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View Diary: Already In Deep Hot Water, JPMorgan Chase May Have Just Reached Its Boiling Point (Part I of II) (181 comments)

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  •  Mr. Bankster: Step Away from the Slot Machine (6+ / 0-)

    I read Bloomberg BizWeek regularly. A recent feature article on AIG pointed out their numbers are being cooked to make them look healthier financially than they actually are. Plus, AIG's CEO stated he wanted them to start investing in mortgage derivatives again. I'm not kidding.

    Helloooooooooooooooooooooo?

    From Naked Capitalism:

    As more news comes to light about JPMorgan’s inadequate supervision of its CIO desk, the source of its multi-billion-dollar losses, it’s clear an investigation of violations of Sarbanes Oxley (SOX) is warranted.  At a minimum, Congressmen and the public should demand that the SEC and/or the DOJ owe it to us to pursue a SOX-related enforcement action. SOX was passed in the wake of Enron to end the all-too-common “I’m the CEO and I know nothing” defense, and the CIO operation is looking more and more Enron-like with every passing day.
    Snip.
    The head of the CIO group was working from home, the CIO treasurer’s office was vacant (a fact which hadn’t been publically disclosed), limits procedures and controls were reportedly revised by staff that normally wouldn’t have that authority. The unit was apparently exposed to the classic ‘Key man risk’ problem we witnessed with Jon Corzine at MFGlobal. If the risk committee didn’t acknowledge this particular risk and design a process to mitigate it then the risk committee’s role in the internal control framework is also up for review. The fact that the former AIG risk head was a member of JPM’s risk oversight committee raises some eyebrows. Given that in 2011 the CIO contributed over 20% of the bank’s profit, that meant it was a significant operation and warranted close monitoring.  It would constitute an egregious internal control breakdown, NOT an egregious ‘mistake’ if any of these people risks were not adequately mitigated.
    Sweeeeeeeet, eh? Nobody minding the store?

    A reader  comment on the JP Morgan mess:

    “(VAR, value-at-risk) is a work of rare idiocy. A model carry the implicit premise of heads, the banks win; tails, the rest of us lose. “

    http://www.nakedcapitalism.com/...

    "I don't feel the change yet". Velma Hart

    by Superpole on Thu May 24, 2012 at 09:49:51 AM PDT

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