# JP Morgan Screws Up With Derivatives Trading **URL:** \ **Category:** Great Debates\ **Created:** [May 11, 2012, 6:49pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633 "2012-05-11T18:49:42Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [May 12, 2012, 5:47am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/21 "2012-05-12T05:47:04Z")
> [@waterj2](#): > > But if JP Morgan fails, we’re pretty much all fucked. Remember when Lehman Brothers failed? It would be a lot worse than that. Too big to fail so regardless what they do we are stuck with their mess? If that is so then we do have socialism. Just not what we usually think of it. Privatize profit and socialize loss. If that is where we are then we need to let them sink and tough it out. ---
**Author:** ![Shayna](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/shayna/32/17976_2.png) [@Shayna](https://boards.straightdope.com/u/Shayna)\ **Post date:** [May 12, 2012, 6:01am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/22 "2012-05-12T06:01:23Z")
> [@](#): > > [AND NOW WE KNOW THE TRUTH ABOUT WALL STREET: It’s Just Kids Playing With Dynamite](http://www.businessinsider.com/and-now-we-know-the-truth-about-wall-street-its-kids-playing-with-dynamite-2012-5) > > … [The bankers said,] Well-run banks should be trusted not to be so colossally reckless and stupid. Well-run banks should be allowed to manage their own risks. Well-run banks should not be hammered with straight-jacket regulations that would stymie their marvelous and creative innovation. Well-run banks should be free to look after themselves, like responsible adults. > > And the banking lobbying engine rushed this message to Washington and threw money around. And the lobby quickly persuaded Congress that Wall Street was fine, that the financial crisis was an aberration, that Wall Street should be left alone. > > JP Morgan was the prime engine of this message. And its brilliant CEO, Jamie Dimon, was Wall Street’s defiant Adult-In-Chief. > > [The problem is] > > …\*\* the gambling instruments the banks now use are mind-bogglingly complicated\*\*. Warren Buffett once described derivatives as “weapons of mass destruction.” And those weapons have gotten a lot more complex in the past few years. > > … **Wall Street’s incentive structure is fundamentally flawed:** Bankers get all of the upside for winning bets, and someone else—the government or shareholders—covers the downside. > > The second reason is particularly insidious. The worst thing that can happen to a trader who blows a huge bet and demolishes his firm—literally the worst thing—is that he will get fired. Then he will immediately go get a job at a hedge fund and make more than he was making before he blew up the firm. > > … now that JP Morgan has proven that even “the best” banks haven’t the faintest idea what they’re doing (or don’t care), it’s time for Congress to finally make it happen. > > **That nothing changed after the financial crisis is outrageous. But if nothing happens now, our entire government should resign in shame.** I think Henry Blodgett is kinda pissed. ---
**Author:** ![waterj2](https://avatars.discourse-cdn.com/v4/letter/w/858c86/32.png) [@waterj2](https://boards.straightdope.com/u/waterj2)\ **Post date:** [May 12, 2012, 6:33am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/23 "2012-05-12T06:33:29Z")
> [@Whack-a-Mole](#): > > Too big to fail so regardless what they do we are stuck with their mess? Basically, yes, that’s what “too big to fail” means. An institution that is so big that if it fails, it’s a catastrophe for the rest of us. Yes, that’s basically an implicit guarantee of a bailout if things go sour. Ideally, we wouldn’t allow this sort of systemic risk, but it works out well for the banks, and they have a lot of political power. And when people got a whole bunch of populist rage at the situation, they blamed the government and elected a bunch of anti-regulation Tea Partiers to Congress. Which didn’t exactly solve the problem. ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [May 12, 2012, 7:03am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/24 "2012-05-12T07:03:04Z")
> [@waterj2](#): > > Basically, yes, that’s what “too big to fail” means. An institution that is so big that if it fails, it’s a catastrophe for the rest of us. True but we could unwind them to something smaller (break them into pieces). I agree though that there is no way in hell the bought politicians (and make no mistake both parties are bought) will let that happen. I fear 2008 was just a preview. We may hang in awhile but things will get worse before they get better if congress does nothing (and this is about as much of a do-nothing congress as has ever been seen in this country…I really think they know this and are playing musical chairs and aiming to be sure they have a seat when the music stops…the rest of us are fucked). ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [May 12, 2012, 7:20am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/25 "2012-05-12T07:20:00Z")
> [@XT](#): > > Too technical for me (and at a guess for all the posters, including the OP, speculating about this in the thread so far), but a couple of observations from someone mostly clueless about this entire situation. First off, business involves risk. JPM took a risk and it didn’t pay off. It happens. You simply can’t take all risk out of the equation. Secondly, and this is from memory here, but JPM is a multi-billion dollar a year company, so while a $2 billion loss on this risk is going to hurt, I seriously doubt that they can’t cover it. Again, business involves risk, and when you take risks you, well, take risks. If it pays off then you get large rewards…if it doesn’t, then it can be painful, and may even drive you out of business. C’est la vie. Thirdly, is more a request for information…I know that there are some legislation being looked at for new regulation (i.e. Volcker Rule), but would it even have effected this? I’ve heard different takes on it, with some saying it would have prevented the trade and some saying it might not have had an effect. Anyone know? As I said, this is all too technical for me so I’m not fully grasping most of the aspects here. > > What I do know though is that you simply can’t take all risk out of business, not if you expect your economy to actually be responsive and grow. You could, of course, regulate things to death, but what you are going to get is a shitty economy if you set the bar too high. By the same token, you need to have a bar, and this might be a case where the bar was just to low. I really don’t know, to be honest…and I doubt the OP does either. Hopefully some 'dopers will wander in who know a bit more about the technical aspects here and will be willing to edjumacate the rest of us on at least the basics of what happened, why, and what should have been done to ‘fix’ this issue…or if anything ‘should’ have been done at all, considering that doing business is risky, and that sometimes you take risks and they simply don’t pay off. > > -XT I suggest you read “The Black Swan” which gives a lot of reasons why these things happen. Yes, business involves risk. And there are entire groups within banks to analyze and control risks - groups which totally screwed the pooch in 2007-2008. However I am having a hard time imagining the upside of a bet that could cause a downside of $2 billion, and I’m having a hard time imagining why a risk group would go ahead and authorize it. There are also groups monitoring trades. As far as I can tell, the guy who screwed up here was not rogue. In fact I believe his actions were well known. What the hell were they thinking not to unwind sooner? Yes, JPM can afford it - though I doubt the stockholders are going to be pleased. So who else pays the consequences? And how do we ensure that this kind of thing doesn’t repeat in an amount which will bring down a company. Like Corzine’s company, for instance. Saying “oh well, you can’t work without risk so nothing to see here” is just like saying that losing a nickel betting on heads or tails is the equivalent of Russian Roulette. ---
**Author:** ![CoolHandCox](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/coolhandcox/32/16233_2.png) [@CoolHandCox](https://boards.straightdope.com/u/CoolHandCox)\ **Post date:** [May 12, 2012, 7:31am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/26 "2012-05-12T07:31:11Z")
so what does this one line JP Morgan headline mean to me: joe dude? ---
**Author:** ![Rune](https://avatars.discourse-cdn.com/v4/letter/r/e68b1a/32.png) [@Rune](https://boards.straightdope.com/u/Rune)\ **Post date:** [May 12, 2012, 11:38am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/27 "2012-05-12T11:38:21Z")
> [@Evil\_Captor](#): > > Here is what I predict will happen: nothing. Nothing should happen. It’s a private bank. They can squander their money on risky trading, unprofitable investments, or booze and prostitutes. Whatever they find most appropriate. As long as no taxpayer money is going to be involved then it’s their own problem. And the bank is still going to post a multibillion profit. Even with the write down it is four billion dollars in black according to one account. > [@Evil\_Captor](#): > > Citizens United may well prove to be the death knell of American democracy. No big loss. American democracy wasn’t all that to begin with. > [@CJJ](#): > > What’s interesting in the FT article is that the other traders suspected the index was being kept artificially low by a single trader at JPM, but since the derivatives market is unregulated they had no one to compain to about it. So it appears that it is just a matter of other banks having earned on JP’s loss. That’s what capitalism is about. The ineptly run businesses gets run over by more adapt and better managed businesses. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [May 12, 2012, 11:45am UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/28 "2012-05-12T11:45:13Z")
AS long as we have a SOT like Tim Geithner, all is well-we can just print up an extra $2 billion-and back up JP Morgan Chase. With “oversight” like this, why would any banker care? The US Government will always come to the rescue, and (after all) its only taxpayer’s money. Jon Corzine is proof of that -he’s now a “bundler” for Obama’s campaign-he dumped about $1.5 billion-and he isn’t facing any indictments. ---
**Author:** ![Esox\_Lucius](https://avatars.discourse-cdn.com/v4/letter/e/848f3c/32.png) [@Esox\_Lucius](https://boards.straightdope.com/u/Esox_Lucius)\ **Post date:** [May 12, 2012, 12:44pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/29 "2012-05-12T12:44:30Z")
–The most, and only, specific reason I’ve heard bankers give for opposing the regulation of derivatives (usually it’s just general cries of “disastrous” and “it’ll never work”) is that money would go off-shore to countries that don’t regulate them. What that would mean for the economy, I have no idea. –Last I heard, the Volcker Rule had been watered down so much by bankers in the negotiations that they’d have no trouble getting around it. > [@LawMonkey](#): > > Lots of derivatives–perhaps most–are perfectly legitimate, safe ways of reducing exposure to risk (and shifting that risk to those who are willing to bear it in hopes of a profit). If they need an instrument to reduce exposure to risk, doesn’t that imply that they’re taking too much risk in the first place? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 12, 2012, 3:16pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/30 "2012-05-12T15:16:55Z")
> [@Shayna](#): > > I think Henry Blodgett is kinda pissed. Probably a hold-over from when he was banned from the securities industry about 10 years ago over a charge of securities fraud. But I’m sure all the folks who defended the Solyndra blow-up will be here shortly to remind us that you can’t judge an investment strategy by one deal gone bad. Call me when JPM asks for a bailout. Until then, this is what markets do. They punish you for mistakes. And as long as that punishment sticks, then they sink or swim based on how they learn from these mistakes. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [May 12, 2012, 3:24pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/31 "2012-05-12T15:24:00Z")
And they are already being punished by the market…IIRC, their stock was down over 9% on Friday and they have gotten a lot of negative lash back from their investors. -XT ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [May 12, 2012, 3:59pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/32 "2012-05-12T15:59:23Z")
Many jurisdictions have laws restricting the fires property owners may start on their own property. This isn’t babyish hand-holding. The government doesn’t care if you burn down your own assets; the concern is that the fire will spread to one’s neighbors. (Some libertarians will argue that one should be free to start fires and, if they get out of control, well … that’s what lawsuits are for. Even ignoring that the arsonist’s assets may not be enough to cover damages, the [del]confused[/del] different model a libertarian has of economic society means I will be unable to engage him in debate.) In this case, the fire started at JPM seems likely to be well-contained, causing merely a few billions of damage to JPM’s own stockholders. Does anyone seriously need examples that such egregious bets could affect the public interest, even if this one did not? Don’t forget that, due to Treasury generosity a few years ago, JPM is already playing, in effect, with taxpayer dollars. Their gambles are one-sided: no limit on profits, but at some point (much higher than $2 billion certainly) it is Joe Q. Public, not JPM stockholders, who will be left picking up the tab. Extreme libertarianism now has such a stranglehold on American intellectual thought that there seems to be confusion about why the government issues charters to banks and corporations at all. Here’s a hint, from one law topic I’m familiar with, patent law. Many think the purpose of patent law is to reward inventors. Wrong (or at least, not quite right): [QUOTE=Article I, Section 8, of the US Constitution] The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries …" [/QUOTE] That’s right. Patent law is about promoting general welfare. And that’s also the reason why banks are chartered etc., contrary to the confused thinking we see upthread. ---
**Author:** ![Capt.Ridley\_s\_Shooting\_Party](https://avatars.discourse-cdn.com/v4/letter/c/cc9497/32.png) [@Capt.Ridley\_s\_Shooting\_Party](https://boards.straightdope.com/u/Capt.Ridley_s_Shooting_Party)\ **Post date:** [May 12, 2012, 4:09pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/33 "2012-05-12T16:09:09Z")
Article in the Independent [here](http://www.independent.co.uk/news/business/news/the-city-trader-who-lost-2bn-and-he-was-the-risk-expert-who-was-meant-to-play-it-safe-7738004.html). Apparently the loss was down to a single French trader operating out of a JPMorgan division in the City of London who had become famed throughout the financial sector for his massive bets. ---
**Author:** ![Linden\_Arden](https://avatars.discourse-cdn.com/v4/letter/l/53a042/32.png) [@Linden\_Arden](https://boards.straightdope.com/u/Linden_Arden)\ **Post date:** [May 12, 2012, 4:12pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/34 "2012-05-12T16:12:44Z")
> [@ralph124c](#): > > AS long as we have a SOT like Tim Geithner, all is well-we can just print up an extra $2 billion-and back up JP Morgan Chase. > With “oversight” like this, why would any banker care? The US Government will always come to the rescue, and (after all) its only taxpayer’s money. > Jon Corzine is proof of that -he’s now a “bundler” for Obama’s campaign-he dumped about $1.5 billion-and he isn’t facing any indictments. The MFG trustee, Giddens, has located all the missing funds. Sorry, you will get no indictment there although the GOP now wants a special prosecuter to string this along for political purposes. Morgan was hedging against their massive long position in the market so $2 billion is fairly light for them. They stress test at $56 billion in losses before capital concerns are raised. Thanks, Geithner, for the stress tests. TG will be rememebered as of the best Treasury Secs ever. We were headed to financial Armageddon in Jan 2009. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 12, 2012, 4:32pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/35 "2012-05-12T16:32:01Z")
> [@Capt.Ridley\_s\_Shooting\_Party](#): > > Article in the Independent [here](http://www.independent.co.uk/news/business/news/the-city-trader-who-lost-2bn-and-he-was-the-risk-expert-who-was-meant-to-play-it-safe-7738004.html). Apparently the loss was down to a single French trader operating out of a JPMorgan division in the City of London who had become famed throughout the financial sector for his massive bets. Yes, he’s some hot-shot trader who lives in Paris and commutes to London. Which isn’t as crazy as it seems, as London and Paris are actually pretty close-- only a bit farther away than NYC and DC. I mean, I wouldn’t want to do it, but if you have a pied-à-terre in London, it wouldn’t be so bad. Back home in Paris for the weekend. in less than 3 hrs by train. Which begs the question… would US regulations apply to the London branch of a US Bank? ---
**Author:** ![Capt.Ridley\_s\_Shooting\_Party](https://avatars.discourse-cdn.com/v4/letter/c/cc9497/32.png) [@Capt.Ridley\_s\_Shooting\_Party](https://boards.straightdope.com/u/Capt.Ridley_s_Shooting_Party)\ **Post date:** [May 12, 2012, 4:37pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/36 "2012-05-12T16:37:37Z")
I don’t think so. IIRC, American banks were opening up offices in London to perform an end-run around American regulators, as British financial regulations had become so lax under Brown. The Vickers Report is due to be implemented in full in the next few years, however, which will hopefully completely stamp out this sort of behaviour (retail and investment banking now need to be completely separated). ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 12, 2012, 4:44pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/37 "2012-05-12T16:44:00Z")
> [@Capt.Ridley\_s\_Shooting\_Party](#): > > I don’t think so. IIRC, American banks were opening up offices in London to perform an end-run around American regulators, as British financial regulations had become so lax under Brown. The Vickers Report is due to be implemented in full in the next few years, however, which will hopefully completely stamp out this sort of behaviour (retail and investment banking now need to be completely separated). That’s what I thought. And if they get kicked out of London, they’ll open shop somewhere else. That is not to say that we should just throw up our hands and forget about meaningful and effective bank regulation, but we should not be naive about it. We in the US have this terrible habit of thinking that everything important in the world either does or should happen here. ---
**Author:** ![waterj2](https://avatars.discourse-cdn.com/v4/letter/w/858c86/32.png) [@waterj2](https://boards.straightdope.com/u/waterj2)\ **Post date:** [May 12, 2012, 5:14pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/38 "2012-05-12T17:14:55Z")
> [@John\_Mace](#): > > Probably a hold-over from when he was banned from the securities industry about 10 years ago over a charge of securities fraud. > > But I’m sure all the folks who defended the Solyndra blow-up will be here shortly to remind us that you can’t judge an investment strategy by one deal gone bad. > > Call me when JPM asks for a bailout. Until then, this is what markets do. They punish you for mistakes. And as long as that punishment sticks, then they sink or swim based on how they learn from these mistakes. Call you when banking deregulation leads to some sort of global financial meltdown and JP Morgan needs to be bailed out with taxpayer money? Like happened in 2008? I think the idea is to get a handle on systemic risk in the financial industry before then. And if that history is a guide, you’ll just be back to saying “no big deal; call me next time” within a few years after that, too. The government (and all of us, really) has a huge stake in JP Morgan’s stability, which isn’t exactly amenable to a market solution. I’m not sure that I buy the idea that JP Morgan can operate the same in any other country and that there’s nothing the US can do about it. We can certainly reinstate Glass-Steagall, and refuse to provide FDIC insurance for banks in the US that engage in proprietary trading anywhere in the world. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 12, 2012, 5:23pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/39 "2012-05-12T17:23:49Z")
> [@waterj2](#): > > Call you when banking deregulation leads to some sort of global financial meltdown and JP Morgan needs to be bailed out with taxpayer money? Like happened in 2008? I think the idea is to get a handle on systemic risk in the financial industry before then. And if that history is a guide, you’ll just be back to saying “no big deal; call me next time” within a few years after that, too. A $2B loss by JPM isn’t going to bring down the banking industry. > [@](#): > > The government (and all of us, really) has a huge stake in JP Morgan’s stability, which isn’t exactly amenable to a market solution. I’m not sure that I buy the idea that JP Morgan can operate the same in any other country and that there’s nothing the US can do about it. We can certainly reinstate Glass-Steagall, and refuse to provide FDIC insurance for banks in the US that engage in proprietary trading anywhere in the world. Good luck regulating the actions of Banks in other countries. These guys are smart, and there’s tons of money to be made. Like I said, I’m not against reasonable regulation, just don’t be naive about it. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [May 12, 2012, 5:29pm UTC](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633/40 "2012-05-12T17:29:50Z")
The real story here isn’t really derivatives, and certainly not derivatives in general. Over in Europe JP Morgan basically had Iksil trying to hedge against the mess in Europe. That in itself isn’t invalid or bad. Unfortunately he got caught up in a complicated scheme and made many mistakes along the way. Improperly hedging an existing hedge, making mistakes in the amount he was offsetting existing trades and etc. He was basically playing with too much money in a risky, complicated environment. Most likely nothing he did would have been prohibited by the Volcker Rule had it been in place. The real story is basically that the big banks are still running loose ships. JP Morgan escaped a lot of the negativity of the big financial crisis because they were the healthiest American bank during that time. What is really scaring the in-the-know analysts is this is evidence that JP Morgan is willing to let guys like Iksil go crazy with a shit ton of money, and from that we get to the core issue: banks like JP Morgan are taking risks that other banks wouldn’t **because they feel the government will bail them out if these risks go sour**. As long as the 4-5 biggest banks (the $1tn + asset banks) in America continue to behave with the expectation that the government will not let them actually fail, they will take risks inappropriately and beyond what a regular business would be willing to take. In terms of JP Morgan as a company, it should be pointed out that even with the $2.3bn loss from this they are still profitable on the quarter, so this by itself doesn’t actually put JP Morgan in danger of going under or anything, it didn’t even make them go into the red for the quarter. But it’s more the attitudes this represents than anything else that should have people concerned. I’ve advocated in the past for a bank asset tax levied quarterly or annually against large banks to try and discourage their existence. I said this in a thread some time ago: > [@](#): > > Implement a Bank Tax that is assessed on the value of the bank’s holdings. Banks with under $50bn in holdings would be assessed no tax. It would be around 0.15% (0.0015) on banks \> $50bn, so Goldman Sachs would owe about $1.4bn a year. Banks above $1tn would owe 0.35%, so Bank of America would owe almost $8bn a year. This is both a revenue gain and **designed** to make being so large a less competitive proposition, we should not want overly large banks. Obviously like all taxes it is passed on to consumers, but since pretty much all credit unions, most small municipal banks, and even many regional banks will not have more than $50bn in holdings it means ordinary consumers will have little to be worried about if they bank with those entities. The very fact that those alternatives will exist for ordinary consumers means even the big banks will probably pass these costs on to large institutional clients who may be too big for a smaller bank to server and who are the reason some of these super banks have such large holdings in the first place. [Previous page](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633.md?page=1) [Next page](https://boards.straightdope.com/t/jp-morgan-screws-up-with-derivatives-trading/621633.md?page=3)