Quote: (05-14-2012 01:46 AM)porscheguy Wrote:
The problem here is what's called a "moral hazard." Michael Douglas talked about it in the second Wall Street movie. Even though the movie sucked, that little tidbit was informative.
A moral hazard is the tendency to take higher risks because the party taking the risk doesn't bear the costs. JPM took money in the past and they did pay it back. But they engaged in the same behavior again because they know that bailouts will be there in the future.
No, not remotely correct. The traders in London -- some of whom were making 8 figures -- thought they could make a shitload of money really really fast. These traders -- and I know some -- are among the most arrogant, self-assured Alphas (and that includes the women who do this kind of work) and are absolutely confident that nothing bad can happen to them.
The notion that they think "Ooops, that's OK, the Feds will back me up" is simply NOT the way they think.
Meanwhile, I will say it again, and I will it loud.
DESPITE THIS TRADE, CHASE WILL MAKE MONEY THIS QUARTER!!
And guess what? Chase is accepting the moral hazard of this trade, just like a company should.
By the way, I am going to buy more JP Morgan Chase stock today. It's a buying opportunity.
Quote: (05-14-2012 01:46 AM)porscheguy Wrote:
And the problem is compounded because the repeal of Glass-Steagal has allowed commercial banks to play the same high stakes poker as the investment banks. And they do it with your money whether you want them to or not. Yes, your money is insured, but only up to a point, and since the taxpayers(you) are the insurer, you you have to pay to cover the loss of your money. They put all the risk on you, while they reap the profits.
No, not remotely correct. I find it amusing when people say words to the effect, "If we repealed Glass Steagall, things would be much better."
Meanwhile, we forget that the dominoes that triggered the 2008 meltdown were driven by dedicated investment banks (Lehman, Bear Stearns) and insurance companies (AIG). Of course, banks were players in this realm, mostly Citibank and BofA, but it was the highly leveraged NON banks that lit the spark. And the fuel for the fire? CDO and CMOs package mostly by...you guessed it...investment banks.
So what did the Feds do? They MADE investment banks COMMERCIAL banks!!
Want a poster child example for the stupidity of government? Here ya go.
No, the talk about bringing back Glass Steagall is all process shit. Again, what we need to do is have regulations related to leverage AND most importantly, interconnectedness of transactions, so one guys toilet dump doesn't soil the whole system.