Roubini: JP Morgan, Dimon Guilty of 'Arrogant Violation' of Volker Rule

"JP Morgan & Dimon were not hedging. They were involved in pure & sheer speculation in arrogant violation of the spirit of the Volcker rule," Nouriel Roubini comments on his Twitter page.

(May 21, 2012) — Economist and avid Tweeter Nouriel Roubini has commented on his Twitter page that JP Morgan and its CEO Jamie Dimon were not hedging, but were involved in “pure and sheer speculation in arrogant violation of the spirit of the Volcker rule”.

Dimon had long criticized regulation, particularly the Volker rule, which aims to limit banks’ ability to trade for their own profit. With the recent trading fiasco in the spotlight, however, industry sources say the CEO will be forced to rebuild the bank’s faltering reputation, regaining public trust in the bank’s ability to avoid losses and volatility. Now, while shareholders continue to question JPMorgan’s views on regulation in light of the trading loss, Dimon has said the bank is “not against new regulations,” but that “we all want better, smarter … regulation.”

Meanwhile, Dimon asserted that the firm does not foresee any scenario in which trading losses in its Chief Investment Office would amount to a disaster. “We’re looking at all the potential outcomes” from the unit’s trades,” Dimon said at an investor conference, according to Bloomberg. “There’s no outcome that will be a disaster for this company.”

“I am not sitting here worried about the ultimate loss on this thing,” Dimon added.

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The banking giant has battled increasing scrutiny following a faulty trade that resulted in about $2 billion in losses as of May 10, which Dimon said stemmed from hedging improperly and could widen by $1 billion in losses this quarter. Shareholders and regulators are now focusing greater attention on the bank’s risk-management practices.

Since the announcement of the $2 billion loss, the company’s stock has fallen more than 21% and lost nearly $30 billion of market value.

Former UK Leader Tells Dartmouth: ‘Make Finance Global’

The former parliamentary leader of the United Kingdom has told one of the most prestigious institutions in the United States that financial decisions must be taken on a global level.

(May 21, 2012)  —  The former Prime Minister of the United Kingdom has called for global decision-making on economic matters at a lecture with the future head of the World Bank.

Gordon Brown, the former UK Chancellor and PM who led the country amid the onset of the financial crisis, addressed an audience at the Tuck Business School of Dartmouth College, New Hampshire last week.

Brown said: “It’s time for a declaration of interdependence. The decisions that we should make, we should make together.”

He shared a stage with Dartmouth President, Jim Yong Kim, who is to take up the role of President of the World Bank in July.

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The announcement last month of the future president’s appointment was showered with disapproval by some, who claimed Kim’s background had been overwhelmingly in healthcare, rather than finance. In July he is set to be in charge of a staff of 9,000 economists and development experts, and a loan portfolio that reached $258 billion last year.

Brown said: “I hold out the prospect that if we work together, if the leadership of (Kim) and others is effective, then we can in these next 10 or 15 years move from a world that in some cases seems unsustainable, and in some cases seems to be unfair, and in some cases actually seems to be irresponsible.”

Dartmouth has been the academic home to several leading economists. Alumni include former US Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner.  Former Bank of England Monetary Policy Committee Member David ‘Danny’ Blanchflower joined the college in 1989 and is now Bruce V. Rauner Professor of Economics at the institution.

For an in-depth interview with Blanchflower, see the next issue of aiCIO, published in June.

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