UNCOMMON WISDOM

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UNCOMMON WISDOM

Postby WalkerARCHITECTS » Thu Jun 21, 2012 6:52 pm

UNCOMMON WISDOM

The existing losses of the Architectural Industry are unprecedented. Architects everywhere are still hoping for a recovery. The housing industry is weak and the Banking industry is not motivated to engage in any significant effort to embrace construction lending. Banking is a business and we wish bankers would return to it. Let the gambling be done by gamblers.

Design Intelligence has become uncommon wisdom.

J.P. Morgan Chase & Co., the nation's largest bank, whose chief executive, Jamie Dimon, has lead Wall Street's war against regulation, announced last month it had lost $2 billion in trades over the past six weeks and could face an additional $1 billion of losses, due to excessively risky bets. This is what is wrong in America’s banking structure today.

The bets were "poorly executed" and "poorly monitored," said Dimon, a result of "many errors, "sloppiness," and "bad judgment." But not to worry. "We will admit it, we will fix it and move on."

“A doctor can bury his mistakes, but the architect can only advise his clients to plant vines.” -- Frank Lloyd Wright, New york Times Magazine, October 4, 1953

Bankers who now bury a mistake resulting in billions of dollars lost should be remembered.

The brutal truth is Architects are now so damaged we can’t move on. We find this attitude to be both arrogant and reckless. We find that we can’t go anywhere or do anything significant enough to recover from the damage inflicted by the reckless actions of the financial industry. Frustration is not the right word for it, they are talking the talk, with very little responsibility for having squandered other peoples money. How do you move on from a $2 billion dollar error? How are they going to do that? Word on the Street is that J.P. Morgan's exposure is so large that it can't dump these bad bets without affecting the market and losing even more money. That is exactly what is happening now! They went right back out there and did it again! Given its mammoth size and interlinked connections with every other financial institution, anything that shakes J.P. Morgan is likely to rock the rest of the Street. It has! You had better believe it is serious!

The impacts from a month ago are still shaking the global economic condition.

Ever since the start of the banking crisis in 2008, Dimon has been arguing that more government regulations of Wall Street are unnecessary. Clearly he is quite wrong about that. Last year he vehemently and loudly opposed the so-called Volcker rule, itself a watered-down version of the old Glass-Steagall Act that used to separate commercial from investment banking before it was repealed in 1999, saying it would unnecessarily impinge on derivative trading. We all wish derivative trading had never been conceived of!

Architects are responsible for liabilities that arise from their errors. This new immunity for bankers gnaws away at reason itself, soon it will be quite impossible to hold anyone in the banking industry accountable for anything they destroy with their bad judgment.

Derivative trading was the lucrative practice of making bets on bets. Where you may recall that “hedging” or hedge fund management, is the practice of using some bets to offset the risks of other bets. Dimon argued that the financial system could be trusted; that the near-meltdown of 2008 was a “perfect storm” that would never happen again. There is nothing about the financial markets that is perfect. Dimon has invented a new breed of logic not only self referencing but self impregnating, and we can only guess what manner of offspring may be the consequence!

So the reckless idea of gambling with other people’s money continues. Thirty percent of Architects had their careers destroyed by reckless gambles that wall street engaged. They screw up on Wall Street and the working class takes the damage home with them. Home owners all over the nation have their loans under water and no recovery of those assets is in sight. Since then, J.P. Morgan's lobbyists and lawyers have done everything in their power to eviscerate the Volcker rule -- creating exceptions, exemptions, and loopholes that effectively allow any big bank to go on doing most of the derivative trading it was doing before the near-meltdown. Be frightened because these same people will use Citizens United to control who can run for an election in your State! The need for restraint is obvious.

“I believe that banking institutions are more dangerous to our liberties than standing armies.”
Thomas Jefferson

Only a few years after the banking crisis that forced American taxpayers to bail out Wall Street, caused home values to plunge by more than 30 percent and pushed millions of homeowners underwater, threaten or diminish the savings of millions more, and sent the entire American economy hurtling into the worst downturn since the Great Depression -- J.P. Morgan Chase recapitulates the whole debacle with the same kind of errors, sloppiness, bad judgment, excessively risky trades poorly-executed and poorly-monitored activity, that caused the crisis in the first place. It is as unbelievable as it is stupid.

I wish I couild say it more bluntly. In light of all this, Jamie Dimon's promise that J.P. Morgan will "fix it and move on" is not reassuring. Last time they fixed at the expense of the working class and landed right on top of Architects and the housing industry with a sickening crunch I still hear it and we still feel it.

The losses had been mounting for at least six weeks, according to Morgan. Where was the new transparency that's supposed to allow regulators to catch these things before they got out of hand?

Several weeks ago there were rumors about a London-based Morgan trader making huge high-stakes bets, causing excessive volatility in derivatives markets. When asked about it then, Dimon called it "a complete tempest in a teapot." Using the same argument he has used to fend off regulation of derivatives, he told investors that "every bank has a major portfolio" and "in those portfolios you make investments that you think are wise to offset your exposures." Wait a minute…what about our exposure??

We need Design Intelligence to regulate the banking industry, last time I checked the risk of such gambles could be statistically measured, and software could be used to evaluate such trades. What has happened to drive the replacement of financial management with gaming ?

"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with the flick of a pen, they will create enough money to buy it back again. Take this great power away from the bankers and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a better and happier world to live in. But if you want to continue the slaves of bankers and pay the cost of your own slavery, let them continue to create money and to control credit."

Sir Josiah Stamp, Director and President of the Bank of England during the 1920's
WalkerARCHITECTS
 
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