In his typical call-it-as-I-see-it, New York Times financial columnist Joe Nocera gives his two cents on the $2 billion plus trading loss at JPMorgan Chase. In an op-ed entitled “Make Banking Boring," Novera calls for smaller comps and a return to the days when bankers weren't addicted to risky derivatives trading.
We know that JPMorgan’s chief investment office, which had orchestrated the debt purchases, decided to hedge the entire portfolio by selling credit default swaps against a corporate bond index. You remember our old friends, credit default swaps, don’t you? Three years ago, they nearly brought down the financial world. Not content with its hedge, it then hedged against the hedge. It was all very complex, of course, and all done in the name of “risk management.”
He quotes a former FDIC head who said that banks have no business gambling with secured loans – and all this risky hedging belongs in a separate business away from lenders’ money.
“What banking most needs is to become boring, the way the business was before bankers became addicted to trading profits. But if that were to happen, Ina Drew wouldn’t make $14 million,” Nocera writes.
J.P. Morgan considers bonus clawbacks. [Bloomberg]
J.P. Morgan reshuffles trading group. [DealBook]
Macquarie of Australia, Principal Financial in the U.S. and United Overseas Bank of Singapore are among bidders for ING’s asset management business in Asia. [Reuters]
Ally will sell some international operations. [Reuters]
Morgan Stanley is taking its time assuming its stake in Smith Barney. [WSJ]
Carlyle’s Q1 profit slid 30 percent on lower fees and investment income. [WSJ]
Does the economy benefit from Wall Street? [Businessweek]