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The FDIC has been in talks with the Bank of England since before Dodd-Frank about coordinating resolution regimes. But the 'London Whale' episode further highlights just how much risk is shared by the two transatlantic partners.
May 21 -
The JPMorgan Chase CEO's role as industry punching bag du jour has more to do with bad politics than with bad business.
May 15 -
All would be well advised to confine criticisms and recommendations to mitigating JPMorgan's systemic risk. What remain are decisions that affect stakeholders. The bank's owners have already spoken in favor of their CEO, and rightly so.
May 25
Pop quiz time. Which U.S.-based financial services firm used the U.K. to make losing trades that caused embarrassment, regulatory scrutiny and much worse: MF Global, AIG, Lehman Brothers, or JPMorgan?
Answer: All of the above.
AIG's Financial Products Group, a PricewaterhouseCoopers audit client along with JPMorgan, made the bets on credit derivatives that caused the insurance company's own liquidity choking fit (and takeover by the U.S. Treasury) in London, too.
Lehman Brothers'
A
When Jon Corzine decided to use repo-to-maturity trades to juice corporate profits, MF Global's subsidiary in the U.K made it happen, for a cut of the action. The risky bets instead caused what MF Global bankruptcy trustee James Giddens called "liquidity asphyxiation" in his
The illegal act of commingling customer funds with company money had already been committed in London by MF Global's main bank, JPMorgan, and by another bank, Barclays.
As a result, MF Global customers are also waiting more than seven months for the return of some of their funds from the U.K., where they were allegedly used to fund Corzine's unsuccessful outsized bet to return the firm to profitability.
It's not clear if the Dodd-Frank Act's Volcker rule, intended to restrict proprietary trading and hedge fund-like activities for deposit-taking institutions, will apply to overseas affiliates of American banks. We need stronger cross-border regulatory enforcement and U.K. cooperation with U.S. regulators to spot U.S firms going to London for looser rules.
It looks like we have regulatory capture instead: Margaret Cole, the U.K. regulator at the Financial Services Authority who presided over the fines for commingling customer funds at JP Morgan, Barclays and PwC, is now general counsel for PwC U.K.
Francine McKenna writes the blog