The Audacity of Institution
Banks are undoubtedly the most corrupt, unrestricted and fallacious institutions in all of the world! Jamie Dimon, Chairman and CEO of JP Morgan Chase, is a supporter of getting rid of the popular ideal coined ’Too Big to Fail’, by Andrew Ross Sorkin, New York Times reporter and columnist. The Chairman believes that it is in all involved parties best interest to allow banks to fail, file bankruptcy and subsequently dismantle. However, you may have learned by now that Mr. Dimon’s organization, JP Morgan Chase, is in a lot of public hot water right now. Why?
Good question. I’ll try to make this simple as it is laborious with jargon and bank-speak. Here’s the backdrop: Investment banks over the last 15 years or so have increasing been participating in what is called ‘proprietary trading’. Proprietary trading occurs when investment banks utilizes a part of itself to generate profits in the markets for its own accounts. Most people think of banks as the middlemen of finance – finding and connecting buyers and sellers. It has become more common for banks to risk more and more of their own money in the markets for proprietary gains. Can someone say “corporate greed”?
That doesn’t sound so bad actually, right? Wrong. In the past, partners of big bank would invest in stocks, bet the markets and lose THEIR OWN cash. Now, however, banks have become these megaliths of finance, merging with the smaller banks and offering stocks on the open market. Because of this, they are allowed to use YOUR money – yes, thats right. That $900 check you just deposited as a result of two weeks of mind-dulling, finger-cramping and back-breaking work is probably now being man-handled in an SPDR S&P 500 ETF fund!
Here’s why you should worry. This guy, Bruno Iksil, a London-based JP Morgan trader, believed himself to be this mastermind of a genius. Unleashed on the open market with approximately $350 billion of the banks funds, Mr. Iksil, a.k.a. Voldemort, went bat-shit crazy. He was able to use derivatives, or essentially, the assumed value of an asset (stocks, bonds, commodity or currency) to make bets on U.S. corporate bonds. He went all-out, accumulating at one point, nearly $100 billion in bet values. Voldemort failed to “hedge” his bets with credit default swaps, or CDS, which would have paid out money for defaulted credits. What was that? Oh, yea, you’re right; What an idiot.\
In the end, Voldemort lost the bank more than $2 billion and could stand to lose up to a billion more if the markets do not work in their favor. So, what did the CEO, Mr. Dimon have to say about this on Meet The Press this past Sunday? “We’re gonna make mistakes. I don’t like this attitude of let’s just blame everybody. Go find those who did wrong and punish them.” Well, Mr. Dimon, how about you lead the way in a show of leadership and fire those who did wrong instead of allowing marginally guilty parties such as Ina Drew, the company’s chief investment officer, to take the fall. Ina Drew worked her way up in that company for 30 years, struggling in a career that is dominated and regulated by men to become Wall Street’s most powerful woman. Now, because she was in charge of the department where the wrong-doing occurred, she has been outed…and inevitably, replaced with a man – Matt Zames.
Is it that bad, though? I mean, the guy (Iksil) could have been using payments from clients to fulfill bogus market gains to others, a.k.a. a Ponzi scheme. Iksil was simply doing what the bank paid him to do. His only fault could have easily been that he was doing it all too well. What do you think? Let me know your thoughts. In the meantime, next time some guy with a Main Street smile comes up to you and says, “Hi, my name is Bernie and I’d like to manage your portfolio”, its probably a safe bet to just say “no”.
Born in Atlanta, Georgia and raised in the small town of Anniston, Alabama, there’s no doubt that country living and sentiments still reside in Terencio Safford, Secret Laboratory’s managing editor.
He came a long way from his roots. He had a very unique childhood which allowed him to experience different cultures, religions and family values; this ultimately gave him a sense of awareness and acuteness that formulated his inspired outlook on life.
He graduated from Anniston High School in 2001 in Anniston, Alabama. He was recruited as a high school senior by the U.S. Army National Guard where he served two years as an Aircraft Electrician. After leaving the Army in 2002, Terencio migrated to Minnesota in 2003 in search of a better opportunity. He attended the Minnesota School of Business in Richfield studying Music Business before realizing that he wanted to pursue music as a hobby and not a career.
He has dedicated his time and talent to writing professionally. Terencio discovered his gift at an early age but pursued other talents and interests with the thoughts that writing was boring and time consuming! Now he finds pleasure and peace in formulating thoughts into creative treasures of literary prose!