The big headline today is still JPMorgan Chase and it’s huge trading losses. Clearly this is a black eye for JPM but the question goes to what longer term consequences the incident will have. I could see JPM taking a more defensive stance like Goldman has done in the past. But, JPMorgan head Janie Dimon he has been out over and over owning up to the mistake and inviting regulators to look over the books. If you want to save your job, that’s really the best tack to take on this one. I think Dimon has built up enough of a reputation as a good leader that he is safe for now.
The real question goes to damage to the franchise and bank regulation in the US. Since Dimon has been unrepentant in lobbying for regulatory loopholes, likely this will have a very ugly backlash on the industry. Lawmakers have no choice but to show they mean business in the face of the biggest too-big-to-fail bank lobbyist making such an egregious error. So my sense is that the Volcker rule will be tougher than it might otherwise be. Moreover, JP Morgan Chase may well be neutered on its lobbying efforts for some time to come given the prominence of this slip up.
In my view, this is one further reason not to own large bank stocks. Small banks that stick to the bread and butter of lending to business and individuals and taking depositis have a lot less regulatory and legal overhang and have also been forced to take more writedowns than the big banks. That means there are likely to be fewer negative surprises going forward that holds them in good stead vis-a-vis JPM, GS, WFC, C or any of the other big banks.
That’s it. Here are the links.
Ex-Yahoo Chief Told Board He Has Cancer – WSJ.com
Dimon Fortress Breached as Push From Hedging to Betting Blows Up – Bloomberg
World edges closer to deflationary slump as money contracts in China – Telegraph
Más sobre Bankia-BFA — Nada es Gratis
Spanish banks to face new scrutiny as fears rise | Business | The Guardian
Eduardo Saverin renounces US citizenship ahead of Facebook IPO | Technology | guardian.co.uk
FT Alphaville » JPMorgan, a Fitch ratings harpooning [update: now S&P]
BBC News – HSBC sells South American units to Banco GNB Sudameris
Schaeuble Says Greek Exit Wouldn’t Bring Down Europe – Bloomberg
China economy shows unexpected signs of weakness | Reuters
Banks prepare for the return of the drachma | Reuters
Neil Barofksy on JPMorgan Trading Loss, Regulation | The Big Picture
Why it’s time for higher interest rates – The Term Sheet: Fortune’s deals blog Term Sheet
JP Morgan Debacle Reveals Fatal Flaw In Federal Reserve Thinking | The Baseline Scenario
El Gobierno aprueba una drástica limpieza del crédito del ladrillo | Economía | EL PAÍS
Don’t Ignore The ‘Fiscal Cliff’ – Comstock Partners
German Attitude Toward Barack Obama’s Healthcare Reform – SPIEGEL ONLINE
JPMorgan has trading loss of at least $2 billion, reputation hit | Reuters
Dimon dismisses ‘London whale’ fears
‘London Whale’ Rattles Debt Market – WSJ.com
JPMorgan’s London Whale Could Use New Nickname – Bloomberg
Joe Weisenthal vs. the 24-Hour News Cycle – NYTimes.com
FT Alphaville » JPMorgan: whale harpooned
Man Steals His Bike Back From The Guy Who Stole It From Him – The Consumerist
Facebook IPO: Company Has a Valuation Problem, Skeptic Says – MarketBeat – WSJ