JP Morgan Made $5 Billion in Profit on $88 Trillion in Unregulated Derivatives Speculation

There is no justification for a commercial bank, with regulated depositors' funds insured by the government, should be speculating on a level this great.

One also has to wonder who actually 'lost' in those derivatives bets that JP Morgan made, who the counterparties were. How many losses were taken by AIG, Bear Stearns, and Lehman?

Who is really being bailed out here? Aren't we paying for JP Morgan's "winnings?"

If they speculate and lose, who pays for that? We do.

What is a bank doing gambling in unregulated over-the-counter derivatives involving commodities and financial instruments worth $89 Trillion?

Getting paid by the public whether they win or lose it appears.

When a single player with deep pockets and government guarantees is placing bets in markets on a scale that dwarfs the Gross Domestic Product of United States that is the very definition of moral hazard.

Until the Obama Administration takes strong steps to bring back Glass-Steagall, and put hard limits on the banks there will be no reform and no recovery.

We are 48 days into this Administration. We have see little or no systemic reform. Just a continuation of crony capitalism under Bernanke, Summers and Geithner.


Bloomberg
JPMorgan earns $5 billion derivatives profit
By Ratul Ray Chaudhuri in Bangalore
Tue Mar 3, 2009 2:56am EST

March 3 (Reuters) - JPMorgan Chase & Co generated $5 billion in profit during the worst year in Wall Street history by trading over-the-counter fixed-income derivatives, Bloomberg said, citing two people with knowledge of the results.

The bank, which reported $5.6 billion of total profit in 2008, has not disclosed earnings for its interest-rate swap, municipal bond and foreign exchange derivatives group, the agency said. The unit was among the most profitable at the New York-based company, it added.

The JPMorgan trading desk may have benefited as the collapse of Lehman Brothers Holdings Inc and JPMorgan's takeover of Bear Stearns Cos left companies and hedge funds with fewer trading partners in the private derivatives markets, the agency said.

Among commercial lenders, JP Morgan dominates OTC derivatives trading, the agency said, citing data compiled by the Office of the Comptroller of the Currency.

The bank held $87.7 trillion worth of outstanding OTC contracts as of Sept. 30, more than the next two banks, Bank of America Corp and Citigroup Inc, combined, the agency reported.

JPMorgan could not be immediately reached by Reuters for comment.