Derivative Scandals: Taxpayer Supported Gambling | Greg Hunter’s USAWatchdog

Derivative Scandals: Taxpayer Supported Gambling | Greg Hunter’s USAWatchdogBy Greg Hunter’s USAWatchdog.com 
The $2 billion derivative trading loss JP Morgan announced, about two weeks ago, is growing in size.  It is reportedly now more than triple the original loss.  According to a CNN report, “One thing seems clear about JPMorgan Chase’s $2 billion loss. It’s no longer $2 billion. It’s likely much higher.  The number being bandied about now is closer to a range of $6 billion to $7 billion, according to several people working on trading desks that specialize in the derivatives JPMorgan Chase (JPM, Fortune 500) used to make its trades and from two sources with knowledge of the bank’s positions.”  (Click here for the complete report from CNN.) 
The problem derivative losses seem to be growing for JP Morgan, and it’s affecting its share price in a negative way.  Yesterday, The Independent (a British publication) reported, “In a further blow, chairman and chief executive Jamie Dimon has suspended plans to use the US bank’s own funds to buy back $15bn worth of shares. Buybacks are a popular way for firms to use up cash sitting on the balance sheet and prop up the share price.”  (Click here for the complete Independent story.)  A trading loss big enough to halt a $15 billion stock buyback sounds like trouble to me, but that’s not really the big problem.
The largest banks in the U.S. were bailed out by taxpayers, and ever since the financial meltdown in 2008, all get taxpayer backing in the form of FDIC insurance.  The Federal Reserve is also providing near 0% interest rates to the banks while the banks provide savers with interest rates as measured in fractions.  JP Morgan may be the world’s biggest bank and holder of the most derivative exposure ($70.1 trillion), but it is far from the only big bank making risky derivative trades.  Too big to fail (TBTF) banks trading in derivatives are not like taking a risk on car loans, mortgage lending, startup companies or loaning money to help companies grow and add jobs.   The enormous risk the (TBTF) banks make is simply taxpayer supported gambling and nothing else.  Derivatives are mostly debt bets.