Wednesday, March 14, 2012

Fed States JPM Might Lose 0.0000043% Under Worst Case Scenario

Bloomberg reports that JPMorgan and Goldman Sachs had an estimated $27.7 billion and $27.1 billion in projected trading losses under the stress test scenarios, leading all 19 firms 'tested'. 
With $61.53 TRILLION in OTC swap derivatives, who in their right mind can possibly believe that JP Morgan's trading losses under the worst possible scenario would be a mere $27.7 billion!?!
$27.7 billion in losses on an OTC swap position of $61.53 TRILLION is 0.0000043%!  The Fed expects us to believe that a 0.0000043% trading loss is the worst possible outcome JP Morgan might face!?!

JP Morgan's maximum trading losses are estimated by Bernanke to be $27.1 billion when The Morgue requires $71 billion in bonds DAILY simply to hedge its IR swap book!?!

JPMorgan Chase & Co. (JPM), which produced the most trading revenue among Wall Street firms last year, had the highest trading and counter-party losses of the biggest U.S. banks under the Federal Reserve’s stress scenario.
JPMorgan had an estimated $27.7 billion in projected losses from mark-to-market changes, credit valuation adjustments and counterparty default losses, according to the Fed results released yesterday. Goldman Sachs Group Inc. (GS) had an estimated $27.1 billion of such losses in the testing.
The Fed is requiring the nation’s largest lenders to show they have credible plans for maintaining capital and continuing lending in an economic downturn. The six largest U.S. banks had a projected $116 billion in trading and counter-party losses, larger than the 19 banks subjected to Fed’s stress tests had in any lending area.
“The relative size of losses across firms depends not on nominal portfolio size, but rather on the specific risk characteristics of each BHC’s trading positions, inclusive of hedges,” the Fed said in the report. BHC stands for bank holding company.
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