond risked $10m in a frantic series of trades following a drink-fuelled lunch. Redmond managed to recover most of the losses the next day, but was still banned from the City.

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