Jamie Dimon’s whale-watching tour came to a crashing end last week as the JPMorgan chief was forced to admit a huge trading loss. JPMorgan’s London Whale Bruno Iksil, the French trader whose super-sized appetite for synthetic bets on exotic derivatives earned him that appellation, had beached the firm to the tune of $2.3 billion and counting.
While Dimon takes the fall from grace as Wall Street’s lead banker taking on Washington’s push for financial reform, these risks that JPMorgan took reflect the consequences of the Bank of Bernanke’s misguided plan to recapitalize our banks and jump-start our economy.
Four years into the Fed’s near-zero interest-rate experiment, the loss is the unhappy outcome of a strategy that may be doing more harm than good. And putting the US taxpayer at risk again for bailing out the bank.
So what’s a good banker like Dimon to do? It’s fairly obvious. Borrow as much money as you want from the Fed at almost no cost, expand your investment portfolio and ramp up the risk in hopes of juicing earnings and lock in fat bonuses.
That’s how the derivatives portfolio at JPMorgan grew to what is reportedly at $360 billion. That’s $360 billion that isn’t going toward business loans or mortgages or creating any other economic growth — until bonus time, of course.
Read Terry Keenan's complete column in the New York Post Monday