With the New York Times reporting that JP Morgan Chase’s losses may reach $9 billion, we asked out Zintro experts what issues may be behind this debacle.
Rex Danford, a consultant in strategic, capital, and marketing functions, says that this incident illustrates how investment and trading practices have grow increasingly complex without comparable growth in management tools and techniques. “Bank management requires more sophisticated and automated monitor and control systems to enforce investment policies and regulatory compliance, he says.
“Probable scenarios as to what caused the losses include inadequate responses to the warning signals due to management’s failure or inability to understand alternative outcomes and repercussions. Banking culture is predominantly one of assurance and risk understatement, which is not rational in the 21st century,” Danford says. “General lack of humility in the trading culture influences people to contain the bad news within their purview rather than seeking assistance from management superiors. JPMorgan-London is a case of humans not being prepared for the technology which makes as much sense as giving a child an Aston-Martn in lieu of a bicycle.”
Allan Foster, a consultant on hedge fund accounting, operations and compliance believes that the rise from $2 billion to $9 billion was expected: “These were huge notional bets that cannot be easily closed out. The CDS instruments are what you could say very leveraged as you only have to put up a small percentage when positions are open and only the P/L is settled up when the contracts are closed,” he says.
Steven Zwillick, a consultant in banking operations and system management, says that Chase had $2 billion plus of assets (customer loans). “It took an equal amount of its operating capital and used it as a hedge against the loan risk. Chase lost this bet when it attempted to renegotiate the hedge deal,” he says.
Jim Higgins, an expert in the card and payment industries, thinks that Jamie Dimon’s recent debacle had nothing to do with Chase’s card programs. “Chase announced a new prepaid card program called Chase Liquid two days before the $2 billion trading loss on derivatives was revealed. In my opinion, commercial banks should not be allowed to trade any synthetic securities on their house account,” he says.
Zintro is a “Search and Connect Engine” that makes it easy for clients (expert-seekers) to find and connect with experts for projects (ranging from one half hour phone consults to multi-month on-site engagements). Some of the uses include:
▪ To engage in phone consults with experts for primary market research or to get challenging business or technical questions answered
▪ To source consultants or vendors for projects
▪ To identify candidates for full-time employment
Zintro has over 40,000 experts (browse) across every single industry sector. These experts have opted-in to receive system-matched inquiries from our almost 15,000 clients. Over 1,000 inquiries come in every month.
For Experts (client-seekers): Are you interested in marketing your services to Zintro’s Clients? It takes just a couple of minutes and is free to sign up as a Zintro Expert. Relevant projects will automatically be emailed to you. Click here to sign up.
For Clients (expert-seekers): In under 90 seconds, you can contact hundreds of relevant business or technical experts within any industry sector. Click here to post an Inquiry (free & anonymous).
Or, do you want to learn more about how Zintro works? Click here to view Zintro’s knowledge-base
Zintro has experts in every industry sector, across every job function, in every geographic region. Recently, some of the following topics have seen inquiry activity: