By Pam Martens: June 26, 2012
JPMorgan Chase filed a prospectus today for a structured investment linked to Starbucks’ common stock. Based on the language of the prospectus, it sounds like JPMorgan has not completely unwound itself from its troublesome derivative trades: “…we may hold certain of our current synthetic credit positions for the longer term and, accordingly, the net income in our Corporate segment will likely be more volatile in future periods than it has been in the past. These and any future losses may lead to heightened regulatory scrutiny and additional regulatory or legal proceedings against us, and may continue to adversely affect our credit ratings and credit spreads and, as a result, the market value of the notes. See our quarterly report on Form 10-Q for the quarter ended March 31, 2012; ‘Risk Factors — Risk Management — JPMorgan Chase’s framework for managing risks may not be effective in mitigating risk and loss to the Firm…’ ”
Think about that sentence for a moment. The largest bank in the U.S. by assets, with $2.3 trillion on its balance sheet and $70.1 trillion in derivatives as of December 31, 2012, who took $25 billion under TARP and over $400 billion from the Fed’s lending facilities during the Wall Street meltdown, is now telling the public that its framework for managing risk may suck, not just in the past but in the future.