Friday, May 18, 2012

If you prick me...

Or, if you're just adamant about being one'
Keep in mind that Mr. Dimon himself decided to transform the relevant part of JP Morgan Chase into a risk-taking operation – and it is the people he chose and the systems he put in place that have now blown up.
JP Morgan Chase is, by its very nature, a risk-taking operation.  All business ventures are, certainly all banks are.  Banks can't simply take in depositors money, put it into vaults and wait for them to ask for it back.  That would be a sure road to bankruptcy, as they would have no revenues to pay their rents, phone and electric bills, and their employees.  Nor would any investor put any money into such a bank.

Somehow banks have to put those funds at risk--it's only a question of which risks--and no bank has a better track record of prudence and profitability than Jamie Dimon's firm.  Which might be why Tim Geithner and Hank Paulson came to Dimon in March of 2008--not the other way around--when there was a major problem with Bear Stearns.

Now, the problem has become political, and people like Simon Johnson are pouring gasoline onto it.  As Jason Rosiak seems to recognize in this Bloomberg video.  If the result of the anti-JPMC hysteria results in more draconian regulation (via a stricter application of the Volcker rule) the markets will have less liquidity and more volatility.  Who is better off if that happens?

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