I thought she's been unemployed since The Gong Show was cancelled.
Posted on 06/15/2012 4:14:29 AM PDT by SeekAndFind
JPMorgan Chase CEO Jamie Dimon was hauled before Congress yesterday for a finger wagging over the bank's recent $2 billion trading blunder. For all the haranguing and grandstanding, Sen. Jerry Moran asked one of the only relevant questions of the hearing; he wondered if JPMorgan failed, then could it go down without costing taxpayers money? The answer was also the most telling.
"Yes," Dimon replied.
And at 11:42 EDT, reality died.
The timing couldn't have been better. The day before, a JPMorgan internal assessment of what it would take to push the bank into bankruptcy was released. The conclusion: a loss of $50 billion.
JPMorgan had $2.3 trillion of assets at the end of last quarter. A $50 billion loss, then, is the equivalent of just 2.17% of assets. That's one of the scariest simple math equations that exists in today's economy.
No need to worry, the report assures. After failing, the bank could be hosed down, cleaned out, and "returned to private sector as a new bank with a clean balance sheet." Taxpayer money used to keep the bank operating in the interim would be repaid, the report promises. Everyone lives happily ever after.
Maybe that's what would happen, but I doubt it. It's inconceivable to think that a bank JPMorgan's size could fail without the FDIC and other taxpayer-backed bank authorities being utterly overwhelmed. The numbers here are astronomical: JPMorgan has more than $1 trillion in deposits, and its balance sheet equals 15% of the country's gross domestic product. Nothing works as planned with a bank that size.
But let's assume for a moment that JPMorgan could fail without costing taxpayers a dime. Is that the end of this story?
Not even close. Nearly everyone in the country would pay a price.
We don't have to do much assuming here; we have 2008 as a template. If JPMorgan failed, we have a good idea what would happen.
Credit markets would freeze
As the financial system ponders who's holding the bag, everything stops and credit grinds to a halt. Anything not called U.S. Treasuries is deemed too toxic to touch. Even the bluest of blue chip companies suddenly can't access credit markets, and thousands of businesses around the country that rely on credit to fund inventory and payroll go bug-eyed. Nobel Prize-winning economist Robert Solow described this in 2008:
So businesses that would normally be investing in a new computer or a new fleet of trucks or whatever that would need to borrow, can't borrow. And if they could borrow, they would be paying a very high rate of interest. So they stop.
And then the real economy begins to slow down, and people lose their jobs because their firms can't sell to consumers, can't sell to other businesses. A modern economy is a more complicated piece of machinery than a simple barter economy. Production is very complicated. You start with God knows what, and you end up with some extraordinarily complicated piece of equipment or the machinery that appears in my dentist's office when I sit down. That can't be directed without a good deal of action which is taken now and can only pay off many stages later. And that's where the credit mechanism comes in. Industry that depends on it has to slow down, simply because it can't get the funds that enable each stage in production to pay off the previous stage.
Other banks would fail
In May 1931, an 80-year-old, well-connected, highly respected bank called Credit-Anstalt in Vienna failed. The global banking world was stunned. How could such a large and powerful bank fail? And if it can fail, who's next? It was sheer panic. Princeton historian Harold James explains the ensuing chaos: "The Viennese panic brought down banks in Amsterdam and Warsaw. In June and July the scare spread to Germany, and from there immediately to Latvia, Turkey, and Egypt (and within a few months to England and the U.S.)." BusinessWeek's Peter Coy puts it more bluntly: "Thus the failure of Credit-Anstalt accelerated the financial panic that turned a recession into a global depression."
There is never just one cockroach in the kitchen, and there's never just one major bank failure. Panic spreads like wildfire.
Markets would crash
This is standard in any financial crisis. Hedge funds and other institutional investors that do business with or are in any way connected to wobbly banks freak out, sell whatever they can and crawl into a bunker. Selling begets more selling, and on and on. By the time the dust settles the world is a few trillion dollars poorer, confidence is shot, businesses are undercapitalized, and unemployment spikes as consumer spending dries up. The Federal Reserve eventually stems the panic with massive intervention, but God knows what the eventual outcome of that is.
And all of that from JPMorgan losing 2.17% of assets.
This is real, folks
None of this is speculative fiction. It's what history tells us happens every time a large bank fails. The same scenario would play out if Citigroup (NYSE: C ) , Bank of America (NYSE: BAC ) , Goldman Sachs (NYSE: GS ) , or any other too-big-to-fail bank were to go under. And eventually, they probably will.
Some might make the doubtful argument that JPMorgan's failure wouldn't cost taxpayers a penny. But no one, not even Dimon, can argue with a straight face that horrific damage wouldn't be inflicted on the rest of the economy if a big bank collapsed. Everyone pays the price for too big to fail.
The good ole US government.
"Banks had hundreds of billions in losses and you don't think they can lose? Is that your claim?"
If the govt. will bail them out on those losses then yes, thay can't lose, that IS my claim. Any othe questions?
Any othe questions?
Which banks were bailed out on their losses?
Every bank that received and needed TARP money. I don’t see too small businesses getting low cast emergency loans to get them over the self created mountains in their path. No, they have to go under. The bankers took taxpayer money and still paid themselves big bonuses.
I thought she's been unemployed since The Gong Show was cancelled.
Near zero rate loans. Even without a Cray carrying out HFTs on free money, just by throwing that free money blindly at the stock market , I could turn a profit, and if the market starts to go south, I know that my buddy will bail me out with another twist. Twist the market, screw the saver, screw the consumer, screw Main Street.
It's funny to read the comments by the free trade uber alles types who are so vocal about tariffs raising costs on Americans and yet so defensive about their dear bailed out banks and silent about the inflation Americans are dealt that results from bailing them out.
Time to break the TBTFs into smaller entities which can't blackmail the American Taxpayer.
The bankers took taxpayer money and still paid themselves big bonuses.
And they paid the loans back, with billions in interest.
HMMMMMMMMMMM no wonder they are in trouble.
Hey lets have a gong show in place of the November election.
As soon as ZERO gets on stage the GONG goes off and won't stop gonging. . . . . . . WE found a new energy source. . . .
How much do you feel the banks are borrowing at these low rates (0.75%) from the Fed?
Ten $200 billion banks collapsing is just as bad as one $2 trillion bank collapsing.
IF everybody who runs their business into the ground doesn’t get the same loan, if the govt gets to pick winners and losers, it is a bail out. There is no risk. Everything is a roll-over. And only some paid back. And that number will get smaller and smaller with each bail out. Much of what was paid back was free money from the Fed. anyway, as we have now learned.
Any bank could participate in TARP.
There is no risk.
Banks lost hundreds of billions. How can you claim there is no risk?
Much of what was paid back was free money from the Fed.
There is no free money from the Fed.
as we have now learned.
You haven't learned much.
The market has discounted JPM’s value already.
According to their books, the company as a book value of about $189 billion.
The market value of their stock is about $132 billion.
If one reads up on what book value means, you’ll understand how negatively the market perceives JPM’s balance sheet.
Other large banks have been in the same situation for a few years now.
Talking heads on TV NEVER talk about the scary market valuations of these companies with supposed “fortress” balance sheets.
A “fortress” balance sheet would be trading above book value.
IBM market cap: $227 billion.
IBM book value: $20 billion.
But not grocery stores, car dealerships, insurance salemen, or any other small business. So if you are a rich banker the govt. bails you out with an emergency loan (you couldn't otherwise get anywhere else) to save you from your own folly but if you are a hard working small business owner - too bad sucker, file bankruptcy. When banks get special treatment, it's a bail out. Who cares if you have losses when the govt will bail you out until one of your high risk schemes finally pans out. You can't lose in the long run. And the subsequent expansion of the money supply caused by the printing of imaginary money to make a trillion dollars in loans decreases the value of the dollar thus again making the citizens the ultimate payors of the loan with the loss of the value of their savings.
Sadly the banking system was more important than a small business.
Who cares if you have losses when the govt will bail you out until one of your high risk schemes finally pans out.
Or until you can raise more capital. Or until your assets become more liquid.
You can't lose in the long run.
Especially if you ignore the hundreds of billions they lost.
And the subsequent expansion of the money supply caused by the printing of imaginary money to make a trillion dollars in loans decreases the value of the dollar
And the rapid contraction of the money supply caused by the repayment of a trillion dollars in loans increases the value of the dollar.
No it's not. Only to an elitist.
"Especially if you ignore the hundreds of billions they lost."
Which the Govt and the Fed took care of.
"And the rapid contraction of the money supply caused by the repayment of a trillion dollars in loans increases the value of the dollar."
No, since it was paid back with imaginary money from the fed, the payback inflated the money supply even more than the bailout did.
No, since it was paid back with imaginary money from the fed, the payback inflated the money supply even more than the bailout did.
Banks didn't borrow a trillion from the Treasury. Not even half a trillion.
What do you feel outstanding bank loans from the Fed are, assuming your claims are even fact-based?
Dimon doesn’t get hauled in front of Congress for just 2 billion...
the cumulative “realized losses/gains securities (AFS/HTM) and Trading and Counterparty Losses” amount to $31.5 billion for the pendency of the stress test.
In other words $31.5 billion is how much pain JPM is allowed, in the NY Fed’s view, to suffer before losses and dividends/buyback would jeopardize the capital structure, and the buyback process should be halted
Once again, as a reminder, the buyback process was halted today.
http://www.zerohedge.com/news/did-fed-just-give-us-very-big-clue-just-how-big-jpms-cio-loss-may-be
I don't know, as it is a secret. Imagine living in a Constitution Republic that is being run by an unelected private entity such as the Federal Reserve to whom your life, your property, and your labor is hypothecated, and you're not allowed to know where and to what other private banks that money which is being created out of thin air that you have to pay for, and for whom you are the collateral, is being directed. But there are some who have attempted to peek behind the veil.
From: http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
"The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma -- investors and counterparties would shun firms that used the central bank as lender of last resort -- and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
$7.77 Trillion"
It's on the Fed balance sheet, released every week. Not secret.
I'm still not seeing who's getting the 2.9 trillion as of last week. Can you please provide a link showing which banks/entities are getting this money?
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