Reggie Middleton

Is JP Morgan Too Big to Survive?

Appropo, i have many an idea. To start with, we should break up the big banks and distribute their risk and portfolios. That would give true capitalism a chance to thrive as well eliminate the vast concentrations of risk that is now rife throughout the system. See boombustblog.com/Reggi...

Is JP Morgan Too Big to Survive?

If that's the case, then the name tag lot on the cartel is shrinking rapidly. The big 4 bulge brackets are now only the big two. Those banks that absorbed the other two (one is simply gone) are highly suspect and may be broken up or absorbed themselves. The biggest mistake any company can make is to believe it will survive forever. Once that mentality is adopted, its days are numbered.

Is JP Morgan Too Big to Survive?

Big Picture? Tell that to WaMu, Countrywide, Fannie, Freddie, AIG, Lehman, Bear Stearns, IndyMac, Citibank, Barings...

Cartel or not, big or not, no one is truly too big to fail

Is JP Morgan Too Big to Survive?

Thanks all. The ISDA agreements are standard contracts and agreements used in creating derivative deals. The problem is that there is truly no set standard. You can download a doc from the web and customize it as you see fit for you, your clients, and most often your year and bonus and P&L statement.

Any customization now makes it not so standardized. This part of the reason why banks are resisting a centralized clearing, formalized exchange and clearing authority. The real reason is that with the added transparency comes lower margins since it makes it harder to scalp clients and counterparties. Shhh! Don't tell anybody I informed you.

Is JP Morgan Too Big to Survive?

Thanks Robert. One has to wonder if the the ISDA netting arrangements are so effective, what was the need for $183 billion to bailout AIG, $80 billion or so to subsidize the sale of Bear, and the need to unwind at the last minute for Lehman (as per the article above). After all, the counterparty risk should have been taken care of ahead of time, right???

All I am saying is that the right and significant counterparty failure will ripple through a whole lot more than just the one bank that would have initially got stiffed. The risk of counterparty failure is not scientifically and uniformly vetted and has truly been transferred if it still sits in a tight circle of highly inter-reliant companies. I know of companies that rely on rating agency rating in a major way, and Lehman and Bear were investment grade up until the end. Think about it.

Is JP Morgan Too Big to Survive?

@ cholmley
You seem to be missing the point. The risks are concentrated and correlated and if it is not, show me how it is not. I am open. The numbers are so big in the top 5 or ten banks and so small relative to everyone else, I am at a loss to who these netting agreements are with sans each other.

As for those professionals who have been doing this for so long, I am assuming they worked at Lehman, Bear Stearns, and AIG Financial products, among other bastions of infallible expertise.

Please, cease with your snide remarks.