Wall Street Employees Lose $2 Billion in Their 401(k)s

Wall Street employees, who dispense financial advice to individuals and companies, aren’t following a basic investing tenet with their own money: diversification. Workers at the five largest Wall Street banks saw the value of company stock in their 401(k) accounts, sometimes the biggest holding of those plans, decline more than $2 billion last year, according to annual filings. Those losses don’t include shares received as bonuses.

The 2001 collapse of Enron Corp. led to warnings that tying retirement funds to an employer’s stock could be more crippling when a company fails, resulting in the loss of both a nest egg as well as a source of income. Traders and bankers felt the pain of last year’s decline in revenue from job cuts and lower bonuses in addition to the shrinking of their 401(k) accounts.

“You’re already relying on that company for your job, your income, benefits and everything else,” said Chris Baker, co- founder of Carmel, Indiana-based Oaktree Financial Advisors Inc., which manages $100 million and primarily advises employees of drugmaker Eli Lilly & Co. “It’s not just another stock. It can magnify the impact on your personal finances if your portfolio takes a beating and your employer isn’t doing well.” Read more >>

Bankers constantly lying, defrauding; most still not in jail

Barclays, JPMorgan and the rest of the megabanks reach new heights in malfeasance, suffer few consequences
By Alex Pareene

Has there ever been a better time to be a disastrously inept banker? Well, probably — over the course of human civilization it’s almost always been a pretty good time to be a banker — but today’s finance titans seem uniquely immune to punishment of any sort.

JP Morgan Derivatives Exposure: Systemic Risk Is Everywhere

The $2 billion loss of JP Morgan in derivatives trading is signaling, once again, the enormous risks big banks take with taxpayer backing.  All U.S. banks are covered by the FDIC, and if a loss is big enough, it could threaten the financial system just as it did in 2008.  JP Morgan has $70 trillion in total derivative exposure. 

The entire world has a little more than $700 trillion in derivative exposure, and one bank has 10% of all the derivative exposure on the planet!  If JP Morgan gets into trouble, it alone could cause systemic failure.  Today, the FBI announced an investigation into the surprise $2 billion (or more) trading loss that happened last week at the bank. 

Reuters reported, “The probe was seen in some quarters as necessary, given the ongoing debate in Washington about bank regulation and reform, and one expert said it raised the level of concern around what happened.  ‘The FBI looks for evidence of crimes and goes after people who it alleges are criminals. They want to send people to jail. The SEC pursues all sorts of wrongdoing, imposes fines and is half as scary as the FBI,’ said Erik Gordon, a professor in the law and business schools at the University of Michigan.” More...

As SEC Downloads More Cross-Dressing Porn, JPMorgan Lights the Fuse

Don’t worry your pretty little heads, JPMorgan Chase & Co. Chief Financial Officer Douglas Braunstein seemed to assure listeners on the bank’s quarterly earnings conference call last month. Regulators knew everything JPMorgan’s chief investment office was doing, he said.

In other words: Clearly there wasn’t a problem, because if there was, the regulators would have seen it. And of course, by all indications, they didn’t see it, even though they were embedded in JPMorgan’s offices. On May 10, JPMorgan divulged $2 billion of intra-quarter trading losses and said they might get worse. Once again, regulators seem to have been oblivious to huge risks at a bank they were supposed to be overseeing. To JPMorgan, however, they also have served a valuable purpose.

Having regulators around the clock at JPMorgan reinforces market expectations that the government has an obligation to stand behind the bank should it run into more serious trouble. Also, lest anyone forget, JPMorgan’s chief executive officer, Jamie Dimon, sits on the board of the Federal Reserve Bank of New York, even as the Fed is one of the agencies now investigating JPMorgan’s trading debacle. More...