What Does The JPMorgan Loss Mean?Posted by Phil Ferguson on May 16th, 2012 – 4 Comments – Posted in Finance
Post by Phil Ferguson
NOTE: This post is part of an ongoing education series. This information is for educational purposes only. This information does not constitute investment advice. No rational person would make investment decisions based on a blog post. Please consult with your financial advisor before taking any action. If you wish to have specific advice for your situation please contact Polaris Financial Planning.
NEW YORK (CNNMoney) — President Barack Obama said Monday that a $2 billion trading loss suffered by JPMorgan Chase is “why Wall Street reform is so important.”
It is not just important – it is critical. You have heard the phrase before..these banks are too big to fail. Sadly this is true. However, that phrase is too long. It should be, “These banks are too big.” The solution is to break them up.
“…six financial institutions, the largest six, that have assets that are the equivalent of 60 percent of the GDP of the United States of America…” – Bernie Sanders
Here are the top 6….(numbers in BILLIONS)
Bank of America $2,136
Wells Fargo $1,313
Goldman Sachs $923
These 6 banks own $9,313 BILLION in assets and US GDP is $15,462 BILLION (that is around 60%) . JPMorgan alone has 15% of the total and they just lost $2 billion – $2,000,000,000! This is a huge amount of money and it is from a division of the company that is supposed to hedge against risk. This is the part of the bank that should balance out anything risky that the bank may do.
Banks need to be safe and stable and they need to loan out money to companies so they can grow. However, a large part of their business is now gambling on risky activities. The banks need to be just banks and they need to be smaller. We as a country have done things like this before. In the early 80’s AT&T was split into several companies and in 1911 Standard oil was divided.
It is time to do it again.
Here is a clip of Elizabeth Warren and she explains it better than me. She is the former Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau. She is currently a candidate in the 2012 United States Senate election in Massachusetts and could be one of the most important voices in our government. She will have my vote if she runs for president in 2016.