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  • JPMorgan Loses $2 Billion; Still Beats Postal Service

    JPMorgan Chase’s $2 billion trading loss is top news nationwide. But over at the U.S. Postal Service (USPS), such losses are business as usual. USPS reported a typical (for it) $3.2 billion loss for the most recent quarter. Try that comparison on for size.

    JPMorgan Chase incurred a “whale” of a loss because, as explained by the bank’s CEO Jamie Dimon to his investors, this is an example of a “flawed, complex, poorly reviewed, poorly executed and poorly monitored” betting strategy. Despite the loss, it by no means spells doom for the bank. The bank has more than enough capital to stomach these losses, as painful as they are. JPMorgan Chase’s actions led to the loss, and JPMorgan Chase’s actions will fix it. You can bet it is already doing just that.

    Commentators will be tempted to say this could not have happened if regulations intended to guard against risky trading, such as the Volcker Rule, were in place. Not true. The trading strategy JPMorgan Chase used is legal, and it would still be legal under the Volcker Rule. In a free-market system, banks as well as businesses are free to take risks, which result in either successes or failures, profits or losses. The Securities and Exchange Commission has already begun an investigation of the bank’s financial disclosures, but the bottom line is that mistakes like this do and must happen, in banking as well as other industries where risk is part of the business.

    This trading bet gone sour will have unpleasant near-term implications for JPMorgan Chase and likely quite a few of its executives, but sorry, Washington, this does not signal a need for more federal intervention. Nor does it mean the federal government should get cracking at issuing even more regulations. Indeed, more regulation would not have prevented this from happening without stifling the business altogether.

    JPMorgan Chase’s shareholders lost money equal to the losses incurred. But what’s true in the private sector doesn’t hold for the Postal Service. And when the Postal Service runs out of cash again next quarter, and the quarter after that, and after that until Congress finally passes real postal reform, the shortfall will likely be paid from your—the taxpayer’s—pocket. It’s a difference worth noting.

    Posted in Featured [slideshow_deploy]

    16 Responses to JPMorgan Loses $2 Billion; Still Beats Postal Service

    1. RandyF says:

      So, where would I find any of your "opinion" pieces from a few years ago touting how the USPS was turning a profit? Also, please explain how the taxpayer pocket is going to be picked by Congress to save the USPS? So many pundits seem to describe the $11 Billion that the Senate has in its legislation to provide to the USPS as, collectively, a taxpayer "bailout".

      In fact, that $11 Billion is USPS ratepayer money that the USPS has been mandated by law to OVERPAY it's part of the obligation into the Federal Employee Retirement System.

      In a round-about sort of way, I would guess that you could call that taxpayer money considering that Congress uses the funds in the retirement systems for what ever it likes.

      Now, if they would address the overfunded Civil Service Retirement System of $50-$80 Billion, USPS would be perfectly fine for many years into the future.

      Oh, one other problem created by your Conservative buddies in a Lame Duck Congress and Presidency is the ridiculous law requiring the USPS, and ONLY the USPS, to prepay around 4%.5 Billion into a fund for the health benefits for FUTURE retirees. In the 10 years the USPS is required to pay enough to cover these cost for the next 75 years.

      Absent this ridiculous law, the USPS would have had an operational profit of some $700-$800 Million even through the great recession of a few years ago.

      Get Congress off their butts and do something that really addresses the ACTUAL problems and then get their collective fingers off micro-managing the USPS and watch it grow and thrive.

    2. G Jones says:

      Government regulations at it’s best, if your a to big to fail business you csn cheat and steal as much as you want. If your a quasi government entity it’s just part of the culture. How is it that a business is allowed to fail as much as our postal service? Not only did they lose 3.2 billion dollars they still owe 11 billion to their retirement fund. I guess Dodd-Frank accounting methods have a few holes. No different than the GM bailout to the tune of about 60 billion they failed to pay their pension plans. Yet they both seem to have millions to spend on campaign contributions. It’s time to call them both failures and let them die. It’s time for the government to stop subsidizing any and all business. Government subsidized industry is nothing more than discrimination against any competing entity. It is political payback with our tax dollars. This president has abused this more than every president combined to date, with deals like Solyndra. Our nation is at stake and we can not afford to keep promoting failure. We promoted the biggest failure in congress to be president, and look where that got us.

    3. Jim says:

      You need to do your homework. JP Morgan doesn't have to prefund retirement for 5.5 billion. No taxpayer money is used to bailout the USPS.

    4. J Brannigan says:

      The Markets will not correct absent corrective action by the markets players. Public outrage and a palliative firing of some lower level execs will not do anything at all to correct systemic failings. To expect lawmakers to do anything helpful is laughable. Board room intelligence might help! it seem though,as if there is no real motivation to resolve problems there is no real consequence and the system is believed to be able to fix itself.Although more regulation is not an answer neither is inactivity on the part of players. I am only an interested observer but the people in these financial monstrosities need n ttitude correction. Seriously.

    5. Pingback: Must Know Headlines — ExposeTheMedia.com

    6. Grannybunny says:

      The Postal Service is not seeking any type of taxpayer "bailout," now or in the future. It is seeking the return of some of its many overpayments — from Postal funds, paid by Postal customers — to the $44+ billion Congressional slush fund (allegedly to prefund 75 years' worth of future retiree health benefits within 10 years), the $50-$75 billion (depending upon which audit one accepts) overpayment to the Civil Service Retirement System and the $11+ billion overpayment to the Federal Employee Retirement System. These are all monies paid by Postal ratepayers that Congress — by mandating all these draconian overpayments — has converted from off-budget Postal funds to on-budget Treasury funds. Congress has used all these $100+ billion to benefit other — taxpayer-funded — agencies and to render "revenue-neutral" some of its other (over)spending, thus benefitting the taxpayers, but these are Postal funds, paid by Postal customers to benefit the Postal Service, and they should be used for their intended purpose.

    7. JustDamnMad says:

      How about we try this analysis for size: private enterprise v.s. government agency

      JPMorgan Chase is a PRIVATE business with stockholders to answer to, and if the management fails miserably in doing their job, they will be out the door before anyone can say, "Gosh, I'm sorry!" Until 2008, government stayed out of the banking business and for good reason: shareholders EXPECT performance for the salaries earned, and when the performance does not measure you, they replace them . . . IMMEDIATELY!!! The ONLY persons the management had to satisfy was the shareholders PERIOD!!!! It is a philosophy that has worked in the banking industry for many years, and it works better than ANYTHING the government could come up with!

      The United States Postal Service is basically now a GOVERNMENT entity who has been regulated into ultimate failure! The government controls how much can be charged for postage, and instead of letting the market determine what needs to be charged, the government PURPOSELY holds down the revenue while costs go up! In addition, a few years ago Congress passed a law REQUIRING the postal service PRE-FUND retirement programs for years in advance . . . something that not one single other government agency has to do! The money was deposited, OF COURSE, with the Secy of Treasury, and if you are a betting person that money was GONE before it even showed up as a deposit!!! It is not bad enough we have a ponzi scheme going with social security and medicare . . . we have added the postal service to it!!!

      WHY is this big news??? Because the lamestream media needs something to distract the American people until the election is over and their sacred cow has been insured another four years! Wake up people . . . watch what the other hand is doing while you are being distracted by the one distracting you. Pure and simple, this is nothing more than another assault on the private enterprise system!

      • pilgrim says:

        For sure the USPS is basically a government entity and it seems the government not only controls how much is spent for postage, but also what stamps will be printed. Take, for example, the fact that the USPS did not print an Easter stamp as they have always done but that soon they will be printing a stamp with Islamic designs on it. Think that's good or sound business?

    8. Pingback: Ouch! | No Silence Here

    9. sashamanda says:

      "This trading bet gone sour … does not signal a need for more federal intervention." The Fed is already intervening with artiicially low interest rates and paying "banks" for excess reserves effectively shifting massive amounts from savers and retirees to Wall Street. Let us not refer to the continued stealth bailout of Wall Street as the "free market system" or pretend it differs morally from a bailout of the USPS.

    10. Pingback: J.P. Morgan Chase $2 Billion Loss Raises Fears of Government Actions | Publius Forum

    11. Pingback: J.P. Morgan Chase $2 Billion Loss Raises Fears of Government Actions | Wizbang

    12. Blair Franconia, NH says:

      No wonder we're losing our position in the world.

    13. Wayne Hatch says:

      Amused that our leaders are ready to pounce on JP Morgan given it's loss, but hesitant to respond to the financial condition of it's own house. What's the difference between a loss termed "defict" and a financial loss in the private sector. The difference in this case is that JP has funds to cover the loss; our government doesn't. JP will take corrective action. our government is incapable of taking action to clean up it's own. January 1, 2013 is just around the corner.

    14. BudFox says:

      Jamie Dimon is Simply Too Big to Fail.
      http://thinkbillions.blogspot.com/

    15. Sparky says:

      Hey Pilgrim–why do you right wingers appear to live in an alternative, fact-free universe?
      "Take, for example, the fact that the USPS did not print an Easter stamp as they have always done but that soon they will be printing a stamp with Islamic designs on it. Think that's good or sound business? " First, not only has the USPS not "always" issued an Easter stamp, they have NEVER issued and Easter stamp. Second, they sill not "soon" be printing an islamic stamp, they issued an Eid stamp with islamic designs on August 1, 2001 during the George Bush administration, one month before 9/11

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