JPMorgan Chase & Co. had an awkward moment recently when it bet its hedges instead of hedging its bets. This resulted in a $2 Billion loss, some management changes, and loss of CEO Jamie Dimon’s ability to lobby against Wall Street reform with a straight face.
“Over the last decade, the wealthiest Americans got richer by trading in the unregulated financial casinos on Wall Street.” — Senator Tom Harkin (D-IA).
“Once Congress deregulated the swaps market in 1999 it became a $600 trillion high-stakes casino for Wall Street to take big risks and bring our economy to the brink.”– Senator Maria Cantwell (D-WA).
” … without action, we’ll continue to see what amounts to highly-leveraged, loosely-monitored gambling in our financial system, putting taxpayers and the economy in jeopardy.” – President Barack Obama.
“Wall Street’s a casino, so maybe state gambling laws apply,” Les Blumenthal, McClatchy Newspapers. (See an opposing view here).
Goldman Sachs claims it didn’t know the housing market would collapse. That’s their story and they’re sticking to it.
There are indications it was otherwise. A 2007 email by Goldman’s Fabrice Tourre says the index used in trading subprime mortgage derivatives is “like Frankenstein” turning against its creators. Email from other execs outlines strategies for Goldman to make money betting against its own failing securities.
The firm released its own raft of emails as evidence of corporate ignorance and indecision. That should inspire confidence on The Street.
More:
“Goldman executives cheered housing market’s decline, newly released e-mails show,” Zachary A. Goldfarb, Washington Post.
Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com
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