JPMorgan’s soap opera makes clear that Wall Street is detached from reality

Jamie Dimon was right about one thing: The embarrassing $3-billion-and-counting trading loss at JPMorgan 

Chase has played right into the hands of pundits who think Wall Street needs to be put on a shorter leash.

Honestly, we pundits probably couldn’t have made up a better story than this one:

A secretive trading operation whose ostensible purpose is to hedge risks that actually makes a quarter of the giant bank’s total profits doing just the opposite.

A cocky London derivatives trader with the nickname of Voldemort who overplays his hand and finds himself squeezed by a couple of hedge fund sharks who pocket tens of millions of dollars profiting from his miscalculation.

Risk management models that were flawed and risk managers who were ignored.

Press warnings that were dismissed as a “tempest in a teapot” by a celebrity chief executive who seems to have been unaware of the risk in a $100 billion trading position.

And all of it going on right there under the noses of resident bank examiners desperate to show they won’t let it happen again.

So much for the idea that the greatest threat to the financial system is overzealous government regulation.

Aside from the embarrassment and the short-term financial hit, the real damage to JPMorgan is that it exposed how the big Wall Street banks were planning to get around the new Volcker rule, by which Congress meant to prevent the too-big-to-fail banks from taking hedge-fund-like risks with their own capital or borrowed money. Rather than running these trades through their old “proprietary trading desks,” which used to generate a majority of their profits, the Volcker work-around plan would disguise such trading as part of the bank’s normal hedging operations.

http://www.washingtonpost.com/jpmorgans-soap-opera-makes-clear-that-wall-street-is-detached-from-reality/2012/05/18/gIQAIJwvbU_story.html

Chinese Human Rights Activist Chen Thanks U.S. For Help

Chinese human rights activist Chen Guangcheng, whose case overshadowed high-level U.S.-China talks earlier this month, arrived in New York City and thanked the U.S. for helping him leave Beijing.

Chen, at a brief news conference yesterday near New York University, where he has a fellowship to study law, expressed gratitude for the encouragement he received from supporters around the world. He also said he appreciated the “cool heads” in the Chinese government.

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Chen Guangcheng, left, walks with Kurt Campbell, U.S. assistant secretary of state, right, and Gary Locke, U.S. Ambassador to China, center, in Beijing on May 2. Source: Photograph by U.S. Embassy Beijing Press Office via Bloomberg

“I hope the Chinese government will continue the course of reform and earn the respect of its people,” Chen said, while adding that he was concerned about further reprisals against supporters and other family members by local authorities.

His exit resolves a dispute that has complicated U.S.-China relations since he turned up at the American embassy in Beijing on April 26 after escaping detention in Shandong province. For President Barack Obama, running for re-election, it puts to rest an issue over which he has been berated by Republicans for not being tough enough on China.

Chen, who is blind, flew to New Jersey’s Newark Liberty International Airport yesterday aboard United Continental Holdings Inc. flight 88 from the Chinese capital. New York University law professor Jerome Cohen, a friend and supporter, arranged the fellowship to enable Chen to study there.

http://www.bloomberg.com/news/2012-05-19/chinese-human-rights-activist-chen-lands-at-newark-airport.html

Iranian Minister Predicts Oil Price Rise With Sanctions

Iranian Economy Minister Shamseddin Hosseini said international oil prices will rise under sanctions designed to persuade the Persian Gulf nation to abandon its nuclear program.

Oil prices might go as high as $160 per barrel if the European Union goes ahead with a July 1 embargo, Hosseini told CNN’s “Fareed Zakaria GPS” in an interview scheduled to air tomorrow. Group of Eight nations gathered a summit at the U.S. presidential retreat at Camp David, Maryland, discussed containing Iran’s nuclear ambitions.

“We must pay close attention when we speak of oil revenues and sanctions against oil sales, who are the winners and the losers of such sanctions?” Hosseini said. “Indeed, it is difficult. But not just for Iran. And we can all rest assured that there will be a considerable increase in international oil market prices. Now, is this the best approach?”

Hosseini said his country has endured sanctions for 33 years and “this really shows that the economy, the economic strength of Iran is in such a way that can withstand these sanctions and will not be the only economy to suffer.”

Leaders from the G-8 nations said they “stand ready” to call on the International Energy Agencyto take “appropriate action” to guarantee supplies in response to disruptions.

http://www.bloomberg.com/news/2012-05-19/iranian-minister-predicts-oil-price-rise-with-sanctions.html