Billions and Billions!
So the venerable J.P. Morgan with the fortress balance sheet and exemplary risk control posts a $2B+ loss. Quite a shocking number but not surprising.
The banks are scrounging for ways to make money. With the Fed printing money and buying Treasuries, the yield curve is historically flat, so they can’t take deposits at one percent and invest in the long end to make five or six. The rates just aren’t there. With all of the regulation, liquidity in the fixed income markets is drastically reduced, so client trading revenues are way down. They are scared to lend money in this economy. So they take market risk – those evil banks!
I can remember when Sandy Weill walked through my office years ago and talking up the Travelers Citibank merger and how Glass Steagall should be repealed. This would remove the Chinese Wall between commercial and investment banks. I recall thinking there would be consequences in the long run.
They say, “If you don’t know history you are doomed to repeat it,” for a reason.