Jp Morgan Chase Mess

Here We Go Again

In today's society, we live amid concerns of greed, "fairness", work ethic, entitlement, and classes of financial standing. Have these concerns just recently appeared or are they issues that have been around for years if not ages? Even in the Bible Christ had to answer questions about providing for the needy and taking care of those "less fortunate". While he did say that "you shall have the poor with us always" and admonished those more fortunate to tend to those needs, he also stated "if you do not work neither shall you eat".

Probably not more than this most recent decade, have there been more questions and debates about the fairness and equality of how wealth is distributed. It doesn't matter if you believe that everyone should just throw their money in a pool and distribute it among everyone regardless of contribution to society, or you think that each person is entitled to what they have earned and worked hard for, you would be hard pressed to find anyone who would argue that the most recent debates and problems of today comes from poor management and irresponsible handling of monies that are entrusted to big banks for depositors safekeeping.

With the history of banking institutions, whether we are talking about the savings and loan crisis and bailout of the 1980's, which prompted more governmental oversight, or if we are looking at the subprime mortgage crisis of which we are still seeing problems stemming today with record foreclosures, it can all be traced back to lack of fiscal responsibility as well as just down right poor decision making, management and lack of internal oversight. Many would argue that included in this is greed. I would argue that it really comes down to trying to please shareholders above all other stakeholders.

For instance, all we have to do is look at the most recent debacle with the huge loss of depositor's money and mishandling of those funds with a loss to the tune of $2 billion dollars. Yes "B" billion. Just recently, JPMorgan Chase admitted to "stupidity and poor decision making" as the reasons for the loss of funds that were arguably not theirs to invest, in a manner that assumed so much risk.

So just exactly what did JPMorgan Chase do that was so bad? What did JPMorgan actually do? As far as we can tell, it used the market for derivatives -- complex financial instruments -- to make a huge bet on the safety of corporate debt, something like the bets that banks made on housing debt a few years ago spoke about earlier in this paper with subprime lending. The key point is not that the bet went bad; it is that institutions playing a key role in the financial system have no business making such bets, least of all when those institutions are backed by taxpayer guarantees. Depositors place their hard earned income in the banks as a means of safekeeping.