This article puts a human face on the $2 billion trading loss at JP Morgan. Top management got warnings from internal risk managers but they were ignored. The risk manager in London was replaced by the head of the investment unit that was making the trades after he became alarmed by the risks. The takeover of Washington Mutual during the financial crisis was also a factor. JP Morgan inherited toxic securities issued by Washington Mutual that were losing value and affecting JP Morgan's performance. Top management was encouraged to take more risky bets in order to cover the losses from Washington Mutual securities.
The NY Fed is responsible for supervising JP Morgan. It was asleep at the wheel, just as it was prior to the financial crisis. Jamie Dimon, JP Morgan's CEO, is on the board of directors of the NY Fed. He was very close to Timothy Geithner, who is now the US Secretary of The Treasury, when he was the President of the NY Federal Reserve. It is pretty clear that the Fed is unable to supervise risk at the Wall Street banks.
No comments:
Post a Comment