The Wrong Risks: What a Hedge Gone Awry at JPMorgan Chase Tells Us about What's Wrong with Dodd-Frank
Rainer Kattel and
Economics Policy Note Archive from Levy Economics Institute
What can we learn from JPMorgan Chase's recent self-proclaimed "stupidity" in attempting to hedge the bank's global risk position? Clearly, the description of the bank's trading as "sloppy" and reflecting "bad judgment" was designed to prevent the press reports of large losses from being used to justify the introduction of more stringent regulation of large, multifunction financial institutions. But the lessons to be drawn are not to be found in the specifics of the hedges that were put on to protect the bank from an anticipated decline in the value of its corporate bond holdings, or in any of its other global portfolio hedging activities. The first lesson is this: despite their acumen in avoiding the worst excesses of the subprime crisis, the bank's top managers did not have a good idea of its exposure, which serves as evidence that the bank was "too big to manage." And if it was too big to manage, it was clearly too big to regulate effectively.
New Economics Papers: this item is included in nep-ban, nep-hpe, nep-pke and nep-rmg
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:lev:levypn:12-06
Access Statistics for this paper
More papers in Economics Policy Note Archive from Levy Economics Institute
Bibliographic data for series maintained by Elizabeth Dunn ( this e-mail address is bad, please contact ).