Libor rate-fixing scandal spotlight now on Citi, JPMorgan [TheRawStory]

NEW YORK — The harsh light of the Libor rate-fixing scandal has crossed the Atlantic, with both Citigroup and JPMorgan Chase saying regulators and investigators have requested information from them in a so-far preliminary probe of the case.

Share prices for both — as well as Bank of America, which has not said if it was asked for information — have fallen sharply this week amid worries they could be in line for the type of heavy fines laid on Britain’s Barclays Bank, at the center of the scandal.

wallstreet.shutterstock

Barclays has been fined $452 million (360 million euros) by British and US regulators for attempted manipulation of the markets for Libor and Eurobor benchmark interest rates between 2005 and 2009.

Three top Barclays executives have resigned and on Friday Britain’s Serious Fraud Office said it would formally investigate the case, which has dented London’s reputation as a top financial center.

But speculation runs to other banks because the Libor rate is set based on information from 16 international banks, and many think that manipulating it would take more than one bank.

The issue affects not just banks but commercial and retail borrowers around the world — in the United States, the payments of a floating rate home mortgage loan are often tied to the Libor base rate.

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Keiser Report [E309] – JP Morgan’s $9 Billion Problem

JPMorgan, Goldman Shut Europe Money Funds After ECB Cut [Bloomberg]

JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. and BlackRock Inc. (BLK) closed European money market funds to new investments after the European Central Bank lowered deposit rates to zero.

JPMorgan, the world’s biggest provider of money-market funds, won’t accept new cash in five euro-denominated money- market and liquidity funds because the rate cut may result in losses for investors, the company said in a notice to shareholders. Goldman Sachs won’t accept new money in its GS Euro Government Liquid Reserves Fund, and BlackRock, the world’s largest asset manager, is restricting deposits in two European funds.

ECB President Mario Draghi

 

“The European market environment is in unchartered territory with such historically low — or even negative — yields for high-quality issuance,” Goldman Sachs (GS) said in a memo to fund shareholders, citing the ECB’s rate cut. “It is not currently feasible for our portfolio managers to deploy capital without substantially diluting the yield for the existing base of shareholders.”

The ECB yesterday reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero. Money funds have been struggling to invest client assets at a profit asinterest rates globally are near record lows and Europe’s sovereign debt crisis has reduced the supply of available debt. Managers have been forced to cut fees to keep customer returns above zero, and some have abandoned the business.

All three firms said the restrictions are temporary and they will monitor market conditions. Investor redemptions from the funds are not being limited.

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Judge Orders JPMorgan to Explain Withholding Emails $JPM [CNBC]

A U.S. judge has ordered JPMorgan Chase to explain why the court should not force the bank to turn over 25 internal emails demanded as part of an investigation into whether it manipulated electricity markets in California and the Midwest.

The Federal Energy Regulatory Commission (FERC) filed a petition in federal court in Washington on Monday asking the court to order the bank to show cause as to why it would not comply with a subpoena issued by the commission as part of its investigation into the bank’s power trading.

On Thursday, U.S. District Judge Colleen Kollar-Kotelly gave the bank until July 13 to submit an explanation as to why the court should not enforce FERC’s subpoenas. JPMorgan has asserted the emails are protected by the attorney-client privilege.

Gavel

 

 

 

 

 

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Jim Rogers, War and the Financial Mafia – LIBOR, Centrals Banks and JP Morgan

JPMorgan Complicit In Vatican Bank Money-Laundering: Jamie Dimon Seeks Time Alone With Pope To “Confess”

Embroiled in another financial scandal pertaining to the laundering of money, the Vatican bank has been called by Forbe’s “the most secret bank in the world” and faces international scrutiny in its highly secretive banking model.  Although details are limited to the public, it is clear that the Vatican bank is facing pressure from Italian and European officials over its innerworkings.  In short, the bank has laundered billions of dollars. It has had help of course, in the deeply interwoven network of high finance, and none other than US bank JPMorgan abetted highly suspicious transactions, although the bank has yet to be accused of laundering itself. Though, this is a no-brainer considering the accounts the bank hosted for the Vatican.

This part of the story begins when Gottii Tedeschi, now former head of Vatican bank, was relieved when four men waiting for him in the street while he was on his way to work were not hit men. They were investigators with the Carabinieri, Italy’s national military police force. Before he had reached his car, they had served him a search warrant. They escorted him back to his house, where they for many hours searched through his home office. Simultaneously, the military police force was searching through Gotti Tedeschi’s office in Milan. They confiscated two computers, two cabinets’ full of binders, a planner and his briefcase. The documents confiscated from Gotti Tadeschi, who was once a confidant of the pope, “provided Italian law-enforcement officials insight into the innermost workings of the Vatican bank.” According to Germany’s Der Spiegel:

The secret dossier includes references to anonymous numbered accounts and questionable transactions as well as written and electronic communications reportedly showing how Church banking officials circumvented European regulations aimed at combating money-laundering.

Tedeschi came under pressure from high-level Vatican officials for his running of the Vatican bank. He was pushing a model more transparent than the Vatican establishment could allow. In short, he upset powerful forces within the Roman Curia, the Vatican’s administrative and judicial apparatus. Where fore?

The bank, officially called the Institute for Works of Religion (IOR), has functioned for centuries as a trust company “for clandestine monetary transactions.” The bank is not only used by the Church, but also the mafia, corrupt politicians and transnational corporations. One of Tedeschi’s seized memos purportedly reads: “I’ve seen things in the Vatican that scare me.”

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JPMorgan Trading Loss May Reach $9 Billion [NYT]

Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation.

 

Jamie Dimon, chief executive of JPMorgan Chase, discussed the trading losses last week before the House Financial Services Committee.

When Jamie Dimon, the bank’s chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.

The bank’s exit from its money-losing trade is happening faster than many expected. JPMorgan previously said it hoped to clear its position by early next year; now it is already out of more than half of the trade and may be completely free this year.

As JPMorgan has moved rapidly to unwind the position — its most volatile assets in particular — internal models at the bank have recently projected losses of as much as $9 billion. In April, the bank generated an internal report that showed that the losses, assuming worst-case conditions, could reach $8 billion to $9 billion, according to a person who reviewed the report.

With much of the most volatile slice of the position sold, however, regulators are unsure how deep the reported losses will eventually be. Some expect that the red ink will not exceed $6 billion to $7 billion.

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JP Morgan: Every Cloud Has a Silver Lining [community.nasdaq]

By Martin Tillier

Jamie Dimon, the CEO of JP Morgan Chase was recently called to testify on Capitol Hill regarding a declared $2 Billion loss on a “hedge” placed by a trader in London. Congress’s favorite Wall Street banker was given an easy ride by the Senators, but details of the loss tarnished the “squeaky clean” reputation of JP Morgan for many people. This is something potential silver investors should take note of.

There have long been rumors in the market that JP Morgan had a huge short position in silver. Many people believed that they were doing everything in their power to keep the price down to protect their position. Simply Google  “JP Morgan + silver” for thousands of results. Those who denied this persistent rumor pointed to the reputation of the firm as more conservative and better behaved than the other Wall Street banks. We all know how that has played out.

Whether the rumors are true or not, and they likely are, JP Morgan’s troubles will have a positive effect on the price of silver. If they are true, the firm, in the light of increased scrutiny, will have to begin to unwind their position. They cannot afford another story about excessive risk. At the very least, they will have to stop holding the market down. They benefit enormously from being Washington’s favorite, but politicians of all stripes will change favorites faster than a 5 year old in the playground if improper manipulation of the silver market is shown to have happened.

Read more: http://community.nasdaq.com/News/2012-06/jp-morgan-every-cloud-has-a-silver-lining.aspx?storyid=149869#ixzz1yzz5HpEV

 

JP Morgan Managers Being Told Trade Loss is $9 Billion [Teri Buhl]

Banking competitors are trying to lure away top talent at JP Morgan by highlighting the recent prop trading losses are likely to affect bonues and Jamie Dimon isn’t being honest about how bad the loss will be. On July 13th the banking giant will announce 2nd quarter earnings and a real-time number is expected on how many billions net income gets wacked with because the London whale trade has been wound down. Last week Mark DeCambre at the New York Post wrote his JPM sources expect the loss to be between $4-6 billion – JPM’s estimate in May was only $2bn. But I heard this week JPM managing directors are being told it’s more. To the tune of $9 billion – Ouch!

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Senators Grovel, Embarrass Themselves at Dimon Hearing [RollingStone]

From http://www.rollingstone.com

I was unable to watch J.P. Morgan Chase CEO Jamie Dimon’s Senate testimony live the other day, so I had to get up yesterday morning and check it out on the Banking Committee’s web site. I had an inkling, from the generally slavish news reports about the hearing that started to come out Wednesday night, that it would be a hard thing to watch.

But I wasn’t prepared for just how bad it was. If not for Oregon’s Jeff Merkley, who was the only senator who understood the importance of taking the right tone with Dimon, the hearing would have been a total fiasco. Most of the rest of the senators not only supplicated before the blowdried banker like love-struck schoolgirls or hotel bellhops, they also almost all revealed themselves to be total ignoramuses with no grasp of the material they were supposed to be investigating.

That most of them had absolutely no conception of even the basics of the derivatives market was obvious. But what was even more amazing was that several of them had serious trouble even reading aloud the questions their more learned staffers prepared for them. Many seemed to be reading their own questions for the first time.

It would be one thing if this had been a bunch of hick congressmen from the plains asking a panel of MIT professors about, say, ozone depletion, or the potential dangers of nuclear fallout. But these were members of the Senate Banking Committee, asking Dimon questions as though he were an alien from another world: “Tell us, Mr. CEO, what is this ‘derivative trading’ to which you refer? How long has it been in use on your planet?” The whole tenor of the proceeding was incredibly embarrassing, and showed just how unlikely it is that you’ll ever get anything like real questioning in a Senate hearing when a) the level of general expertise among the members is so shamefully low, and b) the witness is a man who controls millions of dollars of campaign contributions.

The senators could have used the hearing as an opportunity to grill Dimon in detail about the entire history of the Chief Investment Office, the unit of Chase that recently copped to unexpected multibillion-dollar derivative trading losses. This was an opportunity to show Americans how a too-big-to-fail commercial bank like Chase – supported by vast amounts of public treasure, from Fed loans to bailouts to less obvious subsidies like GSE purchases of mortgages and implicit guarantees of bank debt – uses the crutch of government support to gamble recklessly in search of huge profits, with the public on the hook for any potential downside.

 

jamie dimon
Read more: http://www.rollingstone.com/politics/blogs/taibblog/senators-grovel-embarrass-themselves-at-dimon-hearing-20120615#ixzz1y86ghw00

Jamie Diamond Is Not Alone

Dimon To Ackerman: “We Don’t Gamble. Gamblers Lose” [Zerohedge]

In a somewhat inspired line of questioning by Rep. Gary Ackerman on the differences between ‘investing’ and ‘gambling’, the JPMorgan CEO diligently notes that “on average Gamblers lose” implicitly stating, we assume, that ‘investors on average win’. Ackerman interestingly takes up the common myth that banks (and Wall Street in general) were ‘on the level’ and ‘facilitated investing’ but to him the ‘hedges’ that JPM (among others) are placing are nothing but gambling as he correctly notes the dismal truth that banks are not in fact there for the common good in “helping jobs and being good for America”. Betting against your initial bet suggests a lack of ‘knowing what you are doing’ is how Ackerman frames his concerns, and furthermore (as we pointed out), hedging against your hedge just makes the whole thing farcical as if “throwing darts at a dartboard” and in the process does not help the economy or create one job. The main thrust being that: if JPM is right a majority of the time it helps the company, but if they are wrong it puts systemically everything at risk – the public investing confidence in the system (an unhedgeable risk).

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Chris Whalen: Will Jamie Dimon Tell the Truth, Because He Hasn’t Done So Yet [jessescrossroadscafe]

From JESSE’S CAFÉ AMÉRICAIN

“Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of plutocracy.”

John Pierpont Morgan

Oh you must mean the vaporized money…

Chris Whalen makes some interesting observations and cuts to the heart of the matter, although he sometimes falls into the morality of the income statement.

The reactions of the CNBC spokesmodels and Andrew Ross Sorkin are worth watching.

Still I give them credit for having these sorts of discussions at CNBC, as compared to Bloomberg TV which has become an extended, often arrogantly frivolous, infomercial bordering on propaganda for the one percent. At least the print version of Bloomberg maintains solid journalistic standards.

It is interesting that the argument keeps coming back to the defense that Wall Street firms ‘write off big losses all the time.’

It is not so much the size of the balance sheet, but rather the leverage and risks that are stacked against those assets, and the likely outcomes of cascading losses in a deeply intertwined financial system.

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Ahead Of Tomorrow’s Dimon Hearing, Presenting JP Morgan’s 93.5% Historical Winning Trade Perfection [Zerohedge]

From http://www.zerohedge.com

We are just about 16 hours away from Jamie Dimon’s sworn testimony before the Senate Banking Committee, which even has the theatrical name: “A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?” Will anyone learn anything? Of course not: Jamie Dimon has been well-schooled in not disclosing critical trading information, and will certainly use the “proprietary position” and “more shareholder losses” excuse for any directed question asking how big the JPM CIO loss has become. Because while the hearing could have been productive, if indeed its purpose was to seek to prevent future massive losses of scale such as the suffered by the JPM prop trading unit and its hundreds of billions in CDS notional position, the last thing anyone will care about tomorrow is market efficiency and actual regulation. First and foremost: grandstanding and posturing, in the case of the politicians, and not disclosing anything, without saying too many “I don’t recall”s in the case of Dimon. Which is why we have little hope to get anything out of tomorrow’s formulaic 2 hours of largely meaningless droning. That said, considering we have already covered the topic of the JPM loss from a mechanistic standpoint more than any other media outlet, there is one more chart we would like to share with readers.

The reason for this chart was predicated by a small note in the latest WSJ article on who knew what and when (which came out at just the same time as the Bloomberg piece – as if the JPM CIO leaks can’t decide who to dump information to so does it to both BBG and the WSJ), in which it is said that in “2010, another bad trade caught the attention of a senior finance executive who notified top J.P. Morgan executives. Joseph Bonocore, then chief financial officer of the CIO, became concerned when London-based traders lost about $300 million in a few days on a foreign exchange-options trade, without any offsetting gains to balance out the losses.

We decided to go back to the firm’s 2010 filings and see what it had disclosed about its losses based on trading days reporting.

Here is what JPM reported publicly:

  • Q1 2010: zero days with any trading losses; 64 profitable trading days
  • Q2 2010: 8 trading loss days; 57 profitable days; of which the worst were 2 losses between $100-$120 MM
  • Q3 2010: zero days with any trading losses; 66 profitable trading days
  • Q4 2010: 5 trading loss days; 61 profitable days; of which worst was 1 loss day between $80-$100MM

Most importantly, in JPM’s own words: “During 2010, losses were sustained on 13 days, none of which exceeded the VaR measure.” Recall that this is the fudged VaR, which upon the discovery of the Iksil trade, had to be massively adjusted upward having been found to be completely meaningless and to exclude all CIO positions.

We wonder: was the CIO responsible for all of these losses, and more importantly, is the abovementioned loss captured in any of the JPM public reports? And if not, why not? More importantly, can someone explain how it is possible that a firm that over the past 9 quarters has disclosed a total of 41 days on which it has lost money trading, and 546 days on which it was profitable,or a 93.5% win rate of the total 587 days in the past 2 years and 1 quarter.

All this is shown in the chart below:

To borrow a phrase from Taleb: was JPM’s now mega-loss merely the non-scalable outlier event that occurs when a firm has an artificially impossible winning ratio, and uses complexity to mask the fact that it is in fact merely accumluating losses which have to be booked eventually?

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Jamie Dimon May Come Out Swinging Tomorrow, But His Fast Ball Isn’t What It Was [Angrybear]

“Which Jamie Dimon will appear before the Senate Banking Committee in Washington on Wednesday?” asks Reuters BreakingViews columnist Rob Cox in a Slate piece.  “The self-effacing JPMorgan boss offering apologies for his bank losing at least $2 billion on bum trades?,” he asks? “Or the combative JPMorgan leader who just a year ago publicly challenged the chairman of the Federal Reserve over regulation?”
Cox recommends the latter, which is why the piece is titled “Jamie Dimon Should Come Out Swinging in the Senate.”  He worries that “a mealy submission from Dimon may help effectively nationalize the American banking industry for good.”  He asks us to “[c]onsider the implicit message the senators who called Dimon before them are sending: that banks must answer to the nation for any losses they incur – and that watchdogs and regulations should somehow be able to prevent them.”
I did. This required me to consider his claim that a mealy submission from Dimon may help effectively nationalize the American banking industry for good (meaning “permanently,” not “beneficially”).  He’s saying that the reinstatement of the Glass-Steagall statute or a meaningful implementation of the Volker Rule—separating investment banking from retail banking and barring federally-insured banks from speculating with depositors’ money (which is what JPMorgan did)—would amount to nationalization of the American banking industry.  And he’s saying that a law capping the size of federally-insured banks would do that.

Jon Corzine And George Zimmerman Should Have A Lot In Common…

 From truthingold

To be a “sophisticate” in the 21st century requires the same ability that has been required in almost all the previous ones. It requires the ability to shut one’s eyes and one’s mind to anything one does not want to see or think about. The more glaring the contradiction between what is said and what is done becomes, the harder it is to remain sophisticated. The tragedy here is that the only alternative – that of becoming independent – is looked upon as more terrifying than to go on pretending to be deaf, dumb and blind. One has to be all three to maintain the ridiculous notion that the Fed can “save” the system it has destroyed.  - Bill Buckler, The Privateer

Is anyone besides me disgusted with all of the focus in the media on the queen Elizabeth thing going on in Britain?  I mean, why should anyone in this country give a rat’s ass?  It’s a meaningless, ceremonial position in a country that has become largely irrelevant on the world scene, other than to help our Government manipulate markets and maintain a highly leveraged, fraudulent monetary and banking system.  It’s not coincidental that JP Morgan had its CIO derivatives unit set up in London (see below).

I’ll tell you why Americans care.  Read the above quote.  It’s a distraction.  “People need something to make themselves feel good.”  Right.  Feel good about what?  That some person deemed “royal” by lineage gets to sponge off the public wealth (confiscated and taxed)?  The only thing a distraction does is keep the public from focusing on the fact that the people in control of the system are robbing and pillaging the public, holding the system up long enough to take what they can while the public remains “distracted.”  Taking your mind off a problem doesn’t fix it.  And the longer the problem goes unfixed, the worse it will be when it really hits hard…

Let’s take a look at a couple ways in which the elitists are robbing the public blindly, while the public focuses on “distractions.”

MF Global – Jon Corzine and all of the MF Global management should be in a jail cell sitting next George Zimmerman (I’m sure everyone knows who that is, as its an example of a “distraction”) awaiting arraignment.  But Corzine is running around raising more campaign money for Obama.   Despite headlines yesterday which announced that MF Global bankruptcy trustee James Giddens “might” file charges against Corzine, this article was posted on Marketwatch which suggested that Corzine would likely get away with his fraud:  LINK

Not only is Corzine guilty, the entire upper management knew that the firm was going to hit the wall way before it starting illegally using customer funds to keep MF alive:  “Facing pressure last summer to increase its capital cushion, MF Global moved some of its risky European debt holdings to an unregulated entity in an effort to avoid having to raise the extra money.”  LINK  Someone really want to try and tell me with a straight face that Corzine didn’t know exactly what was going on with customer funds?

Here’s one that should piss everyone off.  The Government/FHA is introducing a new FHA mortgage refinance program – using taxpayer money of course – to incentivize homeowners to refinance their existing mortgage into one that carries much lower mortgage insurance fees.  And guess what?  This refi program is a no-income, no employment verification and it’s okay to be under water program:  “The new lender is not required to verify homeowner’s income, employment or credit score. And no appraisal is required, so the homeowner can be underwater.”  LINK

France McKenna on Trustee Reports for MF Global and JP Morgan’s Pinto Problem!

MF Global Lawsuit Puts Pressure on JP Morgan: Bullish Signs for Silver As COMEX Re-hypothecation Exposed? [SilverVigilante]

From http://silvervigilante.com

 

 

Mainstream pundits are doing what they can to cover for JP Morgan & Chase. Over recent weeks, in an attempt to make JP Morgan appear as the good guy in the MF Global theft, reports that the bank has returned client funds, which would be certain to contribute to the banks collateral problems, have circulated the web. But, would JP Morgan & Chase, a bank that has historically displayed a well-developed instinct for self-preservation, make things right with anything other than negligible amounts of money? Probably not. And, in light of this, the bank could be facing further legal action against it. This legal action could be bring to light the banks unconscionable position in the silver market as it comes to light the bank inherited gold and silver from MF Global after customer accounts were settled in cash and closed out at, basically, the market price of MF Global and JPMorgan’s choosing.

James Giddens, the trustee liquidating MF Global’s broker-dealer unit, has published a 275-285 page report in which he stated he might bring civil claims against former CEO Corzine and other top MF Global executives for negligence and breach of duties to customers.

Giddens also stated he was prepared to sue JPMorgan Chase, if he and the bank could not settle within 60 days claims that the bank played a role in the disappearance of customer funds.

The potential MF Global lawsuit presented by Giddens will presumably argue that Jon Corzine and other executives at the global investment house failed to make the company’s liquidity crunch known, thus helping foment the conditions that led to the company’s collapse.

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JPMorgan Faces $4.2 Billion Trading Loss, ISI Forecasts

JPMorgan Chase & Co. (JPM), the largest U.S. bank, may report a $4.2 billion second-quarter trading loss in its chief investment office, according to an estimate by International Strategy & Investment Group Inc.

The pretax loss would help cut second-quarter earnings to 65 cents a share, a 30 percent decline from an earlier estimate of 93 cents, Ed Najarian, an ISI analyst, said in a note yesterday. Weaker-than-expected trading and investment banking revenue coupled with mark-to-market private-equity losses will also weigh on results, Najarian said.

JPMorgan Chief Executive Officer Jamie Dimon, 56, said last month the firm lost about $2 billion on trades conducted at its CIO unit, which is charged with managing the bank’s idle cash to earn a profit while minimizing risk. Dimon has said losses could grow and it might take the rest of the year to liquidate the New York-based lender’s trades.

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JPMorgan’s Other Messy Problem: MF Global’s Missing Money [Forbes]

As the nation’s largest bank by assets JPMorgan Chase is bound to have its share of legal troubles but recently it’s been party to some of the ugliest accusations.

NEW YORK, NY - MAY 14:  Flowers stand in front...

The most recent of JPM’s legal troubles are related to its massive trading loss of more than $2  billion. The loss has resulted in a number of lawsuits filed by employees and shareholders; even a probe by the FBI.

Today though a more complex legal issue resurfaced for JPMorgan. The trustee for the failed brokerage firm MF Global released a 285-page report about that firm’s bankruptcy, and it isn’t pretty. James Giddens says the former CEO, Jon Corzine, along with his executives may face legal claims for breach of fiduciary duty when they used customer money to fund a growing liquidity crisis.

To date, there is roughly $1.6 billion in missing client money at MF Global.

What does any of that have to do with JPMorgan Chase? It served as MF Global’s clearing bank. In fact, it was the agent for approximately $5.7 billion in securities lending transactions for MF Global, and in the final days of MF Global it was the recipient of some client money, according to the trustee’s report.

JPMorgan has not replied to a request for comment about today’s report.

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CME fines JPMorgan for wash trades in oil, gasoline [Chicago Tribune]

JPMorgan Chase & Co. executed wash trades on 10 separate occasions in U.S. crude oil and gasoline futures in the first half of last year, the operator of theNew York Mercantile Exchange (NYMEX) said in a disciplinary notice on Friday.

 

JPM lawsuit
Wash trades involve having the same dealer on opposite sides of the same trade, essentially selling to yourself, and are banned under exchange rules.

CME Group, which operates NYMEX, ordered JPMorgan to pay a fine of $30,000. One of the JPMorgan traders, Ebele Emelumadu, was fined a further $10,000.

The $30,000 fine, equivalent to just over one millionth of JPMorgan’s total employee compensation last year of $29 billion, comes as the bank’s trading practices are already under the spotlight after the now-infamous ‘London Whale’ racked up huge losses for the firm.

Excessive speculation and energy price manipulation are also hot political topics during this U.S. election year. The U.S. Commodity Futures Trading Commission (CFTC) is bringing in tighter position limits to try and curb the impact of individual firms on oil and other commodity prices.

“On 10 separate occasions between January 1, 2011, and June 30, 2011, in an effort to manage position limits, traders employed by JPM executed block trades between separate legal entities with the same beneficial owner in WTI or Gasoline,” the notice said, referring to West Texas Intermediate (WTI), the main U.S. crude oil futures contract.

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Jamie Dimon And The Fall Of Nations [baselinescenario.com]

From baselinescenario.com

Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” by Daron Acemoglu and James Robinson, is a brilliant and sometimes breathtaking survey of country-level governance over history and around the world. Professors Acemoglu and Robinson discern a simple pattern – when elites are held in check, typically by effective legal mechanisms, everyone else in society does much better and sustained economic growth becomes possible. But powerful people – kings, barons, industrialists, bankers – work long and hard to relax the constraints on their actions. And when they succeed, the effects are not just redistribution toward themselves but also an undermining of economic growth and often a tearing at the fabric of society. (I’ve worked with the authors on related issues, but I was not involved in writing the book.)

The historical evidence is overwhelming. Many societies have done well for a while – until powerful people get out of hand. This is an easy pattern to see at a distance and in other cultures. It is typically much harder to recognize when your own society now has an elite less subject to effective constraints and more able to exert power in an abusive fashion. And given the long history of strong institutions in the United States, it appears particularly difficult for some people to acknowledge that we have serious governance issues that need to be addressed.

The governance issue of the season is Jamie Dimon’s seat on the board of the Federal Reserve Bank of New York. Mr. Dimon is the chief executive of JPMorgan Chase, currently the largest bank in the United States. This bank is “too big to fail” – meaning that if it were to get into difficulties, substantial financial support would be provided by the Federal Reserve System (and perhaps other parts of government) to prevent it from collapsing.

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JPMorgan CIO swaps pricing said to differ from bank’s: report [Reuters]

(Reuters) – The JPMorgan Chase & Co (JPM.N) unit responsible for $2 billion in losses on credit derivatives valued some of its trades at prices that differed from those of its parent investment bank, Bloomberg News reported.

The two different pricing tracks used by the chief investment office and J.P. Morgan’s credit-swaps dealer may have obscured by hundreds of millions of dollars the size of the loss before it was disclosed earlier this month, the Bloomberg News report said, citing a person familiar with the matter.

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Margin Call? JP Morgan Sells $25 Billion in Securities to Offset Derivatives Losses [silverdoctors.com]

In what CNBC calls ‘a stupid decision‘, JP Morgan has reportedly sold $25 billion in profitable bonds and securities to offset trading losses from its IG9 derivatives crisis.

If it was merely an effort to prop up earnings for JPM’s Q2 report we would agree, but this is more likely JP Morgan LIQUIDATING CAPITAL TO MEET MASSIVE MARGIN CALLS OVER ITS ESCALATING INTEREST RATE SWAP LOSSES, which we have discussed are reportedly close to $100 Billion.   Bankers are not fools, throwing good money after bad.  If JPM sold $25 billion in profitable positions, it is because IT WAS FORCED TO.

JPMorgan Chase has sold an estimated $25 billion of profitable securities in an effort to prop up earnings after suffering trading losses tied to the bank’s now-infamous “London Whale,” compounding the cost of those trades.

Chief Executive Jamie Dimon earlier this month said the bank sold corporate bonds and other securities, pocketing $1 billion in gains that will help offset more than $2 billion in losses.

As a result, the bank will not have to report as big an earnings hit for the second quarter.

The sales of profitable securities from elsewhere in the bank’s investment portfolio will increase its costs by triggering taxes on the gains and by eliminating future earnings from the securities.

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JPM Max Pain At 6 Month Highs [Zerohedge]

While we can argue over which exact position Iksil and his crew had on, the widening in IG9 10Y spreads post-Dimon signals an unwind of epic proportions continues. It seems the mainstream media has grown tired of discussing skews, basis, curves, tranches, and tail-risk but for those who care about the reality that JPMorgan faces – we note that the credit index most closely tied to the CIO’s office debacle continues to push wider.

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