Lessons not Learned

One would have thought that after the disasters of 2008 the financial industry would have learned some lessons on how not to run their businesses. However, judging from the blockbuster news that the esteemed JPMorganChase recently lost $2 billion using extremely risky and as it turns out stupid trading strategies.  Theses strategies involved the "hedging" of very complicated derivative securities.  Yes, those same type of derivatives that got us in all that trouble in 2008.  These credit derivatives are essentially a "paper" product developed with the use of sophisticated computer software developed by the best and brightest of the nation's business schools.  The type of trade that led to the $2 billion trade was supposedly banned by post-2008 regulations, but as usual Chase used paid for legal opinions to claim they were within the law.  They were not and now we see the heads starting to roll. The entire episode disgusts me.

I worked on Wall Street for more than thirty years and the culture then was so much different than today. When I obtained by first job as a research analyst I had to learn how to use a slide ruler for calculations. There were no such things as computers let alone the overall technology that drives the Street today. When I worked on the Street the commercial banking industry didn't play the important role that it plays today. It was a simpler more clear cut business environment and I'm glad I was able to work on the Street during that period.  Investment fundamentals were the important items not the latest no-value derivative product. However, what really frosts me in the latest debacle is the arrogance of it all.  In a capitalist society there must in my opinion be a profit motive or the entire concept collapses. However, there must be limits.  This country has moved to break up monopolies and reigned in the robber barons.  It's time for the morons in Washington to get tough with Wall Street but I'm surely not holding my breath on that one since many of those elected to represent "us" only represent their biggest donors many of which work on Wall Street.

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