Jamie Dimon, the exalted ruler of the giant banking trading firm, JPMorganChase (NYSE: JPM),
commanding a hefty trillion dollars balance sheet -- including my small
fortune as a depositor at the local Chase branch in New Jersey --
seemed to make a lot of sense when he went public the other day to
reveal that the largest of the remaining Wall Street banks through his
legendary world oversight had managed to create a massive $2 billion
trading loss. That was the good news. The bad news: It could really be
more. Soon they could be talking about real money.
In a rare misstep, the financial wizard Dimon explained his
bank’s London office managed to make a wrong bet in creating
derivatives. “The wounds are self-inflicted,’ the widely respected,
iconic mastermind declared, absolving himself of guilt, “and this is not
how we want to do business in the future.”
Like Louis Renault, I was shocked (shocked!)
that there was gambling going on with my money, hard earned by charging
me $12 (Overdraft Protection Fee) for every risky strategy I use kiting
a check before the money is available, and all the other outrageous
rising fees, which I now learn are going toward betting the farm on the
If only I had gone to a school of banking -- instead of studying
art history and cultural anthropology, as important as was my specialty
in early Zuni civilization, tracing how they went from hunting buffalo
to waiting on customers in gift shops -- I might have a greater
understanding of the computer models and other complexities of this bet
Not necessarily. I might have wound up at a JP Morgan trading desk.
As I gather, though, the problem was they made what Jamie Dimon
called a stupid mistake, exceedingly stupid because they were betting
European bonds would rise, while countries like Spain, Portugal, and
Greece were on the brink of depression.
Why, even I would know, without going to that school of banking,
you’d be better off going to the racetrack than betting on those
All you had to do was read the London financial papers, watch the
Wall Street TV shows, or look at the BBC and you’d know the situation
was dire. It wasn't a hidden secret. So why did these geniuses at JP
Morgan, as the custodians of my money, think they could make such a
Apparently, the “mistaken” strategy was approved by those senior
genius know-it-alls, the risk committee of the bank. I bet a number of
folks blew this year’s bonus.
I would have liked to be a fly in the office the days they decided to
buy ever more European bonds, on the premise they would go up in value:
“Oh, what are those extra zeros doing here?”
I think the undisputed leader of the Wall Street banking world has
to revamp hiring practices, and only hire people who are literate enough
to read the financial pages.
My confidence in my friendly bankers at JP Morgan is badly shaken. I
don’t care if they think of themselves as the Masters of the Financial
Universe and their belief in the almighty derivative prevails. As my
sainted mother told me, it’s impossible to predict the future of what
will go up or down. Not even God can do that with any regularity.
By the time this is all over, I wouldn't be surprised if some people
at my bank’s London branch will be taking early retirement.