Tyler Durden’s analysis on the whale of the blowup over in Jamie Dimon’s house. His thesis is most disturbing: JPM was willing to take such large risks as they knew they’d be bailed out if they went bust.
Read the article here.
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I’d call it the prop “trading” desk.
The big blowups suggest to me that, without restraints from top management, or from government regulators, the incentives given to traders encourage them to let “trading” morph into pure gambling.
If it is gambling, my thoughts are:
1) gambling isn’t a productive activity, but instead is deserving of higher “sin” taxes rather than special tax treatment aimed at encouraging productive economic activity
2) the money being wagered too often turns out to belong to somebody who didn’t approve use of their money for gambling
3) winnings and losses are not allocated in an equitable fashion (no such thing as large negative annual bonuses), and losses sometimes end up being allocated to people (including taxpayers) who get little or nothing when there are winnings.