You're watching...
Euro Pacific Capital’s Peter Schiff and Better Markets Inc.’s Dennis Kelleher the impact of J.P. Morgan’s trade loss on the bank’s outlook.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
For the decline okay earlier today JPMorgan CEO Jamie -- shed light on the trading loss known as the London wailed the -- diamond says the company lost.
A total of five point eight billion dollars -- so far.
So is the worst over for JPMorgan -- me now is Peter Schiff from Euro Pacific Capital males have Dennis Kelleher from.
Better markets incorporated gentlemen thanks so much for joining me Peter to start with you could you're on remote here on a little bit of the disadvantage -- so let you go first.
You think about the call today and and what did you think about that numbers of the total now so far is five point eight.
You know they're saying that we could see another one point seven billion in the third quarter do you think that a total of seven point five is the real number does get bigger.
Does that number make you nervous -- will never.
We'll never know until the position is fully -- out I knew the minute that they disclosed.
The unrealized losses that they were gonna get a lot bigger.
Especially when.
The traders smell blood when they know what their position is they're gonna trade against it and so it gets more difficult once everybody knows your -- so I've always expected the losses to get bigger.
But but clearly if you put him in the scheme of things it's a trade not all trades.
Are profitable.
They had other trades at more than offset this and of course somebody took the other side about losing trade.
For every dollar that JPMorgan lost somebody made that money it's -- -- some games I think there's.
No -- certainly over reacting to it from a regulatory.
Opposition.
But -- Dennis what do you think about this because I mean it's it's still huge numbers seven point five billion and today we learned that you know some of the traders may have been hiding losses that was -- revelation.
Right.
Actually from a trip from a regulatory perspective it's very significant it's not the -- -- -- remember in the years before the financial crash in 2008 banks reported.
You know fabulous billion dollar revenue you quarter -- -- quarter we found a most of it was fraudulent many ways.
And from toxic securities so.
And the the outlets as your home -- out whether it's what the promise that all those profits are were wiped out in the financial crisis so illusory was probably the better -- We think you get big profits in -- really don't so the mere fact to profits -- -- tell you much.
There with three interesting disclosures today at one was that they're afraid that they reported that the trades were not priced at the right level in good faith -- fifth for the may in fact have been fraud going on here that was important disclosure.
The second important disclosure was JPMorgan Chase disclosed that they -- material weaknesses in their controls.
Which is almost never.
Found and it corporation public corporation certainly not a big corporation and that's cause for concern.
-- the third thing is that the loss has grown from roughly three million to almost six million.
And it may go to eight million so from a regulatory point of view in the eight billion I'm sorry billion yes thank you.
If only -- as a -- -- But from a regulatory point of view it's not the dollar amount it's what happens inside a bank that's backed up by taxpayers so.
While it is true that somebody else made some money in somebody lost money at the end of the day.
Taxpayers stand behind the too big to fail banks not just -- -- And here's here's the problem seek.
Taxpayers shouldn't be standing behind these banks that's the larger issue here there should be no taxpayer guarantees behind these banks what we need is capitalism.
In the banking industry not socialism but I think it even bigger point.
I think this loss is gonna be small in the scheme of things weight do you see what happens to JPMorgan.
And all the other big banks when interest rates finally rise I think the losses are going to dwarf.
This -- -- talking about the illusory profits they had.
I was -- -- -- before the financial crisis I was on this and many other networks are predicting a collapse and in in the banks because I knew how they were exposed to the mortgage market and I realize what was gonna happen in advance I think banks are even more vulnerable now in fact I think all the major banks that were bailed out with the -- -- -- need to be bailed out again I think they're even in worse shape.
Because of interest rate exposure once the Fed loses control of race and they're forced up.
I think all these big banks are so over leveraged their balance sheets are loaded up with a long term low yielding government bond up mortgage.
Did you get -- there -- get a -- And the bullet on some of the results from this earnings report -- I mean if you look inside of it.
You look at the mortgage business delivered nice results I mean a big improvement there -- it's gone under the watch of frank is that not a there's a lot of improvement arrogant and a lot of good news in this report -- that -- dwarfed by this box.
Not all but if you understand long term look if you wanna trade the financials because you think you're nimble enough.
Nobody should own these stocks as a long term investment they're they're -- -- implode.
The profits they're making today are just sowing the seeds for future losses yet they might be making money on the mortgage market today.
But wet that's because the Fed Funds rate is at zero they can make money on three -- 4% mortgages what happens when the Fed Funds did so pretty dramatic -- process and -- and they're drowning in the -- that anything and.
Up you know Peter is right in terms of the interest rates only have one way to go let's face it there -- -- right now for all intents and purposes for these too big to -- banks so when they go up they're gonna get caught in the whipsaw.
From low rates to higher rates.
But that's a multiple years down the road probably based on what the Fed is saying.
So while that's coming the real issue is how to we deal with too big to fail banks and and this is the biggest of them all and one of the things we really need -- -- before we get to the interest -- hit.
It's how they regulated in a way so that the -- most risky activities to create the biggest loss.
More regulation is the answer but not -- -- -- fail as the answer -- if we allowed yet.
We could do that we we tried to do that in the congress during Dodd-Frank and we weren't allowed to do that primarily because of the lobbying going on to prevent it from happening.
But there was -- you know infect the amendment to do that -- 33 vote only 33 votes in the senate.
But that's the real solution but until you get there -- yeah at their activities -- we have to have this discussion again another time thanks to both of you for joining us we got to move.
