Bank's distrust of eachother: The Times online and Bloomberg have broken stories on JP Morgan causing the collapse of Lehman by freezing $17 billion of its highly liquid assets over the weekend. JP Morgan was Lehman's (and Bear Stearns) clearing bank. That means it was to act as custodian of these bank's assets in order to assure their safety. It appears that JP Morgan was also a counterparty to the tune of about $23 billion as well. I hope we all realize the dangers in this conflict of interest. If true (most likely), JP Morgan is not only guilty of self dealing but has branded itself as untrustworthy as prime broker and custodian. Where do you think the big PM accounts of BSC, LEH, and MS went when they had runs.
Tuesday, October 7, 2008
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