Friday, August 22, 2008

US Bank Derivative Exposure (JPM)

In "In the Kitchen with Pierpoint: Cooking up Carbon Credits (JPM)" I said:
I take back every bad thing I've said about the CDM and JPM's derivative book. Well the derivatives anyway.
Yesterday, Barry Ritholtz at The Big Picture had this post:

Chris Whalen at the Institutional Risk Analyst asks an interesting question: How Much Capital Does a Bank Need?

The short answer: Alot.

The longer answer depends upon the bank's derivative exposure. Chris includes this handy chart to help you figure out just what that cap need might be:

Economic Capital is as calculated by IRA. All figures in $000 :

Sources: FDIC/IRA Bank Monitor; Q1 2008 data shown in “bank only” rollup.

WTF? $90 Trillion dollars derivative exposure for JPMorgan ? No wonder the Fed "rescue" of Bear Stearns was via JPM -- it was their own derivative exposure that was at risk.

I thought everyone knew that. Go to TBP for some interesting comments.