May 23, 2012
Could the JP Morgan Chase Situation Get Worse? Should Dimon Resign?
1) According to CNBC, the unit responsible for the $2 billion plus loss has a roughly $100 billion exposure to asset backed securities and other types of complex, illiquid securities. Why did JPM allow such a large composition of assets to be allocated to this risk?
2) Would the complexity of financial reform/regulation have helped or hurt in this situation? I'm left to ponder why 2,300 pages of Dodd-Frank, a new Consumer Protection Bureau, and a Securities and Exchange Commission could not prevent such a problem. (Note: See the second video for more on this).
3) Will Jamie Dimon lose his job as a result of this? In my opinion, it depends on a) if the firm followed (or follows) all disclosure and accounting rules, b) if the loss gets much worse (like $10 billion), and c) if Dimon or his subordinates are found liable in some way by regulators/authorities.
Tomorrow, I will address the Volcker Rule and how it would not necessarily represent the cure to some of our financial ills.
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