JPMorgan Chase Spends $500 Million On a Data Center

1sockchuck writes "JPMorgan Chase spends $500 million to build a data center, according to CEO Jamie Dimon. That figure places the firm's facilities among the most expensive in the industry, on a par with investments by Google and Microsoft in their largest data centers. Dimon discussed the firm's IT spending in an interview in which he asserts that huge data centers are among the advantages of ginormous banks. Dimon also offered a vigorous defense of the U.S. banking industry. 'Most bankers are decent, honorable people,' Dimon says. 'We're wrapped up in all this crap right now. We made a mistake. We're sorry. It doesn't detract from all the good things we've done. I am not responsible for the financial crisis.'"

Comments

We're Sorry...

[Anonymous Coward]

Ya... they're sorry; sorry all the way to the bank!

Wait...

Re:We're Sorry...

[tooyoung]

Sorry to hitchhike on a top thread, but in case anyone came here for interesting discussion regarding a $500 million data center, there is not a single comment below dealing with the topic. Just partisan bickering about TARP, etc.

Re:We're Sorry...

[drkstr1]

Thanks for the warning.

Re:We're Sorry...

[bungo]

Well, that does appear to happen more and more these days, instead of discussing the technology aspect, the discussions veer towards pro/negative comments about the companies involved.

Also, discussions are getting hijacked by partisan politics, which I suppose is only to be expected given that election season is ramping up.

To be fair, I did read TFAs, and they really didn't have much about the technology and what they were going to do, other than having some fat pipes and more servers to speed up response time. The articles don't give much to discuss, technology wise, but the socio-political situation around the company involved is quite sensitive, so it's not unreasonable that the discussion heads in that direction.

Re:We're Sorry...

[Evtim]

The last message of the financial sector to humanity, just before civilization goes to hell (written with 30 meter-high letters composed of glued banknotes):

"We apologize for the inconvenience!"

Re:We're Sorry...

[SlippyToad]

Also, discussions are getting hijacked by partisan politics, which I suppose is only to be expected given that election season is ramping up.

OK, you've been here longer than me and you don't know about political discussions on Slashdot? Did you like take a 10-year vacation or something?

And, to be fair, the article invites discussion of Dimon's views on the crisis and his culpability because, well, they are RIGHT THERE IN THE WRITEUP.

I also don't give a shit about Chase's 500 million dollar data center, only about the fact that I too got fucked in the ass by them and am not impressed by Mr. Dimon and his obviously-crooked company either.

Re:We're Sorry...

[emaname]

Thanks, tooyoung. You just saved me some time and irritation.

Re:We're Sorry...

[bungo]

Hmm.... check the category that this was posted under, you'll find that it is "hardware".

While of course I'm aware of political discussions taking place here for a number of years, politics used to come under YRO.

These days, it's appearing everywhere, and the ratio of tech/politics is very low for tech.

If you really want to just complain about banking bailouts, surely there are other places than somewhere that the intended discussion was about tech? I mean, I agree, and feel that the banks shouldn't have been able to get away with what they did, but in the context of this submission, it's off-topic.

Huh.

[dyingtolive]

How much does JPM still owe the US Government?

Re:Huh.

[Sarten-X]

Apart from the normal everyday fractional-reserve loans from the Federal Reserve Bank, JPMorgan probably owes close to $0. I'm assuming you were referring to the $25 billion in bailout money, which was apparently paid in full.

Re:Huh.

[Anonymous Coward]

JPMC repaid TARP funds around June 17, 2009. http://dealbook.nytimes.com/2009/06/17/jpmorgan-repays-treasury-as-tarp-exits-continue/

June 17, 2009 -- JPMorgan Chase & Co. (NYSE: JPM) announced today that it repaid in full the $25 billion preferred stock investment it accepted through the Troubled Asset Relief Program (TARP). In addition to this principal amount, JPMorgan Chase has paid the U. S. Treasury an aggregate of $795,138,889 in dividends on the preferred stock, including dividends that had accrued through the redemption date. The company will also notify the U.S. Treasury today of its intent to repurchase the 10-year warrant issued to the Treasury in connection with the preferred investment.

Re:Huh.

[cpu6502]

Yeah ProPublica is wrong. It's called an accounting trick. Borrow money from the government in loan #2, and then pay back the government on loan #1 (TARP). General Motors pulled the same schenanigans when it claimed to "pay back" the loans, but in fact is still deep in debt to the government.

It's reminiscient to how a certain president (I'll let you guess) claimed to "put 100,000 more cops on the street". In reality the law said 100,000 cops or 100,000 cop-equivalents... like new computers. Most departments spent the money on computers and only hired an additional ~500 actual cops.

When you listen to a politician or CEO or marketer you have to realize they are not lying to you. Instead they are redefining words on the fly (a "cop" is not really a cop... could be a computer), or omitting crucial information (we paid TARP, but we borrowed money to do it).

Re:Huh.

[Anonymous Coward]

That's great. So, all I need to remember is that if anything goes wrong at JPMorgan and a cascade of other banks that hold up the economy, I just have to keep a few hundred billion in taxpayer money around to cover them if their gambling bets go bad, and they'll be nice enough to pay me whatever the going rate is. Never mind that in the interim, while they are getting their balance sheets back in order and making profits again, millions of people will be thrown out of work and be struggling to survive economically for multiple years after those risky bets go sour, costing individual people a lot more money than what ever went out from the government. I'll continue to provide the backing for this huge, high-stakes, highly-profitable Wall Street gambling consortium, and in return I'll just take a modest cut if and when things go bad.

Yeah, sign me up for that deal.

I'll be impressed when the banks can tell me with confidence that I'll never have to cover their bets again, under penalty of law that will result in confiscation of their entire business if they don't. Either that, or I at least expect much higher than prime interest rate of return for my investment -- preferably paid in advance every year as a cost of doing business as "financial hazard insurance". They want that service from the taxpayer? Pay up. We sure as hell do for any service we request from the banks, including accessing our own money.

Paying us back is great, but it doesn't change the fact that we were and still are being played for suckers by socializing the risks and letting them privatize the profits.

Re:Huh.

[NemosomeN]

In GM's case, yes, it was an accounting trick. In JP Morgan's case, Goldman's Case, and in the case of several other banks, it's not. All of the big banks were forced to take loans from TARP; many of them didn't want to. It's widely believed that JP Morgan was among the banks that did not need or want the loans, and has therefore almost certainly paid them all back.

If you don't believe me, please, prove me wrong. Provide some evidence that JP Morgan still owes the government money, even on gross. (On net, I would be willing to bet they are owed money, due to treasury holdings).

Re:Huh.

[Sarten-X]

[citation needed]

Specifically, I'm wondering which government program (or anybody else, for that matter) provided the funds for loan #2? I doubt it'd be the Federal Reserve Bank, which wouldn't lend out that much money in the first place (hence necessitating the bailouts) without more cash being in the JPM's reserves.

In fact, JPM's corporate debt is at its lowest since the bailout, regardless of the source.

That's okay... you can feel free to keep ranting about politics if it makes you feel better.

Re:Huh.

[khallow]

If you don't believe me, please, prove me wrong.

I'd love to be able to prove your assertions one way or another. But how to do that? This sort of speculation veers on being unfalsifiable.

Re:Huh.

[glodime]

Would you care to cite any sources for this info on TARP being paid back by additional loans from the government?

Re:Huh.

[timeOday]

Goldman (and JP Morgan?) don't owe the government anything because they were simply gifted enough money to stay afloat, free and clear. This was done by the government paying AIGs debts to Goldman, even though they were unregulated, non-FDIC arrangements. In other words, the banking industry set up a scapegoat (AIG) to receive bailouts for it and then die, which it did. So Goldman and the others get their cake ($$$ with 9 zeros) and eat it too (carping about how they never wanted and didn't need TARP).

Re:Huh.

[NemosomeN]

They got a fair interest rate. They borrowed $25B, and paid it back 7 months and 20 days later. The revenue to the government was $1.7 B.

It was preferred stock with a 5% dividend, with warrants attached. This basically means the banks sold stock to the government with a required, 5% dividend. The government also received warrants, which allow them to purchase additional common stock at a predetermined price (These warrants were dilutive, that is, existing shareholders pay for the government's profit when they are exercised). The banks "repaid" the loans by buying back the preferred stock. The government was then left with the ability to buy shares of the banks at a discount if their stock performed well (If the share price was greater than the exercise price of the warrants, the government would purchase the shares at a discount).

TARP was certainly not a sweetheart deal. Bernanke and Paulson (Not Geithner) sat in a room and basically said they were going to offer the banks the loans, but it was all or nothing. If anyone refused to take the loans, no banks would be able to borrow. Any bank that had refused would have gone down in history as "The bank that vetoed the bailout." Payback was also forcibly delayed. The idea was that if half of the banks took loans and half didn't, the market would panic, selling the banks that took loans and buying the banks that didn't. This would have caused the bailout to fail immediately, and, in fact, have the opposite of the desired effect.

I guess to answer your question; yes, I have an opinion.

Re:Huh.

[NemosomeN]

He's probably referring to what's mentioned below. Last two paragraphs. GM paid back the cash portion of the bailout with the cash that was held in escrow. I think this piece is a little shaky, it appears they just gave the cash part of the loan back unspent. Regardless, it doesn't matter, since most of the true bailout was with a stock purchase. I am not a fan of the GM bailout. The idea that 1,000,000 automaker related jobs were at risk is absurd. If a GM dealership shuts down, they aren't going to sit, worthless for the foreseeable future; they are going to turn into Honda dealerships. This is the case with aftermarket parts manufacturers, domestic-only auto shops (a rarity these days), and other "automaker related jobs." The bailout was made for emotional, overly-nationalistic reasons. A large number of "foreign" cars aren't made in poorer countries like China and Mexico, they are made in poorer states like Mississippi and Alabama.

http://www.forbes.com/2010/04/23/general-motors-economy-bailout-opinions-columnists-shikha-dalmia.html

Re:Huh.

[NemosomeN]

The only part that is speculation is that it's believed that JP Morgan didn't need the money. I'd say based on the current health of the company, it's a pretty safe bet. The fact that JP Morgan has paid back TARP money is beyond question.

Re:Huh.

[NemosomeN]

That dastardly Obama and his accomplice, George W. Bush, who signed it into law in December of 2008 before Obama was in office. The union vote would have certainly gone to the Republicans had Obama not intervened!

The auto bailout was stupid, and although Bush had little to no choice, (Why veto a bailout that's going to get signed a month later, and cost more because of the wait?), the idea that it was to secure the union vote when signed into law AFTER Obama was elected but BEFORE he took office is absurd. The Democrats had the union vote already, and they'll have it this year, too. No action necessary. The Republicans don't even want the union vote. Yes, additional, larger bailouts were approved afterwards by Obama, but again, he already had their votes, and would still have them now even if he didn't bail out the automakers.

Re:Huh.

[Anonymous Coward]

"It's not exactly "taxpayer money"." "the money are more or less conjured out of thin air"

You sir are confused. Did a private corporation or wealthy individual bailout these corporations with their money or was this engineered and financed by the federal government? I seem to remember something about some legislation called the TARP program.

Conjured out of thin air? Did you write this with a straight face?

Obama clearly is capable of amazing things. Was this money "conjured" up from states 51 through 58?

So how then is this not taxpayer money? How indeed?

What money is it that the state (the collective state) has, that is *not* taxpayer money? What do they produce that generates income other than the confiscation of the wealth of the productive citizen? Do they make widgets? Do they produce corn or beef? Do they drill for oil or sell lemonade? Which is it sir?

Truth be told you answered your own question rather schizophrenically with your assertion that

"its not 'free', the USD gets weaker, ie you can buy less for your money, and inflation increases".

Inflation IS a tax, although slightly obscure... which of course if why they like it.

You do understand this no?

Re:Huh.

[NemosomeN]

The Fed ALWAYS extends short-term loans via the discount window. The Fed gave preferential rates because they had incentives that the private lenders did not -- to lower rates without regard for profit. This was a big story when it came out because everyone screamed "$7.7 trillion" when it was really more like $77 Billion in overnight loans, every night for 100 days (Not real numbers, but the math is the same. $ * days = $7.7 trillion, $7.7 trillion / days = average daily on-loan balance. At NO point did the government have $7.7 trillion at risk). These loans were to stimulate lending at the banks, lending is how banks make their money, so of course, the banks profited from this lending. It was a legitimate story, but the numbers were overblown for dramatic effect, something I would not expect from Bloomberg, and they took some heat for it.

Re:Huh.

[glodime]

Thanks. I didn't think that the TARP funds that went to banks were paid off by other government loans. The GM bailout has little to nothing to do with any bank bailouts. So, I don't understand why cpu6502 brought it up.

Re:Huh.

[Quiet_Desperation]

Was this money "conjured" up from states 51 through 58?

Shhhh! No one must speak of the Stealth States.

Re:Huh.

[glodime]

The case of AIG created all sorts of systematic and regulatory trouble. More questions were raise than answered in the handling of AIG.

Re:Huh.

[slick7]

How much does JPM still owe the US Government?

Nothing, they got their $3TTTTTTTrillion - $500 MMMMMMMilion = $3TTTTTTTrillion.

How's that for Bankster math?

Re:Huh.

[NemosomeN]

I'm only speculating, so I'd wait for a response from him on what he was referring to. I would imagine though, that GM is what he was thinking of, but I defer to him to clarify. Even though the bailouts weren't really related, they happened at pretty much the same time.

Re:Huh.

[NemosomeN]

The risk appetite was so low that banks didn't want to lend anything. The rates they would have required would have been absurd. The market interest rate was one at which nobody would transact. It wasn't so much a subsidy as it was a poorly negotiated loan from a lender that was less concerned about risk and more concerned about the transaction occurring. The market interest rate was not rationally based on default risk, it was based on uncertainty about the market as a whole. The government was the only lender with enough capital (unlimited) to adequately diversify risk away.

Re:Huh.

[slimjim8094]

I happen to know personally that JPM didn't have any interest in the government money (who wants government debt?) and didn't need it (they didn't get into subprime stuff) but they agreed that it was necessary to take it to prevent a panic. They paid it back in full as soon as they were allowed to.

There's a lot of hatred at banks around here, and most of it is fair. But frankly JPM isn't one of them. They're even in favor of tougher (and substantive!) regulations because the uncertainty of crashes hurts them as much as the rest of us.

Re:Huh.

[Sarten-X]

Having lived in Michigan in 2008, I can offer some insight into those million disappearing jobs. They're real. They're almost all in the northern Midwest, in the supply chains heading into Detroit. Machine shops in the area are commonly contracted out for a year at a time making a single set of parts for a car, with full expectation of getting a new contract when that one's filled. Around the massive part plants, other dependent industries grow to serve the hundreds of workers at the big plant - restaurants, grocery stores, strip malls... anything a worker would be likely to stop at on his way home from work.

While the idea that a single car company's reorganization would directly affect that many jobs is indeed absurd, the indirect jobs are just as dependent on Detroit's stability. One lost contract at a small plant can put a few thousand people out of work, and most of them aren't comfortably over the union's safety net. Those contracts aren't exactly easy to come by, either, so if a major manufacturer like GM or Chrysler has to back out of their contracts, it could easily be a few years before the plant could start up again.

Re:Huh.

[Sarten-X]

It's worth noting that almost 100% of those overnight loans were repaid, as well. I'm too lazy to look up the details, but out of the trillions of total dollars loaned (a few billion at a time, as you said), a few hundred thousand dollars were outstanding last time I checked.

Re:Huh.

[NemosomeN]

I would be shocked if less than 100% of overnight loans weren't paid back.

Re:Huh.

[NemosomeN]

Allowing GM to default would have been extremely painful in Michigan; there's no doubt about that. The pain in Michigan would be offset in other parts of the country, and the net would ultimately be positive. But even with the bailout, things in Michigan are bad. The government should have let GM go through bankruptcy and funded make work programs in Michigan while GM got its house in order (And, likely, got absorbed by another auto manufacturer). Let the free market deal with corporations. When corporations fail, people lose jobs, and wealth is redistributed, naturally, to those who can best use it, namely other, more efficient corporations. In the mean time, the government should be using excess tax dollars (You know, from raising taxes when things are going well, to offset tax cuts in lean times) to fund welfare benefits for those who fall victim to the natural business cycle.

Re:Huh.

[NemosomeN]

Fucking HTML. That post was formatted nicely before I forgot to preview.

Re:Huh.

[NemosomeN]

Interestingly, the google search you linked to does not contain a result for the market value of derivatives. Rather, it only contains a figure for the amount of cash that would have to be transferred if all derivative contracts were triggered simultaneously, a circumstance that is impossible. I wrote up a scenario, but the Company A, B, C, D, etc. just got too onerous. Anyone on /. should be able to do the math on their own. In a closed system, it's impossible for everyone to default at the same time.

Re:Huh.

[Gumbercules!!]

Oh about 500 million....


Hang on a minute!

Re:Huh.

[Sarten-X]

Still lazy, and this isn't really important anyway, but as I recall it was a few loans to banks that had gone bankrupt after getting the loan, or had turned their overnight loans into something longer that was still reported in the same figure... Special circumstances with so little money as not to be significant.

Re:Huh.

[tibit]

Huh? They are a publicly traded company. They have financial reporting, and a lot of it, too.

Re:Huh.

[Grishnakh]

No, fucking Slashdot for not allowing you to edit a post after it's posted.

Re:Huh.

[Sarten-X]

On the one hand, I agree... Michigan was screwed to begin with, and no less screwed now.

On the other hand, that's a lot of folks whose lives depend on having constant access to that wealth, regardless of where it's distributed.

Michigan effectively put all its eggs in one basket without realizing it. Nobody ever thought that all the Detroit car companies would be failing at once without something else in the area taking their place.

Re:Huh.

[purpledinoz]

JPM, like all other big banks, are engaged in outright fraud. Like rigging municipal bonds, where the penalty was a just fine (ie - cost of doing business). Maybe even rigging LIBOR, where I bet the end result will just be another fine. The problem is, no one goes to jail since it is now official policy not to prosecute bank fraud.

Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis.

Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. The Justice Department’s directive, involving a process known as deferred prosecutions, signaled “an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,” Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September.

The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to delay or cancel the prosecution if the companies promised to change their behavior.

Re:Huh.

[GPLHost-Thomas]

JP Morgan will soon go the way of Enron... They are engaged in multiple accounting fraud, and it already showed with their bad bets on Silver.

Re:Huh.

[GPLHost-Thomas]

Yeah, right... Like, "we're sorry, we wont steal again from everyone, we swear!" Who's going to believe this? They already crashed the world economy, stolen money by the hundreds of billions, put so many people in the streets, and doing so much fraud that it's even hard to account all of them. And all they get is "it's ok, you just have to swear not to do it again". Oh, we're safe now, thank you!

Re:Huh.

[Anonymous Coward]

"They got a fair interest rate. They borrowed $25B, and paid it back 7 months and 20 days later. The revenue to the government was $1.7 B."

Not enough. Where's the payback for the millions of people thrown out of work due to the financial crisis? If the banks want "moral hazard insurance" from the taxpayer, they should be paying much higher premiums. We should be insuring them with the same sort of premise as an ordinary person after they've had a major car accident and when they are determined to be at fault: the premiums should go *way* up, and it should persist a lot longer than it takes to pay back the loan.

As far as I'm concerned, there should be a special corporate tax applied to any bank that is deemed "too big to fail". That will either force them to stay at a size that isn't "too big to fail" (in which case we *let* them fail if things go bad), or to pay enough money in taxes to cover the risks they'll be expecting us to bail them out of for the sake of preserving the economy.

Re:Huh.

[khallow]

I bet they do. But how do you determine that they're reporting the actual financial state of the company when the regulators and they have a common interest in representing the company as being healthier than it actually is?

Re:Huh.

[NemosomeN]

I wasn't entirely comfortable with the situation either, especially considering the bailout was a loan that charged interest. I can't think of any good alternative though. The fact is, if only some banks took the loan, those banks that took the loan would be subject to extreme short pressure.

Re:Huh.

[oh_my_080980980]

Somebody works or JP Morgan.....

Re:Huh.

[jimbolauski]

Huh? They are a publicly traded company. They have financial reporting, and a lot of it, too.

So was Enron

Re:Huh.

[Svartalf]

So was Enron. So was Tyco. So was AIG. Your point?

Re:Huh.

[HornWumpus]

As they should have been. If any other company fucks up they are subject to extreme short pressure.

Too big to fail is too big to exist. They should have all been broken up.

Re:Huh.

[Quiet_Desperation]

Not sure what part of my post came across as partisan...

Re:Huh.

[NemosomeN]

Not me. Nor would I want to. They are not a good company to work for at my level.

Re:Huh.

[NemosomeN]

The issue is not companies that fucked up, it's companies that had large exposure to counterparties that fucked up. A large amount of the bailout money was used as collateral to shore up the banks' creditworthiness. I'm not saying it was a good solution, and without knowing for sure which banks, and how many banks would have turned down the bailout money, it's hard to even form an opinion about it. It's generally believed that Goldman Sachs, JP Morgan, and State Street would have turned down the money if they could have. In fact, Goldman Sachs subsequently sought additional capital from Warren Buffet just to prove to investors that GS was a good investment (Although they offered Buffet terms that were far beyond what any other investor could have gotten). The link below references internal documents relating to this, can't be bothered to find the original documents.

http://www.msnbc.msn.com/id/30750868/ns/business-stocks_and_economy/t/documents-paulson-forced-banks-bailout/#.UCr7RcWQNqA

Re:Huh.

[NemosomeN]

A LOT of financial institutions did exactly that, but not the nine that were told they had no choice.

Re:Huh.

[NemosomeN]

What the hell is this, a poem?

Re:Huh.

[tibit]

We're talking about a very specific thing -- namely the debts owed to government. That's not something that there's a big point in hiding. If their reports say those debts are repaid, and they weren't, it'd be too low hanging of a fruit for a lot of regulators not to act swiftly. Enron, Worldcom and France Telecom were a very different kind of animal; I have heard some first hand accounts from people who were the to clean up the mess. I'm not familiar with what AIG and Tyco was all about.

Re:Huh.

[HornWumpus]

Having large exposure to counter parties is _fucking up_. Counterparty risk reporting is SOP. Just another index on Position and another subtotal break on VAR reports/cubes. All risk packages have this.

The fact, in hindsight, is that some counter parties were 'too big to fail'. Hence they were assigned insanely high counter party risk limits. I bet these limits are still in place. Select * from Counterparty where Counterparty.VAR1SigmaAlertLim > 1.0EE15 (alias fields as appropriate): Those are the problems. Again I bet these expectations are still realized in the form of insane counter party risk limits running in risk management systems world economy wide. The people that are supposed to be minding the store are deliberately shutting down alarms to keep operating.

I worked in risk management for electric power trading. I am free to talk about this mess. Just don't ask me about the CA power pool. I bet there are a few people reading /. that aren't allowed and don't dare post regarding this subject.

Re:Huh.

[NemosomeN]

I don't think you should be assuming the controls in place in "electric power trading" are indicative of those in the financial sector at large. (For those who may not know, he's talking about Enron). Besides, there are a limited number of counterparties, it's just not possible to diversify all of the risk away.

Line Item

[Galactic Dominator]

It doesn't detract from all the good things we've done.

Can I get a line item listing of these "good things"?

Re:Line Item

[jhoegl]

1)Gave loans to people
a)people who couldnt afford them
a1.)When the bottom falls out, we will own them.
1a1.)

Re:Line Item

[Anonymous Coward]

Holy shit you're a brainwashed idiot.

1) Nobody makes money making sub-prime loans. It's trivial for any idiot to understand that loaning money to people who can't pay it back is a dumb idea.
2) The only reason anyone did offer sub-prime loans was because either a) they knew they could sell it to the government (Fannie and Freddie) for a profit, or b) they were forced to by the Fed's regulations requiring a certain percentage of all loans be high risk loans to poor people who were buying houses far bigger than they could afford.
3) Most of those loans were initially offered by the thousands upon thousands of real estate loan companies that sprung into existance due to the artificial market created by the Fed, not by the huge banks you've been brainwashed into hating. If you're old enough you will remember when there was a home loan business on every damn corner in every town and city.
4) The banks that still held sub-prime loans when the market crashed lost their pants. Yeah they may have owned a lot of people's houses, but those houses were worth a whole lot less than the money still owed on the loan, so how is it a good thing from any bank's point of view to "own" someone?

Re:Line Item

[kraut]

My goodness, well informed, well reasoned posting from an AC. That I lived to see this day!

Spot on!

Re:Line Item

[jhoegl]

1) Then why did so many get sub-prime loans, ending up in people still losing houses today because their payments have continuously gone up? Risk.... none to bank, all on person.
2) So then with this argument you just refuted your previous one... GG there AC... GG
3) How did the Fed create an artificial market when the market was based on supply/demand? Demand went up because people were buying houses, people were buying houses due to sub-prime loan offers not understanding the full implications
4) Yes they did, but they were thinking about the people paying them more, not walking away from the house or bankrupting themselves. The banks actually won out because they are still owed that money by the initial person, they resold the house at auction, and they can get in on the auction loans.
So yes... they do own these people for the rest of their lives or until they pay it off. Wasnt it once said, discover a way for people to keep paying you and you will be rich?
Guess what...
Oh and dont come on here all AC and spout your gibberish.

Re:Line Item

[cvtan]

They haven't had you killed...Yet.

Re:Line Item

[Capt. Skinny]

How many new substantial business ventures do you think got off the ground or went public in the last several decades without a loan? I'm talking about those large enough to have a national or even regional impact. Many businesses that provide the products we now use in our daily lives and the profits we have in our retirement portfolios simply wouldn't exist without bankers extending the loans. Whether the bankers benefit themselves or not is irrelevant (I can anticipate someone making the point that they were motivated by their own profit) -- the point is that these successful businesses are considered "good things" by a large segment of the population.

Re:Line Item

[khallow]

Risk.... none to bank, all on person.

And how is the bank going to make a profit when the loan is underwater? The best that the bank can do in that situation is to recover the loan principle. They can't keep the extra beyond that.

Yes they did, but they were thinking about the people paying them more, not walking away from the house or bankrupting themselves.

Well, there's the risk right there. When those people walk away from the house, go bankrupt, or successfully contest the bank's ownership of the loan, that all becomes losses for the bank.

Re:Line Item

[khallow]

How many new substantial business ventures do you think got off the ground or went public in the last several decades without a loan?

Quite a few. For example, high tech start ups don't bother with loans for the most part. And family investors generally are a lot easier to get, more forgiving, and more generous than bank lenders. Loans really are for businesses that have a stable, predictable business model with decent ROI and a need for a lot of capital.

Re:Line Item

[Anonymous Coward]

"And how is the bank going to make a profit when the loan is underwater? The best that the bank can do in that situation is to recover the loan principle."

Or never hold the loan in the first place. Mortgage-backed securities = The method by which known bad loans can be packaged up and sold off on the open market to investors, who are told what a great value they are.

Banks generally don't hold loans anymore. They hold servicing rights, which is the money skimmed off you every month when you make a mortgage payment. It's a transaction fee, nothing more. The loans themselves are held by institutional investors.

Summary: Loan brokers originated crappy loans they knew would default, and got their commission for doing so. Banks packaged the crappy ones into nice packages and called them "Awesome Investment Super Duper Grade" which were then sold to the duped investors. Risks to banks - zero. Until the entire financial market began to collapse. Oops.

Corporate karma. Too bad we spared them nearly all of the pain they had rightfully coming.

Re:Line Item

[glodime]

1) Nobody makes money making sub-prime loans. It's trivial for any idiot to understand that loaning money to people who can't pay it back is a dumb idea.

I don't think you know what subprime lending is.

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[rtb61]

Corporate executives on ludicrous bonus schemes make shit loads of money on loans destined to fail, in fact that was the whole problem. Immediate bonuses being paid all the way up and down the corporate executive line for shit loans, all schemed from the top down by psychopaths, who didn't care how much money their company lost, as they were all in a cosy conspiratorial relationship to protect each other from outside view.

Thanks to the whole principle of disposable labour, you now have disposable companies. At the highest levels it's all about squeezing out the maximum amount of money out of companies. From dirty off-shore off-balance sheet transactions, that while allowing the companies to cheat on taxes also allow those corporate executives to play all sorts of games with those funds, to cross company conspiratorial schemes to push around funds for no other reasons other than running up executive bonuses.

Pay close attention. It's not really companies corrupting the politics any more, it's corporate executives using company funds to corrupt politicians and government agencies, getting legislation rewritten not so much to benefit corporations but more targeted at generating more income for corporate executives regardless of the consequences for companies. Psychopaths in suits, they are every where at the top executive level.

Re:Line Item

[Anonymous Coward]

Going AC on this one:

Jamie Dimon is now and has always been a one-note executive. He became the head of JPMorgan Chase as part of the twisted merger with Bank One, in which Bank One was swallowed whole paper, yet ended up exporting a lot of its officer culture and procedures. For example, before the merger, Chase offered a single credit card brand. Bank One offered over 500. The merged bank now still supports over 500. No one is really sure WHY that happened, as JPMorgan Chase was already a much better run organization.

At the time of the merger, Dimon became essentially the President of JPMorgan Chase. When JPMorgan's CEO finally retired a year later, Dimon stepped up as the new CEO. The bank also brought on numerous other questionable practices from Bank One. At Bank One and in more than a few financial circles, Dimon was seen as a golden boy for hauling Bank One out of the fire. His entire corporate philosophy could be summed up as "trim the fat." Unfortunately for him, there really was no fat to trim at JPMorgan Chase. Oddly enough, it's hard to improve on something that's been doing well for over a century. So instead of increased profits, Dimon gave a lot of excuses.

I'm told he's charismatic. I wouldn't know: I had never heard him speak until he was recently brought before Congress. But he has never been a great CEO, and for Chase, not even a good one.

Re:Line Item

[Anonymous Coward]

To expand khallow's point: it's VERY HARD for a small company to grow by contracting loans (from a bank or similar), because any loan of a significant amount requires collateral, which most small companies don't have. Small companies grow by attracting INVESTORS, who give money as investment, which is something completely different from a loan.

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[timeOday]

1) Nobody makes money making sub-prime loans. It's trivial for any idiot to understand that loaning money to people who can't pay it back is a dumb idea.

False! Extending a loan (or owning a mortgage-backed security) to anybody is a great idea so long as I get my commission (or sell it at a markup) and no longer own it when it goes kaboom.

In your imagination, the only party willing to buy those bad loans was the government. In truth, most everybody bought them. Partially this is because the ratings agencies gave these mortgage-backed securities the highest ratings. But the notion this was a wholly government-created situation is just libertarian wishful thinking. Nations in which banks were deregulated the most did worst (see also Ireland), and those where time-tested regulations were preserved did best (see Canada - where average net worth is now higher than in the US).

Re:Line Item

[Hentes]

Not exactly. The big "advantage" of digital banking is that banks can now lend out many times more virtual money than they actually have, making them concentrate on loans as they are far more profitable. Here, the big profit of the bank doesn't come from the banking activity itself but from creating virtual money and inflating the currency. Because of this, banks are much more willing to give risky loans.

Re:Line Item

[tomhath]

Close but no cigar. The reason they made those loans was because the government (Clinton) required them. Business as usual would have meant no changes to banking laws and no subprime loans. Social engineering failed again.

Re:Line Item

[khallow]

Or never hold the loan in the first place. Mortgage-backed securities = The method by which known bad loans can be packaged up and sold off on the open market to investors, who are told what a great value they are.

They somehow managed to screw that up. It's worth noting a lot of banks which supposedly were in that business got caught with a lot of bad debt.

Re:Line Item

[Quiet_Desperation]

Can I get a line item listing of these "good things"?

They got vetoed. :(

Re:Line Item

[RabidReindeer]

Holy shit you're a brainwashed idiot.

1) Nobody makes money making sub-prime loans. It's trivial for any idiot to understand that loaning money to people who can't pay it back is a dumb idea.

This is why Mitt Romney won't be inviting you to his inauguration. You don't know how to think like a high-flyer. I know a bank that specialized in subprime loans. They, in fact, sold off the good ones because the subprimes were their cash cows.

Banks don't make money off the principal. They make it off the interest, which on a 30-year mortgage would typically exceed the principal and more. In fact, one of the old Carter-era loans at 10% on 30,000 would end up costing the mortagee over $100K.

But what good does that do when people don't pay back? No good at all, if, in fact, they don't pay. But few people actually take out a loan with the express intent of defaulting on it and trashing their credit rating, they try very, very hard to keep paying. But if they're closer to the bottom 1% than the top 1%, they will frequently fall behind and that's where the subprime advantage kicks in. ZING! Late fees and penalties. Even MORE income on top of the returning principal and the mortage interest and servicing fees. Suddenly subprime doesn't look so bad after all. The same old story. The richer you are, the cheaper you can live - no need to resort to payday loan roulette or usurious auto title loans if you're a 1-percenter.

It's only when the economy completely tanks and people give up on repayment entires and the (foreclosed) home prices deflate that subprime actually starts to look bad from the loan servicer's point of view.

Re:Line Item

[jd2112]

1: Loan money to people who can't pay it back.
2: Sell off loans from step 1.
3: PROFIT!!!!

Re:Line Item

[jd2112]

4: Blame the government when the scheme collapses.

Re:Line Item

[glitch23]

I'll add to your #2 item by stating that another reason they made sub-prime loans was because the individual mortgages were rolled up into mortgage-backed securities and sold to investors so the lenders were also getting money by selling them as bundled securities. This money from investors became an essential piece to funding the sub-prime mortgage boom. But please note, the investors aren't at fault here because they were just making investments in securities that they thought had little risk, just like they invest in other securities based on risk. It was the lenders who were making the risky deals with people who couldn't pay their mortgages AND because there were so many of them it began to backfire. Had the people actually suddenly been able to make their enormous payments or had there not been so many of them there may have been a chance at the investment banks surviving putting all their eggs in one basket, despite being told that the fact that these mortgages were bundled lessened the risk (it did lessen it but couldn't offset the fact that so many mortgages were made to people who eventually couldn't make their payments). It's unfortunate you were modded flamebait but as usual the truth hurts. But to be honest, I think jhoegl was kidding since admitted the loans were given to people who couldn't afford them. By the way, one of the good things that JPMorganChase does for people is they provide an avenue for corporations, who employ us, to make investments for their employees' pensions and 401ks.

Re:Line Item

[Galactic Dominator]

Whether the bankers benefit themselves or not is irrelevant (I can anticipate someone making the point that they were motivated by their own profit)

Seeing that a great number of businesses closed the doors due to the economic pressures placed upon by the actions of their (indirect) creditors, I don't see how that helps the balance sheet on good vs evil, nor how CEO's personal gain is irrelevant to the question at hand.

the point is that these successful businesses are considered "good things" by a large segment of the population.

The point really is these successful businesses survived in spite of the actions some financial institutions rather than because of. I don't believe consequentialism is a view held by the population by in large(see poll), however I would believe it if said of the business community.

http://www.pollingreport.com/terror.htm

Re:Line Item

[kqs]

And how is the bank going to make a profit when the loan is underwater? The best that the bank can do in that situation is to recover the loan principle. They can't keep the extra beyond that.

The bank originates the loans and collects fees from the home buyer, then sells the mortgages as mortgage-backed securities and collects fees from the securities buyers. Thus: profit without risk. Well, the risk is that people might start distrusting the banks, but that seems to be solvable by the CEO smiling and saying "hey, trust me. It wasn't my fault!"

Re:Line Item

[kqs]

You know how much lobbying money the banks spend, and yet you believe that the banks would have let such a theoretical law be passed? Wow.

The federal government passed laws which prevented banks from discriminating against low-income people if they could pay the loan amount, but the approval terms were set by the banks. The banks found that they made more money in the short term if they approved bad mortgages and collected those fees. And they know that they'll be held blameless because somehow people believe the banks when they say "it wasn't me, man, it was the government". The perfect scam.

Re:Line Item

[dbIII]

What about people that have ambition to do a little more than their rich relatives have already done? Sorry, but your post really just tells us more about your own immediate environment than what is going on outside of a small bubble.

Re:Line Item

[TheMathemagician]

By "good things" Dimon just means profitable things for the bank. As opposed to bad things like the London Whale losing $6 billion through his blowhole. He doesn't mean altruistic "good things".

Re:Line Item

[Opportunist]

Sure!

That is all.

Re:Line Item

[khallow]

What about people that have ambition to do a little more than their rich relatives have already done?

Well, that is why those "rich relatives" are investing in your business in the first place rather than just doing their own thing.

Sorry, but your post really just tells us more about your own immediate environment than what is going on outside of a small bubble.

Well, find a situation where that "small bubble" doesn't apply then.

Re:Line Item

[Opportunist]

Umm... if you're the government, and if you promise me to pay the loan of anyone who can't pay it if I lend them money regardless of risk, my only question is how much you will cover. If it's "unlimited", I will lend money 'til the pond is dry.

Consider: I could buy government bonds at, say, 4 percent (I'm generous here) or lend money on 10+ percent to private citizens with government deficit guarantee, which essentially amounts to the same kind of risk associated. Bonus question for 200: Which one will I do?

Re:Line Item

[khallow]

Why are these banks in so much financial trouble then, if they were just nearly risk-free fee collectors? There's something wrong with the assumptions above. My take is that the banks were using their own product.

Re:Line Item

[khallow]

By taking ownership of the real estate, which had an massive, guaranteed return on investment.

"Underwater" means that the "massive, guaranteed return on investment" is negative.

Juest because you've screwed yourself doesn't mean you're absolved of your crimes.

While a number of crimes were committed, it's worth noting that most of the activity was entirely legal. This will be the case again, I predict, for the next financial crisis as well.

Re:Line Item

[dbIII]

Example: A company that wishes to expand seeking a loan from a bank.

Re:Line Item

[oh_my_080980980]

Hey jackass, there isn't a single law in place that forces banks to lend money to anyone.

The high risk mortgages that were defaulted were not made to the poor but in fact to the rich. In fact mortgages made to low income people were actually safe mortgages.

The reason the banks were handing mortgages left and right were for the derivatives market. They make money off of selling mortgages then slicing them up and repacking them as securities. Thats where the real money was made.

Know what you are talking about before posting.

Re:Line Item

[oh_my_080980980]

Because they over leveraged themselves. Before 2008, they made alot of money.

Re:Line Item

[oh_my_080980980]

Are you intentionally stupid? The problem with the mortgage backed securities was that no all mortgages in the security were AAA rated. They were suppose to be. So you had risk where there shouldn't be risk and then the banks over leveraged themselves.

Re:Line Item

[ranton]

While there are plenty of stories out there about huge companies that got their start from angel investors and venture capitalists, the reality is that most businesses still start from a combination of owners' cash injections and bank credit.

Most people who start their own businesses are not 22 year olds with an idea they can sell to a VC. They are quite often 40 year olds with decades of experience and decades of savings, who combine their assets with additional funding from banks to get their business of the ground.

Re:Line Item

[Galactic Dominator]

"Good things" meant good moral actions from the context of the original article. I'm not sure what Dimon means, but yes it certainly has nothing to do with altruism.

Re:Line Item

[HornWumpus]

If they could have paid the damn loan it would have been very different.

They were required to 'not discriminate' against low-income people even though they clearly could _not_ make the payment. To argue otherwise is to deny history.

Re:Line Item

[Lithdren]

The best post i've ever seen on this subject is as follows, I highly sugest giving it a read.

http://news.slashdot.org/comments.pl?sid=1643810&threshold=-1&commentsort=0&mode=thread&cid=32121058

Re:Line Item

[kqs]

You do realize that in the past 3 years, the percentage of failed mortgages for middle-income and upper-income folks is very similar to low-income folks, right? Funny thing, someone making $30K getting a $50K house is similar to someone making $100K buying a $250K house, or making $300K buying a multi-million house.

Actually, there is one bright spot. A few companies specialize in mortgages to illegal immigrants. And illegal immigrants have low foreclosure rates.

http://www.npr.org/templates/story/story.php?storyId=17597739

http://www.splcenter.org/get-informed/intelligence-report/browse-all-issues/2009/spring/minority-meltdown

Re:Line Item

[khallow]

It still remains that these banks supposedly were operating like supply shops for a gold rush.Somebody else was supposedly taking most of the risks.

They should have been able to dump what currently was in the pipeline and take the proceeds elsewhere. The massive fail indicates that the banks were either leveraged up to their eyeballs (well we do know that was the case for a lot of them) or they were using their own product (well, we do know that was going on as well).

jhoegl's story is of banks that could do no wrong (well ignoring bailing out). But that simply doesn't agree with what happened.

Re:Line Item

[khallow]

Merely, expanding a business doesn't qualify to me as " new substantial business ventures [which] got off the ground or went public". Sure it can be, if the expansion is ambitious or novel enough. The original poster seemed to be speaking more of creating novel businesses rather expanding existing ones.

Re:Line Item

[khallow]

So you had risk where there shouldn't be risk

So what? When one speaks of "profit without risk", as kqs had, then that's the ideal scenario for leverage. There isn't risk where there shouldn't be risk.

We see plenty of flaming wreckage indicating that the ideal scenario didn't happen. The explanation can't be that ratings were incorrect because there's no connection between wealth and the value of such assets that aren't part of that wealth.

Re:Line Item

[dbIII]

Well, I was replying directly to your question. If you want it to fit another persons question asked above then it still fits if you consider it in terms of company founders taking a proposal to a bank. Sorry to spoil your petty weasel shift of the goalposts there.

Re:Line Item

[khallow]

I also might add here that my "small bubble" accounts for expanding existing businesses with loans. There was no "weaselly shift", just a misunderstanding on your part about what I was talking about.

As to company founders taking a loan proposal to a bank, perhaps you ought to read this other reply to my original post. I think he explains the key problem pretty well.

Re:Line Item

[HornWumpus]

Duh, there were plenty of people in all incomes that paid more then they could afford. Sucks to be them.

Doesn't change the fact that both groups got to where they were by different routes. Richer people more then likely can still afford the payment, but choose to walk away as the bank can suck it with regards to recourse in almost all cases.

Re:Line Item

[dbIII]

Yes, harder than borrowing whatever relatives can afford to hand over - yet people do it!

"I am not responsible"

[TimHunter]

Don't piss on my leg and tell me it's raining.

Re:"I am not responsible"

[TheMathemagician]

That could work ...

Oh, shut up

[realmolo]

'We're wrapped up in all this crap right now. We made a mistake. We're sorry. It doesn't detract from all the good things we've done. I am not responsible for the financial crisis."

Actually, it *is* your fault, and it *does* detract from everything you've done.

It's like a daycare provider saying "Sorry that we sold your kids' organs. It seemed like a good investment. But it shouldn't detract from the great job we were doing before that!"

Banks are supposed to MAKE money, not lose it. And they lost money on a MASSIVE scale due to incompetence and especially greed. Everything they do is tainted, forever.

Re:Oh, shut up

[Anonymous Coward]

Also, it wasn't a mistake... it was premeditated fraud.

Re:Oh, shut up

[Trepidity]

And it's not like this particular fellow, Jamie Dimon, just got involved in the sector. He's got a long history doing all sorts of stuff, some of it more on-the-up and some of it more questionable.

Re:Oh, shut up

[glitch23]

Where was the incompetence and greed? Explain your version of events to me. I want to hear if you are using an accurate representation of history to fuel your anger.

Re:Oh, shut up

[GameboyRMH]

Yes it's quite possible and fair if you fuck up badly enough, but most people will never do such terrible things.

"Decent, honorable people"

[Anonymous Coward]

Yeah, and serial killers are always described as real nice people by their neighbors.

"The peak of financial innovation was the ATM"

[nweaver]

Sorry, Jamie: your company has become largely a parasite. For the average American, you provide no more benefit than 10 banks 1/10th your size: when you get so big, you have negative economies-of-scale.

But your salary is dictated by being big.

If you were serious about preventing such disasters in the future, you'd reform your compensation schemes and endorse restoring Glass-Steagal.

Re:"The peak of financial innovation was the ATM"

[jhoegl]

But regulations are bad!
They hurt job creators ability to create jobs in other countries, or make our kids work!

Re:"The peak of financial innovation was the ATM"

[ducomputergeek]

They are in a left hand doesn't know what the right one is doing with fingers in so many pies. All they saw with the derivatives were double digit return rates quarter after quarter until the house of cards fell. So long as the profits were rolling in, they didn't stop to ask any questions.

Re:"The peak of financial innovation was the ATM"

[dnaumov]

Sorry, Jamie: your company has become largely a parasite. For the average American, you provide no more benefit than 10 banks 1/10th your size: when you get so big, you have negative economies-of-scale.

You have it backwards. Being Too Big To Fail is a fantastic benefit (for a bank) for being big.

Vital Question . . . planning ahead

[StefanJ]

When JPMorgan is busted up into regional banks -- some of which do investment banking, the others FDIC insured savings & loans -- will they be able to share this server farm?

Re:Vital Question . . . planning ahead

[jhoegl]

Nope, the mother will get the kids... the mother always gets the kids

Re:Vital Question . . . planning ahead

[afidel]

If that were to happen I'd hope it would also involve enshrining Glass Steagall into untouchable law so that they couldn't re-form ala the terminator or AT&T.

Worst Bank...

[tgetzoya]

I have not once opened a Chase bank account, but through mergers and acquisitions they owned 5 of my accounts at one time. Easily the worst bank I have ever had to deal with. But now I know where all my interest charges and late fees went to.

A funny side note...Capital One has done the same thing to me, they now own 3 of my accounts. I hope they're an easier bank to work with if something goes wrong.

Re:Worst Bank...

[MightyYar]

Worst was the old "CoreStates".

Chase was expensive, but not bad. I had an account there for years, but cancelled when they started charging me for the honor of putting money in their bank.

They are also big enough to be stupid. My credit card interest rate is very similar to my mortgage rate, all because they acquired my account from another bank that had given me a promotional rate that is now about 10 years old. I must have been part of some edge case during the database merge or something. Anyone else have a card pinned to 1.4% over prime rate?

JPMorgan's Blythe Masters

[udachny]

I don't see banks as the source of the problem, they are part of the problem because they cooperate with the corrupt government, but they are not the source, the source is the government, however I do have a specific problem with JPMorgan and one particular person there - Blythe Masters.

She is pretty much somewhere near the root of the naked short defaults swaps and AFAIC, naked credit is just as much counterfeiting as the fractional reserve and the Federal reserve with its fake credit line.

JPMorgan holds a gigantic position in naked shorts against the silver market (and other markets), it's amazing that this particular activity isn't investigated, but the fact that it exists is just another side effect of fake fiat currency provided by the central banks.

Re:JPMorgan's Blythe Masters

[kraut]

What's this obsession people have with shorts? "Shorts bad, mmmm-kay?"

No. Every market takes buyers and sellers, and if I think silver is going to go down, while you think silver's going to go up, why should you be allowed to bet one way, but not I the other?

Also it's hardly new - it's been going on in futures markets for centuries - , or in any way related to the cause of the crisis.

Re:JPMorgan's Blythe Masters

[udachny]

Do you have problem concentrating? ADHD?

NAKED shorts, as in - nothing was borrowed to sell.

Re:JPMorgan's Blythe Masters

[kraut]

Makes no difference.

Re:JPMorgan's Blythe Masters

[udachny]

Makes no difference.

- to the uninformed, and even to them it should make a difference, you are a special kind of person not to understand the difference.

It's the difference between engaging in a normal market activity (borrowing and then selling with the intent to buy back and give back the loan, because you think the price will go down) and counterfeiting (not borrowing, selling something you don't have, so now you don't have to cover your short position).

It's counterfeiting, just like currency printing and fractional reserve banking. In fact in naked short silver contracts, JPMorgan has a position that is 20-50 times greater than the entire physical silver purchasing market. That's definition of counterfeiting and in case of JPMorgan and silver it's done to push the prices down. JPMorgan so far shorted 1-3 billion ounces of silver, this much silver doesn't even exist above ground.

"Selling" an asset that you do not have is not selling, it's nonsense. The only reason this continues is because of very high 'delivery taxes' (20% tax on silver delivery in London).

Break up the big banks and...

[Anonymous Coward]

reinstitute Glass-Stegall, preventing conglomerates of investment banks with commercial lenders backed by government-insured savings and checking accounts. And the assembling of massive coast-to-coast financial supermarkets like Bank of America and Citibank should never have been approved by Federal regulators under the Clinton and Bush administrations.

Dimon and JPMC actually proves the rule. After the 2008 banking crash and TARP fiasco, Dimon was anointed as proof that not every big bank CEO was a bad egg. (Although JPMC accepted TARP money, they did so because Henry Paulson asked them to, not because they necessarily needed it). Jamie Dimon, said John McCain and many others, was old school and took his responsibilities to the world economy and banking industry seriously.

Obviously, not seriously enough in the face of the non-ending quest for superior returns and mind-blowing take home pay.

Re:Break up the big banks and...

[Tangential]

reinstitute Glass-Stegall, preventing conglomerates of investment banks with commercial lenders backed by government-insured savings and checking accounts.

Absolutely.
Let's also reinstitute the Bank Holding Act of 1956 as well. When banks weren't giant, multi-state/multi-national conglomerates they couldn't become "too big to fail".

Re:Break up the big banks and...

[c0lo]

Obviously, not seriously enough in the face of the non-ending quest for superior returns and mind-blowing take home pay.

Obviously... considering the whale

Pablo Escobar built schools and hospitals

[fustakrakich]

He was still scum. And these bankers are laundering their drug money. This guy is trying to redefine decent and honorable. "Mistake" I like that.

Riiiiight

[Nerdfest]

I am not responsible for the financial crisis.

No raindrop feels it's responsible for the flood.

Silly CEO

[milbournosphere]

Instead of ranting about how it's not his fault, why didn't he just repeatedly mutter phrases about 'Big Data' and 'Cloud Infrastructure' to the reviewer?

Really.

[rickb928]

"I am not responsible for the financial crisis."

No, but the people who work for you were. And you're supposed to be in charge.

Re:Really.

[slimjim8094]

"I am not responsible for the financial crisis."

No, but the people who work for you were. And you're supposed to be in charge.

[citation needed]

Specifically, what do you think was responsible for the financial crisis? And did JPM do those things? Because they didn't get into subprime mortgages or credit default swaps or any of that other stuff. In fact, they were one of the very, very few big banks that didn't need any help over the last 4-5 years.

$500 Million for What?

[twmcneil]

This Dimon fellow is the best used car salesman I've seen for a while.

He kinda alludes to the fact that they will use this fantastic new data center for customer service. My guess is they will probably use it to scam more money from people with some devilish plot like HFT.

Who cares?

[gallondr00nk]

'Most bankers are decent, honorable people,'

Being decent and honorable isn't worth shit if the institution they work for is monstrous.

That's what it boils down to, at the end of the day. They internalised the profits and externalised the losses as best they could. They would have blown that bubble up for eternity if they could have, and paid no heed to the consequences. They want every cent you have, no less. Regulation kept them in chains, and now those chains are broken.

What we've witnessed is 30 years of large financial institutions gradually being allowed to do exactly what the fuck they want. Naturally, the monster devoured so much, so greedily, and took such monumental risks that it took merely a few years of true excess for it to ignite the biggest world slump since 1929. It didn't learn from then, it didn't repent or change its ways, and you can be sure as hell that it hasn't learned now. The devastation it wrought will happen again and again, simply because destruction is all it knows.

In light of that grim reality, who gives a toss how decent they are as individuals.

Re:Who cares?

[geoffaus]

its worse than that - they werent just passing the bill to the taxpayer - they were ripping them off right across the U.S. http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620. and yes as you say they want every cent everyone else has.

JPMorgan's IT Department

[mattyj]

So does this mean I can now use punctuation marks in my password? Seriously, you can't do this for online banking at Chase.

Re:JPMorgan's IT Department

[techesq]

...so now we know your password is password!

How is this necessary?

[erbbysam]

"We were a port of safety in the storm."
“It’s a free. Fucking. Country.”

This article really makes me angry. Who does this support other than the IT industry that supplies them with 500 Million in servers, networking equipment & infrastructure?
What is this data center going to do? A grad student could design a decent database system for trades and banking. So they now have a 500 million $ data center, are they now going to use that scrape a few more milliseconds off there HFT's or the associated algorithm's? Are they going to figure out the optimal market strategy to beat there competitors? They can't possibly have enough data to fill something like that, so it has to computation power, right?

How does this contribute to society other than support an electric company? Don't give me liquidity bullshit.

Separate your banking from investing and then we can talk about how "banks" like this isn't a plague on society. /rant

Re:How is this necessary?

[Anonymous Coward]

I beg to differ. Aside from storing all the transaction data, the before mentioned bank has taken upon itself to literately spy on all their "high risk" customers. Now the definition of "high risk" is one that is constantly changing. But trust me, they have a lot of stuff on anyone they choose. They pretty much subscribe to all the so called "Big Data" companies, ChociePoint et al. I only assume that they will eventually move from just "high risk" to all customers, than to potential customers, then to "why the fuck not just call it everyone."

Re:How is this necessary?

[kraut]

Banks have a lot of data, and they need to do a lot of calculations on it. Simples.

And having a big data centre full of computers isn't going to help you with latency (i.e. HFT), it's for storage and throughput. E.g. to revalue your derivatives positions, run stress scenarios, risk analysis, regulatory reporting (from the general reporting you get the impression that Wall Street is completely unregulated; in fact, it's more the opposite).

How does this contribute to society other than support an electric company? Don't give me liquidity bullshit.

Liquidity is only bullshit until it dries up.

Re:How is this necessary?

[alexander_686]

Reading between the lines and knowing something about the industry I would guess this has almost nothing to do with the Investment Banking side and everything about running the boring bits of the business.
For a long time there was a question if mega banks could achieve better returns to scale then a large bank. For the 80s and 90s the answer was no. However, during the 2000s, mega banks have achieved economies of scale when doing international business. (we are talking about the boring, low margin bits - money management, custodial accounts, etc.)

You don’t spend this kind of money for high frequency trading. For that you want a couple of fancy servers near the exchange and some expensive quants. It is real money – but not 500m in Delaware money.

No, this is to handle X number of checking, credit card and mortgage accounts - ensuring that all of the interested is calculated correctly, all of the transitions are posted – in multiple states / countries with different reporting requirements – in real time – with a high level of reliability.

Re:How is this necessary?

[glodime]

HFT

How does this contribute to society other than support an electric company? Don't give me liquidity bullshit.

Liquidity is only bullshit until it dries up.

The bullshit part is that the additional liquidity HFT provides is conditional on there already being sufficient liquidity.

Re:How is this necessary?

[khallow]

Who does this support other than the IT industry that supplies them with 500 Million in servers, networking equipment & infrastructure?

Why should it support anyone else? I imagine that if we poured through your financial dealings we'd find a few things that didn't benefit me or the interests I support. Does that mean I should be pissed at you for those things?

Re:How is this necessary?

[tnk1]

It is a funny thing to hear someone complain about supporting IT on Slashdot. I mean, most of us probably work in IT to begin with. It's not like money that goes to IT disappears into some black hole that helps no one. It helps me quite a bit, and I'm actually in the middle class.

Mind you, it sucks working for banks, but it can be a paycheck when the latest DotCom-esque bubble pops. You also learn a little about how to run datacenters that stay running with real 99.99999% uptime... or else heads start rolling.

Re:How is this necessary?

[Prof.Phreak]

It's also probably to cut ties with overpriced service providers (e.g. HP).

Re:How is this necessary?

[khallow]

The bullshit part is that the additional liquidity HFT provides is conditional on there already being sufficient liquidity.

Well, that's true of any other source of liquidity, unless you have someone trading just for the sake of generating liquidity. It works all the same.

Re:How is this necessary?

[glodime]

The bullshit part is that the additional liquidity HFT provides is conditional on there already being sufficient liquidity.

Well, that's true of any other source of liquidity, unless you have someone trading just for the sake of generating liquidity. It works all the same.

Not exactly. Market makers are required to guarantee liquidity in certain exchanges. Also, people buy and sell for other reason than short term trading. The point being that when there is sufficient liquidity for HFT to exist there is very little value left in additional liquidity that HFT can provide. And when it would be very valuable for HFT to provide additional liquidity they provide no additional liquidity at all, sometimes proceeded by amplifying volatility before ceasing thier trading.

Re:How is this necessary?

[khallow]

Market makers are required to guarantee liquidity in certain exchanges.

Remember I said "trading for the sake of generating liquidity"? That's an example.

Also, people buy and sell for other reason than short term trading.

Mostly irrelevant, except of course, they're going to be more reluctant to invest in markets where it is very hard to divest from.

The point being that when there is sufficient liquidity for HFT to exist there is very little value left in additional liquidity that HFT can provide.

Why do you think that? There's short term traders and they'd appreciate the liquidity that HFT provides. Short term traders in turn provide liquidity that long term investors can appreciate.

And when it would be very valuable for HFT to provide additional liquidity they provide no additional liquidity at all, sometimes proceeded by amplifying volatility before ceasing thier trading.

Nobody likes giving away free money. It's be very valuable for you to just give me money, for example.

Re:Quote

[nigelo]

It's you.
Look on page 3 of 3.

Remind me to short JPMorganChase tonight

[xxxJonBoyxxx]

>> JPMorgan Chase spends $500 million to build a data center...asserts that huge data centers are among the advantages of ginormous banks.

Remind me to short JPMorganChase tonight. Even the tiniest bank has access to "huge data centers" today because most banks already use an outsourced financial processor...which are all hosted in centralized, redundant data centers (which generally cost less than $500M).

Seems like this guy missed the leveling effect of cloud services - one that descended on the banking industry a good 10-15 years ago.

Re:Remind me to short JPMorganChase tonight

[kraut]

Remind me to short JPMorganChase tonight. Even the tiniest bank has access to "huge data centers" today because most banks already use an outsourced financial processor...which are all hosted in centralized, redundant data centers (which generally cost less than $500M).

I wouldn't be altogether surprised if you found that JPMorganChase is the "financial processor" that lots of banks outsource their payment systems TO.

Just saying.

Seems like this guy missed the leveling effect of cloud services - one that descended on the banking industry a good 10-15 years ago.

Bankers are extremely conservative with this stuff, and (at least sometimes) for good reason.

Re:Remind me to short JPMorganChase tonight

[tnk1]

There are economies of scale at that size that make building your own datacenter actually cheaper than outsourcing it. You have to be big, but if you are big enough it makes sense. You can also become one of those financial processors of which you speak.

I am not responsible for the financial crisis

[cant_get_a_good_nick]

No one person is. The financial crisis was built by a huge number of people.

But he did contribute. Part of the financial crisis is the lack of regulation in the industry. The London Whale incident proved we're not quite past it. Mr. Dimon sure as hell lobbied for less regulation.

I liken regulation to maintenance on your heart. The parallel is... your heart rhythm is surprisingly similar to the general market health. There are inputs (you're sick, you're running you're sleeping... vs. general economic news, P/E ratios, etc) and even feedback. It works most of the time. I wouldn't want to be on an EKG all day. You're not gonna put a pacemaker in me to regulate my heart-rate for the odd chance i may need it some day. Its a waste of the machine and my time.

But... every once in a while a heart can get out of whack. You get arrhythmia, and you need to shock it back to normal. My grandmother has a pacemaker. She'd be dead now if it wasn't for that. She also had a heart attack, luckily enough she was in the hospital when it happened, so she's ok. By the "never regulate" crowd's wisdom, they'd say "well, there are so many people's hearts that work fine that a pacemaker is never needed, it a complicated surgery that just gets in the way" she'd not have a pacemaker, and they'd assume she'd magically adjust.

So, we need to strike the balance. Too much regulation/heart shocking kills the market/patient. But, many people see the normal market/healthy heart and say "hey, we'll never need regulation, it's wasted money". They say, don't even have the doctor, don't even have the defibrillator. Well, then when the market shock comes, they're unprepared, and we all die. Or in this case, we came in in the last minute with the shock, too late, and the patient has limped along. And half the country states that the problem was the defibrillator, that somehow the heart attack patient would have magically come back all on their own.

Re:I am not responsible for the financial crisis

[kraut]

No one person is. The financial crisis was built by a huge number of people.

But he did contribute

So did everyone who leveraged up to buy a big house...

Part of the financial crisis is the lack of regulation in the industry.

I don't think there's another industry (apart from possibly medicine) that is as regulated as finance.

So lack of regulation per se clearly isn't the problem.

Bad, or badly enforced regulation? Yes, that could well be the case.

Remember the Madoff case? People reported him to the authorities years before it blew up... and nothing happened.

The London Whale incident proved we're not quite past it.

The London Whale incident proves nothing, apart from the fact that trades lose as well as make money. Yes, it was a big loss, and they should have had better internal controls, but they only lost money they could afford to lose.

Re:I am not responsible for the financial crisis

[zippthorne]

So did everyone who leveraged up to buy a big house...

But that's the thing, isn't it. The extra credit was boosting house prices.... They were leveraging up to buy the same size house for more money.

Re:I am not responsible for the financial crisis

[slimjim8094]

Mr. Dimon sure as hell lobbied for less regulation.

Did he? All I've read in the last few years was him lobbying for better regulation. Specifically, he wanted it passed in chunks (as opposed to all at once) so they could let the effects settle out incrementally over a few months, tweaking the next phase as necessary. As infeasible as that would be nowadays politically, it seems like a rather reasonable request. I know he lobbied against Dodd-Frank, but only because it didn't actually have anything in it and they were nervous about waiting for the committee to figure it out.

But I could definitely be misremembering. Has he lobbied against regulation that you thought made sense?

THIS GUYS IS AN HONORABE JOB CREATOR!

[Anonymous Coward]

now blow his wang like a good republican should!

Re:THIS GUYS IS AN HONORABE JOB CREATOR!

[gagol]

+1 Funny, sadly I have no mod points left...

Well, this is stupid

[alexmin]

I would guess that given the implosion of US market volume and all that space built out recently demand for DC space is just not there. Smart players (like BATS for example) are picking up space freed up by other at discount. Looks like JPMorgan is not in this category.

Re:Well, this is stupid

[kraut]

Or maybe
* JP Morgan needs more space than can be picked up cheaply
* They're thinking countercyclically - I'm sure it was cheaper to build this now than during the boom.
* They're planning ahead - they need some of the space now, and will fill the rest over the next few years

It's all nice an well to rib big banks for being stupid, and it's true that they are often slow and inefficient. But they didn't get to where they are buy being totally stupid.

Just some management cretin wanting a monument

[gweihir]

That is what you usually find behind these projects.

As to "we made a mistake", if that were all it was, why are those few bad apples not in prison and stripped of their fortunes? You let it happen on your watch, you are just as guilty as these criminals!

Too Big To Fail

[cpm99352]

Remind me again how many "too big to fail" banks/finance firms/etc. have been broken up since 2007?

Eh... quicken loans = chase for me

[Dead_Smiley]

I refinanced a couple of years ago with Quicken Loans. They told me if mortgage rates dropped within two years they would automagically lower my rate. What they didn't tell me is that they would immediately sell my mortgage. Turns out they sold it to Chase. So now I am stuck with these bastards unless I want to refinance again. I will probably do it but I will ask more questions this time. Damn, I haven't posted here for a while. =D

Re:Eh... quicken loans = chase for me

[NJRoadfan]

Just about every mortgage broker will sell the loan to a big bank within a month. In an extreme case, a friend of mine had his mortgage switch between 4 banks within a month and a half after closing on the house.

Re:Eh... quicken loans = chase for me

[Cro Magnon]

Doesn't sound THAT extreme. Mine bounced through 3 banks in the first few months.

Some regulations are bad ...

[drnb]

But regulations are bad!

Some regulations are bad. How often do we geeks criticize regulations/law/policies addressing the internet, computers, or other tech areas? What makes you think the US Congress does a better job in the domain of banking and finance than they do in the domain of technology?

There is nothing inherently wrong with wanting to reform regulations. The problem is that reforming regulations can be done as poorly as creating and implementing regulations.

Re:Some regulations are bad ...

[Marxdot]

Yes, some regulations are bad. This is a revelation.

Re:Some regulations are bad ...

[drnb]

Yes, some regulations are bad. This is a revelation.

To some people, including some around here, yes this would be a revelation for them. Some people blindly support anything Congress suggests that is well intended. For some, only intentions seem to matter, not results.

Re:Oh, shut up, but Remember

[glodime]

The "Community Reinvestment Act" doesn't require loans to poor credit risks.

Cheap!

[geoffaus]

They could have got almost 5 of these for 1 mistake of their chief investment officer: http://www.hangthebankers.com/only-on-wall-street/

It is possible for a banker to do good

[istartedi]

Here is one example. of a banker who most would consider "good". Two observations: 1. It's news that a banker is good. 2. It's a very small bank.

Oh good!

[NotSanguine]

Now maybe they'll actually review past purchases before calling/texting me every three weeks or so about how some transactions I make all the time could be fraud. sigh.

Re:Ginormous is not a word!

[Eponymous Hero]

the dictionary disagrees. usage is circa 1948.

http://www.merriam-webster.com/dictionary/ginormous

http://artofeloquence.com/unwords/

The first use of Ginormous was in 1948 as British “military forces’ slang”. It’s a blend of gigantic and enormous and refers to something extremely large or gigantic in size. Ginormous is a word that is currently acceptable to use, but only in informal conversation. It is considered a bit too childish a word to use in formal or business settings.

last i checked, slashdot is not a formal or business setting. it's a troll farm. arguing that point is childish.

Talking of blood

[Taco Cowboy]

That $500 million price tag tells me one thing - someone is making a killing !

Drop in the bucket...

[NuttyBee]

Hmmmm, I wonder who owns the multiple new CRS-3 chock full of 10G Ethernet ports next to my cage... I have a pretty good idea - and 500M is a drop in the bucket for them.

I have been to an awful lot of data centers and it's not trivial to build or maintain them. I am aware of more than one that wanted to expand but couldn't because of power issues. One of them was going to require a "couple" of new substations. Another one needed a new power main that would require substantial trenching through an urban area.... Datacenters are not built like normal buildings. They are built to be hardened, self-sufficient, and have multiple levels of fail-safes -- that isn't cheap. If my home AC goes out, I'll just be hot. If a Liebert 20 ton AC fails in one of these places, blade servers overheat, vast arrays of businesses go dark.

Dimon's comments are interesting, but the costs don't strike me as far outside the norm. There are more than a few companies out there who have made very major expenditures in infrastructure.. Most don't detail it, for obvious reasons.

I am sorry...

[hackus]

WE GOT CAUGHT.

I hope Jamie has that private jet on hot stand by when his plan to dump JP Morgan's silver holdings. Lots of people I know want Jamie's head...on a pike.

From the index count that shouldn't be too long. Probably 9 months max before the game is afoot.

Hack

double standard

[Dan667]

No banker has been criminally charged regarding the financial crisis even though it is well accepted they did not behave in their Customer's interests. However, the goldman sachs programmer keeps getting charged over and over again. An that is not the only example. It is a double standard of the rich vs everyone else.

Re:Oh, shut up, but Remember

[afidel]

Quite the opposite, the CRA (of 1977!,) requires
CRA lending needed to be done "consistent with safe and sound operation." In 1999, banking regulators issued guidance concerning sub-prime lending and made the point that CRA lending needed to be responsible -- well underwritten, well priced, and understandable by the borrower.

Also

With respect to performance, Canner and Bhutta did three types of analysis. First, looking at mortgages originated between January 2006 and April 2008, they found that sub-prime and Alt-A loans originated in zip codes with incomes just below the level that "counts" for CRA purposes performed slightly better than those originated in zip codes with incomes just above the CRA level. They also looked at the performance of first mortgages originated under the affordable-lending programs of NeighborWorks America, most of which counted for CRA purposes, and found that these loans had delinquency rates lower than sub-prime or Federal Housing Administration loans, and foreclosure rates lower even than prime loans. Finally, they noted that only about 30 percent of foreclosure filings in 2006 took place in CRA-eligible zip codes. link

That's right, tightly regulated lenders making first mortgages under the CRA had a lower foreclosure rate than largely unregulated lenders making other types of mortgage loans including prime loans. Blaming the CRA for the foreclosure crisis is the reddest of red herrings and allows the true culprits (independent mortgage originators and their enablers in the securitization arms of the big banks and the credit rating agencies) to walk away scott free.

Uhhhhh

[manaway]

"(they didn't get into subprime stuff)"

According to Reuters, in 2007 JPM was involved in subprime lending: "JPMorgan's first-quarter subprime mortgage originations, through Chase Home Finance, jumped 11 percent to $3.02 billion, according to Inside Mortgage Finance." So your knowledge may be more personal than reliable. And as of 2012, according to other sources, is still involved in Credit Default Swaps so there is reason to continue distrusting banks.

Do you hear of any US banks that want Glass-Steagall reinstated? No? Banks want regulations that protect them with a facade of trust, not restrict them from unlimited salaries and shareholder profits. But hey, at least they'll be hiring some database and network admins.

apologies aren't good enough

[epine]

"Most" of the bankers who are "good people" are hanging around enabling those who aren't by not demanding effective change at the levels that matter (governance, regulatory oversight).

Apologies aren't good enough. Point us to some real change that bites the psychopaths who rise to the top.

Suggestions: smaller institutions, less opaque financial instruments, fewer ex-bankers crossing the floor to work inside government.

I don't see why any person who has held an executive position at Goldman Sachs should be welcomed into any U.S. government agency with real power. At best they should be allowed to work inside some toothless intermediary and reporting to other agencies with no personal loyalties to Goldman whatsoever.

If the argument is "we need these people because no-one else understands how the system works" then Plan A is to simplify the system with extreme prejudice.

Most bankers are...

[grrrl]

come on, who else read that as "Most bankers are decent, horrible people"

Dimon should go to jail!

[GPLHost-Thomas]

Dimon is "sorry", yet pretends that he did "good things"? WTF!!! That's a joke, right?

Perhaps he's sorry that, as one of the biggest crooks in the world, he didn't go to jail? Or maybe he's sorry about the wash trading he did, and that he got only a 30k fine, for manipulating the crude oil markets? Or probably, he is sorry for JP-Morgan naked short selling on the Silver market? Or for emitting more bonds of Silver than they physically have? Or...

Come on, we all know what these data centers are for. They are for doing high frequency trading. It's been a long time that we all know such trades are destroying more wealth than it creates.

Such declaration is simply outrageous. We're tired of the financial terrorists. None have been punished, yet destroying jobs and lives by the millions, and proves of that accumulating. This one day will stop, once the general public understands what is going on. They'd better have strong necks when that day comes, because probably, their head will go off, just like in the French revolution.

In the mean time, since the people have lost their power over this disgusting "elite", everyone should play on the same game, and buy (physical) silver coins. Not only this is a very good investment, especially considering today's record low, but this also has the side effect of crashing JP-Morgan, since (as I wrote above) they did very dangerous bets, and already lost billions. As Max Keiser puts it: "GO GO! Silver liberation army!"

Re:Dimon should go to jail!

[Enigma2175]

This one day will stop, once the general public understands what is going on.

Have you met the "general public"? You seem to have a much higher opinion of them than they deserve. As long as there is bread and circuses the public is NEVER going to understand what is going on. These banks own the politicians and regulators - they are never going to be punished.

JP Morgan involved in many fraud

[GPLHost-Thomas]

And wash trading (eg: manipulating market prices by buying and selling at the same time), and MF global scandal, and naked short sellings, and accounting fraud, and selling Silver they don't have, and...

The list goes on, and on, and on, and on. But nobody "regulates" them. Or rather, should I say, nobody does JUSTICE, and put these crooks in jail.

So, when I read that [JP Morgan is] "in favor of tougher (and substantive!) regulations", one may wonder what this means.

Re:Riiiiight...as rain.

[GameboyRMH]

I fear that mine doesn't count, I really hope it does, but I see it as working against the problem.

Thanks for the link, excerpt, and summary.

[glodime]

Thanks for the link, excerpt, and summary.

regulating bankers

[manaway]

So, when I read that [JP Morgan is] "in favor of tougher (and substantive!) regulations", one may wonder what this means.

It means exactly what you hint at. It's meaningless talk to convince a target audience of properly educated intellectuals. It's fake regulations, lobbied and created by the banking industry. A financial industry which has repeatedly demonstrated, on local and foreign economies, it's systemic skill in taking from the many to give to the few.

What's needed? Among addressing the issues you raises (speculative investments), perhaps also more small local banks and no multinational corporations which are too big to control. It's what the 99 Percenters, Occupy Wall Streeters, and others are working toward.

Re:Oh really?

[NemosomeN]

Wtf, how is everyone paying the same tax rate "real capitalism"? Tax fairness is a completely normative component of economics. And besides, a "flat tax" that everyone pays the same rate is NOT fair in any way. I would be completely screwed if I had to give up half of my income. Warren Buffet? Not so much.