$2 billion loss at JP Morgan Chase shows need for Glass-Steagall

May 12, 2012 (LPAC)–JP Morgan Chase announced May 10 that it had
lost $2 billion on London-based derivatives bets in the past six
weeks and could face another $1 billion in losses in the second
quarter. The losses, racked up by the bank’s chief investment
office, occurred on synthetic credit securities, and involve
trades that are still active.
The trading activity was centered in the bank’s London
office, under the chief investment office’s (CIO) top executive
there, one Achilles Macris. According to a Bloomberg item from
April 13, Macris had been hired in 2006 to use the CIO’s office
to generate trading profits, in a shift “closely supervised” by
CEO Jamie Dimon. The positions Macris’s unit took became so large
that one of his traders, Bruno Michel Iskil, was dubbed the
“London whale” and “Voldemort.” Macris brought Evan Kalimtgis
from Dresdner Bank to help with risk management. Kalimgtis had
worked at Dresdner with Macris, and had previously worked with
David Goldman at Asteri Capital, a hedge fund set up by Marc
Rich’s Glencore. Kalimtgis is the son of former LaRouche associate Kostas
“Gus” Kalimtgis.
Goldman and Kalimtgis were two Labor Committee associates of
Lyndon LaRouche who defected.  Kalimtgis was stupidly entrapped
into an FBI blackmail operation at the end of the 1970s, and
joined LaRouche’s enemies run out of London.  Goldman
subsequently dropped away out of inordinate self-love, and lost
all morality.
Reports of large activity at JPMC’s London office began to
surface in early April, as competitors began to complain the
bank’s positions were so large they were moving the market.
During the bank’s first-quarter earnings call with analysts April
13, Dimon dismissed the reports as a “complete tempest in a
teapot.” Dimon had to eat those words in a call yesterday. “There
were many errors, sloppiness and bad judgment,” Dimon said.
“These were egregious mistakes, they were self-inflicted.”
Dimon, a vehement opponent of even cursory re-regulation of
the banks, admitted that the losses “plays right into the hands”
of those calling for strict regulations on banks. Others are
making similar points:
*Robert Reich, in his blog, said the affair shows that we
cannot depend upon Wall Street to mend its ways, and called for
the resurrection of Glass-Steagall and the breaking up of the big
banks;
*Bloomberg columnist Jonathan Weil said that either Dimon
mislead the public about the gravity of the situation last April,
or did not know what was going on in his own bank, and said that
the positions were probably, in effect, speculative wagers rather
than bona fide hedges;
*The Morgan affair shows that the “too big to fail” banks
are too big to manage and should be broken up, and that continued
opposition to the Volcker Rule is ridiculous, said Simon Johnson,
a former chief economist at the IMF and a senior fellow at the
Peterson Institute for International Economics