This week, J.P. Morgan Chase stunned the financial world by announcing a $2.3 billion loss on derivative trading, derivative trading being one of the major financial instruments that set-off the near global financial meltdown in 2008-09. Worse yet, J.P. Morgan didn't disclose this loss until weeks after it had begun. And even worse, this morning (5/20/12) The Wall Street Journal disclosed J.P. Morgan Chase's derivative index exposure is $100 billion!
As J.P. Morgan Chase is one of the world's biggest financial firms, and called "to big to fail" by the U.S. government, this is huge exposure for U.S. taxpayers. And worse yet, as global banking giants are intertwined in their business dealings, one huge failure could potentially take them all down, as we saw nearly happened when Lehman Bros. went bankrupt in 2008.
To solve this problem, the U.S. government passed the Dodd-Frank Wall Street Reform Act. But that Act became toothless when banking industry lobbyists finished with it, as J.P. Morgan Chase just demonstrated. J.P. Morgan Chase's actions or that of its giant competitors could easily threaten the global financial system as happened in 2008-09, showing us how little we've actually done to protect ourselves from another potential global financial meltdown.
J.P. Morgan Chase did us all a favor by showing us we desperately need regulation over the financial markets, and timely public disclosure with that regulation. During the Great Depression of the 1930's, in response to the collapse of 1929, the U.S. government found the courage to regulate Wall Street and it must find that courage again today.
Dick
To learn more, please see "J.P. Morgan Struggles To Unwind Huge Bets," The Wall Street Journal http://online.wsj.com/article/SB10001424052702303879604577412613778263918.html
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