"This one's on you Ben," writes David Schawel, not blaming the Chairman for the JPM failure, but...

"This one's on you Ben," writes David Schawel, not blaming the Chairman for the JPM failure, but for creating an environment in which investors (including banks) have no alternative but to seek out risk to get returns. Another example: The explosion in AUM at mortgage REITs which use high leverage to generate returns. "These will blow up at some point."
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Comments (40)
  • bbro
    , contributor
    Comments (11234) | Send Message
    Ridiculous.....Bernanke deserves the Medal of Freedom....you forgot to blame him for the bad weather too...
    14 May 2012, 03:11 PM Reply Like
  • nkpdispr
    , contributor
    Comment (1) | Send Message
    what bad weather?
    14 May 2012, 03:21 PM Reply Like
  • Losing Paper While Gaining ...
    , contributor
    Comments (490) | Send Message
    Nice trolling bro!
    14 May 2012, 03:29 PM Reply Like
  • rodeo444
    , contributor
    Comment (1) | Send Message
    Banks are raking in billions of dollars and the blame goes to Bernanke? Million dollar bonuses? JPM Stability plus??? Really David Schawel......?


    This $2B loss will barely be remember within 6 months.
    14 May 2012, 10:20 PM Reply Like
  • youngman442002
    , contributor
    Comments (5123) | Send Message
    No the Goldman Sachs loan to Chesapeake at 8% is a prime example....bad companies will issue bad debt...and people will buy them for the return.....it is a feeding frenzy....so they are loading up on junk debt.....not going to end well....again...
    14 May 2012, 03:22 PM Reply Like
  • Betalyst
    , contributor
    Comments (666) | Send Message
    I think REITs are fair game and perform pretty well, I wouldn't associate JPM with REITs' ability to payout strong dividends.
    14 May 2012, 03:23 PM Reply Like
  • vermille
    , contributor
    Comments (42) | Send Message
    Spot on! Even the folks in the pits are calling for higher interest rates. It's about time to deal with reality not just continue with pumping and priming the printing presses. Dollars galore can mean dollars no more!
    14 May 2012, 03:28 PM Reply Like
  • surfgeezer
    , contributor
    Comments (10352) | Send Message
    It is the dependence on trading for profits!


    Bernanke is doing EXACTLY what he is mandated to do- control inflation and balance employment.


    The TRADER's @ JP - trying to go AROUND D/F no trading with taxpayer backed money rules!
    15 May 2012, 12:38 AM Reply Like
  • Richard S. Daskin CFA, CFP(R)
    , contributor
    Comments (351) | Send Message
    We need to keep printing until asset prices as a whole stop falling. All this stuff about deleveraging being the way to go is hogwash. Deleveraging = Depression. Count me out. My bone to pick is that we did not stimulate enough. We need inflation over 2%, probably 4% in this environment would be a good target. And I will take it anyway I can get it, monetary policy, fiscal policy - tax cuts and spending increases - you name it. That is dealing with reality.
    14 May 2012, 03:37 PM Reply Like
  • into dark shadows
    , contributor
    Comments (472) | Send Message


    I don't know how to break it to you but we are in DEPRESSION!


    Deflationary pressure is all around you!
    The fact that people are so UNFAMILIAR with deflation and depression is what is so troubling.




    Japan is and has been called a country in recession for the better part of 2 going on three decades.
    Is Japan or has Japan ever been in a deflationary depression?


    You better believe it is!


    Bernanke is so scared sh** less of deflation, he risks run away inflation on the upside to try and combat deflation on the downside!
    Bernanke has made this mess a thousand times worse! If we had bitten the bullet in 2000 under Greenspan we would be closer to coming out the other side today!


    This has not been and is not your normal " Boom Bust Business cycle" like in the past.


    Our only, albeit extremely painful way out of this massive 50 plus year debt fueled bender is to slowly DELEVERAGE!


    we have turned Japanese!
    14 May 2012, 03:52 PM Reply Like
  • JayPar
    , contributor
    Comments (213) | Send Message
    We aren't in a depression. Neither you or I were around for it, but things were alot worse then this when the real depression happened.
    But it sounds like that is exactly what you would be advocating. 'Biting the bullet' would mean 50% unemployment and a stock market at 10% of its value now. Have fun with that because I don't want it. Technically we aren't even in a recession since GDP growth has been positive.
    14 May 2012, 06:00 PM Reply Like
  • Jack Rice
    , contributor
    Comments (1588) | Send Message
    Frothing cranks, with their mindless rants about monetizing debt -- of course we did, of course we should! -- and de-leveraging, to fight what? inflation?


    You are exactly right, we have not stimulated enough. If anything, the bailout was too timid. And the consensus of economists agree. We are DEFLATED, not inflated. We need to print money, which we're doing, and make money cheap, which we're doing!


    Thomas Edison said, "There is no expedition to which a man will not go to avoid the real labor of thinking." You can see this truth-in-action from the inane chest thumping and bloviating and sloganeering coming out of both right and left. Stupidity knows no politics.
    14 May 2012, 06:19 PM Reply Like
  • buddhaprince
    , contributor
    Comments (10) | Send Message
    Greenspan did not come out of his housing reverie until a while ago, when he admitted all that loose money HE allowed caused the bust.
    14 May 2012, 07:08 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3527) | Send Message
    Well then if it's inflation you want, have helicopter Ben send a ten thousand dollar check to every citizen and you'll get your inflation. Enjoy your $25 burger at Micky D's.
    14 May 2012, 07:10 PM Reply Like
  • Shambles
    , contributor
    Comments (3) | Send Message
    Reality? Talk about distorted perceptions!
    14 May 2012, 03:51 PM Reply Like
  • AggGrow
    , contributor
    Comments (210) | Send Message
    Banks, for millenia, were there to serve the community. The profit motive was the incentive and was secondary. Investors did well - better than the managers - but not obscenely so. There have always been the criminally greedy, but society/government/cus... have generally kept them in check. That is currently not the case and Bernanke has nothing to do with it.


    Big banks have sought greater risk since the 80's, cornering unfair advantages and abusing their customers rather than focusing on their cost structures. Maybe one can remove blame from some saying that they need to compete on the same terms others have been allowed to compete, but that's a lame answer. Other banks (or similar entities) will behave consistently with what customers need and will thrive. My Credit Union and Paypal serve me very very well - as a matter of fact, they're all I need. Even commercial entities need to be better served.


    Dimon is considered a great bank manager, but he's just been lucky, that's all. Statistics tell us that every spin of the wheel is 50-50, so his reckoning is neither surprising nor interesting.


    The TBTF's are experiencing Darwinism at it's best, and I for one am not sad to see it happening, because this is capitalism at it's best.


    "No alternative but to seek out risk..." please!
    14 May 2012, 03:53 PM Reply Like
  • Jonathan Christopher
    , contributor
    Comments (349) | Send Message
    David Schawel:
    1. Don't blame Bernanke. Bankers tale risks because they are allowed to. Glass Steagall was designed to reduce their opportunities ( and opportunities to fail).
    2. We currently have VERY low velocity, because bankers are afraid to take OTHER risks (like home loans) and companies are afraid to take other risks (Like investing in an uncertain environment). When that changes, and velocity increases, you will get as much inflation as you want. perhaps more.
    3. Bernanke is supposed to start removing reserves when the economy starts expanding. But he may have trouble slowing THAT train, especially in a political year.
    4. On the other hand, the government, with it's vastly increased rate of spending is sopping up liquidity like mad. If the automatic cuts come into play, Bernanke will really have his work cut out.
    Now, aren't you glad your name is not Bernanke?


    14 May 2012, 04:12 PM Reply Like
  • Brad Denny
    , contributor
    Comments (140) | Send Message
    I am with bbro and AggGrow on this one. The financial industry does not take risks for any purpose other than to line the pockets of those who run it. Shareholders don't benefit and the public too often winds up paying the price.
    14 May 2012, 04:13 PM Reply Like
  • bill d
    , contributor
    Comments (1893) | Send Message
    I guess you get what you pay for.
    NLY Farrell gets $35 million/year based on book value and doing quite well..
    JPM raised Dimon's pay to 23 million - based on what ? Certainly not for losing 2 Billion. Maybe cause he's Underpaid?
    Which one do you prefer?
    14 May 2012, 04:21 PM Reply Like
  • Regarded Solutions
    , contributor
    Comments (20531) | Send Message
    the world will blow up someday also...in the meantime I am keeping my dividends on NLY, and will buy a nice fall out shelter when armageddon comes.
    14 May 2012, 04:50 PM Reply Like
  • Boog
    , contributor
    Comments (96) | Send Message
    In the midst of intelligent, though polarized, dialogue on macro economic matters, you still scrunch down in your little world of NLY. Poor baby....
    15 May 2012, 10:59 AM Reply Like
  • JayPar
    , contributor
    Comments (213) | Send Message
    The big banks should have been broken up into manageable 'small enough to fail' institutions with shareholders getting new stock in each of the smaller, separated businesses. Obama has his chance to dictate terms but decided to listen to Geitner and not panic the markets more. Break up value is actually higher for some of these banks so shareholders and the country wins. Instead we came out with the big banks even bigger due to orchestrated shot gun weddings by the US government.
    14 May 2012, 06:05 PM Reply Like
  • Rhianni32
    , contributor
    Comments (2086) | Send Message
    Ok I know its popular to blame Bernake on everything but you guys are seriously going to blame him for JMP using hedging money for profits because of the interest rate?
    14 May 2012, 06:40 PM Reply Like
  • hittpink
    , contributor
    Comments (3) | Send Message
    We're missing a larger picture here of the US debt. Without low rates, we would not be able to pay our debt & borrow more. Until Obamas high debt, high unemployment, high taxes polices are out, we will need low rates.
    14 May 2012, 06:50 PM Reply Like
  • davisg39
    , contributor
    Comments (3) | Send Message
    What needs to be done is to regulate the devil out of the big banks and then break them up so we go back to the days when banks served their customers for home loans, auto loans, etc, not to pay the officers millions of dollars in salary each year.
    14 May 2012, 06:52 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3527) | Send Message
    And who are you going to keep in the regulator's office when the regulated come with a nice job offer?
    14 May 2012, 07:14 PM Reply Like
  • dendv
    , contributor
    Comments (360) | Send Message
    Dodd Frank did regulate the banks. I thought we were protected by our Government. You mean we are not. They just regulated all of the banks. It did not work? How much did this cost us?
    14 May 2012, 08:49 PM Reply Like
  • wongsokguan
    , contributor
    Comment (1) | Send Message
    Anyone watch "Inside Job" a documentary on Wall Street and Federal Government. It tells you a lot about how Wall Street has taken over the Federal Government.
    14 May 2012, 06:54 PM Reply Like
  • buddhaprince
    , contributor
    Comments (10) | Send Message
    There should be no default swaps for anyone, except those who are directly involved in the resource, builders, farmers, energy companies, RESOURCES companies, NOT BANKS, trying to get in the middle to cash in on others work and doing insane trades on things that is not their primary business. The frigging bamnks and Republicans are in lock step to deny the sort of regulations that would stop this stupid gambling. The banks are getting money for nothing and they therefore take insane risk when they should be lending to REAL PEOPLE and Star-Up companies.
    14 May 2012, 07:06 PM Reply Like
  • coelacanth10
    , contributor
    Comments (110) | Send Message
    The really scary concern is that credit default swaps are totally lacking in transparency. There is no public clearing house for complex derivatives. No one really knows the total value of CDS contracts written by the TBTF banks, the details of the contracts, and who the parties on the other side are...whether hedge funds, foreign banks, or even sovereign countries. These agreements can blow up at any time and $2 billion is just a drop in the bucket compared to what might happen. that's why we need to return to Glass-Steagall.
    16 May 2012, 05:57 PM Reply Like
  • jstratt
    , contributor
    Comments (4014) | Send Message
    I strongly disagree with the author of this post. I think he has drunk too much of the Kool Aid from CEOs wanting to earn 9 figure paydays.


    It is a threat to our economic existence to allow huge bets for executive bonuses with taxpayers holding the bag. Unless you are a big bank CEO or Hedge fund leader the Fed is in your corner on this one.


    It wouldnt hurt to think before writing a dimwitted article.
    14 May 2012, 10:14 PM Reply Like
  • donecon
    , contributor
    Comment (1) | Send Message
    It never ceases to amaze that people who would never think they can alter the laws of gravity by leaping from an aircraft without parachute do not shy from attempting to defy the laws of economics with various pieces of legislation and/or regulation fly against all reason. If nothing else, history has shown us that Marx, Engles, Keynes, and Krugman were demonstrably wrong and Hayak, von Mises, Schumpeter and Laffer were right. Greece and Spain will illustrate the former for us and Texas and Chile the latter. The current mess will have to be unwound and there will be pain.
    14 May 2012, 10:16 PM Reply Like
  • a. palmer jr.
    , contributor
    Comments (1370) | Send Message
    Bank pass book interest rates were 51/4 percent for as long as I can remember up until the late 80s when they blamed it on the S&L crisis. It wasn't a crisis for the S&Ls, it turned out the only ones hurt were the people with a little money in the bank. Nowadays we're lucky to get 1/2 percent and they act like it's a gift to the savers. You bet we're having to go to risky investments to get some returns, what else are we gonna do, go with bonds or mutual funds? They don't pay well either...
    14 May 2012, 11:38 PM Reply Like
  • surfgeezer
    , contributor
    Comments (10352) | Send Message
    Schwael needs to learn the differance between Financialism and Capitolism. Price discovery does not require derivatives. JP was not hedging risks, they were trying to gain revenue. Mr Schwael is pointing at a different subject to remove light from the core problem.


    The Fed is doing EXACTLY what is mandated to do, when the bozo's in Washington had a temporary moment of clarity and realized they do not know what they do not know about money.


    THEIR removal of Glass/Steagal IS the cause and reason we have low rates and the great recession. Whining about a symptom is ridiculous.
    15 May 2012, 12:53 AM Reply Like
  • firstinsnow
    , contributor
    Comments (635) | Send Message
    Spin this anyway you want, but the fact that these huge
    banks refuse to play by any rules but their own, speaks
    to the need for either breaking up the largest banks and/or
    providing regulation that benefits the owners of the banks,
    [the stock holders] without ripping off the American taxpayers.
    15 May 2012, 08:08 AM Reply Like
  • bill d
    , contributor
    Comments (1893) | Send Message
    Yep - Jesse James without a gun. And now BAC just terminated McMillan Firearms company with NO explanation - a financially sound company with BAC for years. BAC accepts our money yet will deny a successful company to help their (our) bottom line.
    See the interview with the owner here (BAC would not allow the actual meeting to be recorded):
    BAC would not allow the meeting to be recorded but here is their response:
    "We want to let you know that we hear your comments and questions regarding one of our customers. While we cannot discuss the details of any individual client we work with, we can assure you the allegations being made here are completely false. Bank of America does not have a policy that prohibits us from banking clients in this industry. In fact, we have numerous, longstanding customers in the industry.
    We are also extremely proud of our support of the US military and reject any assertion to the contrary. We count as clients many companies that provide for our nation’s defense. We employ thousands of veterans, Guardsmen, and Reservists, and plan to increase our hiring this year."
    Restraint of trade? A public company accepting our handout money refusing to do business because of politics?
    An arrogant POS bank - wonder why they are losing customers?
    16 May 2012, 02:33 PM Reply Like
  • Hawmps
    , contributor
    Comments (489) | Send Message
    Yep, I moved all my money from BAC about 6/7 years ago... it is an arrogant POS bank.
    17 May 2012, 04:25 PM Reply Like
  • Jack Rice
    , contributor
    Comments (1588) | Send Message
    @Hawmps Amen, Brother. I grew up with a great local bank. They were part of the community, knew their customers, made character loans, etc. Then it got eaten up by BAC. POS is being too generous.
    17 May 2012, 06:03 PM Reply Like
  • ChuckJ
    , contributor
    Comments (80) | Send Message
    What's happening to the Reits? AGNC is down for several days now very close to the xdiv.


    17 May 2012, 12:29 PM Reply Like
  • Jack Rice
    , contributor
    Comments (1588) | Send Message
    Good question.
    17 May 2012, 06:02 PM Reply Like
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