New Math - JP Morgan Earned $5 Billion On Derivatives In 2008
I'm sorry but this story is hilarious. And, if the story is based in claims made by JP Morgan, it is even more hilarious.
So.....If American citizens didn't bail out Wall Street with about $10 trillion in government money, how much would JP Morgan have made off of derivatives? Uh, I might speculate that they would have "earned" enough to bankrupt the company. No. The American citizens made JP Morgan $5 billion in derivatives profits by absorbing counterparty risks.
What will happen to those profits when the system is no longer back-stopped by the people? Poof! This environment is simply unsustainable and I am extremely confident, as we wrote in our CDS post, that these instruments will not represent a source of future income anywhere near today's levels. Or, in a worst case scenario won't even play a role in viable businesses.
This seems no different that Goldman Sachs stating that they want to return the TARP money. That somehow infers they managed this environment quite well and escaped the carnage we see today. Becoming a federally chartered bank last year gave them monopoly access to very favorable credit terms. And, counterparty risks backstopped by the American people saved Goldman from its exposure to derivatives. Goldman purportedly had $25 billion exposure to AIG alone.
So.....If American citizens didn't bail out Wall Street with about $10 trillion in government money, how much would JP Morgan have made off of derivatives? Uh, I might speculate that they would have "earned" enough to bankrupt the company. No. The American citizens made JP Morgan $5 billion in derivatives profits by absorbing counterparty risks.
What will happen to those profits when the system is no longer back-stopped by the people? Poof! This environment is simply unsustainable and I am extremely confident, as we wrote in our CDS post, that these instruments will not represent a source of future income anywhere near today's levels. Or, in a worst case scenario won't even play a role in viable businesses.
This seems no different that Goldman Sachs stating that they want to return the TARP money. That somehow infers they managed this environment quite well and escaped the carnage we see today. Becoming a federally chartered bank last year gave them monopoly access to very favorable credit terms. And, counterparty risks backstopped by the American people saved Goldman from its exposure to derivatives. Goldman purportedly had $25 billion exposure to AIG alone.
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