Why Was JP Morgan Chase Felicitated With A 'Crisis Management' Award For A Disaster It Created?

The London Whale Crisis was a series of bad bets on derivatives that went worse when traders began to double down stakes to earn profits. But those profits turned out to be a garbage gamble. The banks hid the fact that these trades were risky to regulators and the result was a $ 6.2 billion loss, a drop in the hat of the bank itself, but a huge hit to investors and shareholders.

And now, the people who created the crisis are actually been awarded for their actions in the aftermath.

So why are we praising them, instead of punishing them?

JP Morgan Chase has a Chief Investment Office which is now looking at $356 billion that has been represented as excess deposits. Normally, the way a bank works is to take deposits and lend them out to earn the interest margin as profits. So when JP Morgan states that they have excess deposits, it simply means that they were accepting deposits but not lending them out.

What JP Morgan did instead is that they accepted deposits, moved them to London and invested them in financial speculation and an internal hedge fund.

During the crisis, JP Morgan bought Washington Mutual and a whole bunch of deposits that way. Big corporations with billions of dollars in excess cash on their balance sheets needed to put that cash somewhere safe. These corporations needed a safe investment as they didn’t want their deposits to go bust and wanted a risk-free return. What they did is they put the money into big banks like JP Morgan Chase, because they believed that JP Morgan was too big to go bust that easily.

JP Morgan was expected to take this money to lend it out to corporations, individuals and businesses to help the economy grow. But instead, JP Morgan paid traders hundreds and millions of dollars as bonuses. And all these activities were being conducted in an entirely different country, outside the United States.

When the bank began losing money in 2011, it ignored the red flags and instead put in more money to cover up losses. The total accumulated losses came up to $6.2 billion.

However, the trading loss is not the real outrage. It’s JP Morgan’s use of excess deposits to make trades in an entirely different country instead of putting the money back into the US economy by lending it to businesses that needed it.

In light of this, do you think that the recent award given to JP Morgan Chase is justified? Is it ethical?