JP Morgan Chase Derivative Loss Analysis - Case Study Example

Download file to see previous pages - According to economists of the U.S. market, the crisis of JPMorgan made the whole banking community uncertain.
- The Congress government wanted to impose regulatory measures on the derivative trading deals to avoid such losses in the future.
- Unlike trading in New York Stock Exchange, most of the derivative transactions took place between private parties in the U.S.
- The government wanted to make such trading through ‘clearinghouses’, where public intermediaries’ would inspect the dealings.
- According to the government, it was also necessary to implement the Dodd-Frank Act that would oppose the banks from undergoing excessive risks in big dealings.
- At this juncture, the commercial banks claimed less government intervention.
- Jamie Dimon the chief of the company commented that three high-ranking executives left the company and this was the reason for the loss.

The JPMorgan loss affected both the market and the non-market stakeholders.

The customers are the depositors who keep their assets in the bank. The loss of JPMorgan would make the customers feel unsafe depositing their wealth in the bank. They would fear that the bank might collapse in such an adverse crisis and thereby might withdraw their deposits.

The employees of the bank would lose confidence in the organization and might decide to leave their jobs and join elsewhere. They would do this in fear of losing their jobs in the future.

The suppliers would also turn out to be non-supportive to the bank. They would cease the major derivative dealings in fear that in such a crisis the bank might not be able to pay back the returns to them.

The government would need to offer an implicit bail-out to finance the loss-making projects of the firm. The state would offer an implicit bail-out only if the bank accepts to operate under its regulations.

The communities would expect the bank to recover its loss. This is because JPMorgan initiates certain socially responsible schemes for the communities. They would encourage the employees, suppliers, and customers not to lose confidence in the bank.

The business support groups would also support the views of the company chief. They would claim less state intervention in matters of private banking. They would claim this because they are in favor of banking-led business expansions.

As shown in the above map, the communities and business support groups would take this loss to be a normal incident. They would comment that the loss has taken place because three important officials left JPMorgan bank at this juncture. Ina Drew was one of these three officials, who used to look into the risk in the firm’s derivative deals. On the other hand customers, government, suppliers, and employees would move against the views of the issue. They would lose confidence in the bank in due course of this loss. However, since the U.S. is a republican country the salience or power of the customers would be of utmost influence on the decisions of the banks. The government and the communities would have the minimum powers.

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