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Egan-Jones Ratings Managing Director Sean Egan on J.P. Morgan CEO Jamie Dimon’s comments on the bank’s losses.
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Solidly profitable.
-- let's bring in Sean Egan of Egan Jones who is standing by and listening to all of this.
Is make you feel ahead of the testimony tomorrow.
But -- a couple of things that come out one is that it's likely that -- losses going to ballooned from 2000000000 and two with something north of four billion.
Who knows whether it's going to be five billion -- how large it is.
But rest assured that traders are now trading against JPMorgan.
Another write down that comes out very loud and clear is that there are no perfect hedges.
That JPMorgan -- is hedging its positioned properly obviously was not.
Impress the next the most important thing.
In that is is that the big banks and JPMorgan as -- -- the more sophisticated ones.
Have difficulty getting a handle on risk -- -- that got us into the 20072008.
Crisis.
Whereby they thought they understood risk and that assumption turned out to be seriously flawed.
Basically there's a problem in the system when the bank tries to assess his own risk.
Without any independent firm looking -- had they typically underestimated.
When they bring in affirmed as being paid directly by the banks -- a basic conflict of interest.
We have to get this right before causes serious problem.
-- 45 billion dollar loss is a huge amount of money by JPMorgan can manage it but perhaps as a precursor to some.
Bigger losses at other firms.
Start right there with that number between four and five billion because that is a number that I'm hearing everyone say right now and I'm wondering.
How did you get that I mean are they sort of leaking that -- you why is everyone coming up with that number.
Because if they say it's two billion dollars.
You know that all the traders are lining up on the other side waiting for JPMorgan to try and unwind this positions is going to be fairly difficult for them to do that.
Is something over five billion scary to you or make you feel like.
You know they need to gather more capital or does it change in circumstance for you as a -- agent if it's more than five billion.
I think JPMorgan has enough capital to absorb velocity even in the ten billion dollar area.
But it underscores a bigger issue and that is that there are some risks in the banks that a lot of people.
Didn't expect to come out before and this is just another indication of it.
What would be your advice to him for his testimony tomorrow what points do you think that he needs to hit -- obviously there's a lot of happen here but he goes on.
You know there's a long statement about perspective where you know he says he feels terrible but the fact they've lost shareholders' money but.
No client money no customer and a taxpayer money was impacted by this interest at -- incidents are fortress balance sheet remains intact.
You know over the same period we provided a 116 billion in credit to midsize companies.
You know we provided 62 billion in credit to consumers.
Obviously is gonna go out there and trying to make the case of they're doing a lot of good for the country do you think that helps.
I think a little.
Well a little bit more humility it probably would go a long way.
I think number of people on the financial market don't quite buy into the fortune -- -- -- balance sheet.
As much as they did perhaps six months ago.
You're -- is having a significant amount of troubles right now.
Indeed donate know exactly how way well the CDS positions are hedged I think what would also help is it.
There's a recognition that the existing.
Risk assessment systems which are primarily value that risk which measure which are great when the markets are in ordinary conditions their hard -- When the markets gap out as they do from time right time that's -- led to long term capital is demise in Lehman Brothers and a bunch of others.
No I mean that's a fantastic point what's going on what we're watching happen in Europe today will we -- happen over the weekend.
Is it helping them exit this position as a making things better right as you understand the trade.
But now it's not there's a huge amount of turmoil in the market right now in fact if you believe the analysis that we've put out we think there's going to be a lot more turmoil.
And I think that what would go along way in this hard -- diamond Jaime diamonds.
-- testimony is a little bit more understanding and an analysis on the -- side so that.
Investors can come away and realize that he that the systems the current systems are working properly.
And even though he is a lot of Smart people on barred.
That they've obviously -- assess things.
But -- is about another problem.
Is a compensation system whereby -- trader.
Might make forty million for the bank you walk away away at that -- five million dollars.
Then next here he loses forty not a just walks away I don't think that -- very well with most people in the marketplace especially vote.
