It Sure Helps to be a Prominent Democrat

Most folks who follow the financial news know that JP Morgan Chase lost somewhere about $2 billion on a failed hedging strategy involving derrivatives. This $2 billion belonged to the bank and the lost did not even wipe out the expected profit for the current quarter. Nevertheless, the news media is going all out to cover the story. Here is the latest headline that I just saw: "JP Morgan: Do they even know how they lost $2 billion?"

The headline is, of course, misleading. The bank is not disclosing details of the bad positions since they still hold some of them and want to be able to close them out without a massive market pressure caused by disclosure which might increase the total loss. Indeed, it is entirely possible that the total loss will be substantially less once the positions are closed. In other words, not only does the bank know what the failed trades are, it has a coherent stratgy to close them out and minimize the loss.

Let's contrast this with the way the media treated the bankruptcy of MF Global last fall. MF Global lost $1.2 billion of clients' money from their accounts when it declared bankruptcy. Since then, the high officials of that firm have claimed that they do not know where the $1.2 billion actually went. Investigators say that they have managed to find out where the money went, and the news does not sound good. Indeed, indications are that the money was transferred with the direct consent of John Corzine, the then chairman of MF Global. Corzine, of course, is the former Democrat senator and governor of New Jersey. He was also Obama's "go to guy" on how to deal with the economy according to Joe Biden. There have been no charges brought by the Obama administration for Corzine's alleged looting of the customer accounts. Further, most of the news media has not bothered to cover the MF Global story in detail. Mf Global lost about the same amount as JP Morgan Chase, but MF took the funds from its custormers while Chase was using bank funds. MF claimed not to know where the funds went, while Chase knew exactly what happened. The MF affair seems laced with potentially illegal conduct while there is no hint of criminal conduct at Chase. But the media is all over the Chase story and hardly touched the scandal at MF Global. I guess that proves the adage that it sure helps to be a prominent Democrat. Corzine must have been given a "get out of jail free" card.