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It's Official: JPMorgan Chase Is Still Too Big To Fail

Maybe we should have broken up the banks!
It's Official: JPMorgan Chase Is Still Too Big To Fail

I'm not gonna be happy until I see Jamie Dimon in an orange jumpsuit. But that's just me:

A failure of JPMorgan Chase poses the greatest threat to the international financial system, according to a new government study.

The New York-based bank was given a "systematic risk score" of 5.05% in a report of 33 U.S. banks by the Office of Financial Research (OFR), a unit of the Treasury Department, in a new paper released this month.

That was the highest score on the list, which measured banks with assets of over $250 billion based on data gathered by the Federal Reserve through Dec. 31, 2013. And the higher the score, the higher the risk to the system.

JPMorgan was followed by Citigroup, which scored 4.27%, and Bank of America at 3.06%. Investment bank Morgan Stanley scored 2.60%, followed by Goldman Sachs, which scored 2.48% on the risk chart.

The OFR was created in the aftermath of the financial crisis to measure risk in the financial sector. Its goal is to warn the country about situations that could lead to another round of multibillion-dollar taxpayer bailouts.

The report measured the 33 banks based on five categories: size, complexity, global activity, interconnectedness and substitutability, or whether customers would have a difficult time replacing the bank's services.

The authors said the largest banks generally scored highest for all indicators. However, some large banks were given high scores for other reasons, including dominating specific businesses, such as asset custody services, or due to the complexity of their business lines, the report said.

JPMorgan, for example, scored high on size, but also on over-the-counter derivatives, which fell under the "complexity" category.

JPMorgan also scored high for Level 3 assets, or assets that are very illiquid and therefore hard to value. During the financial crisis, some banks were able to feign good health until it was too late by not adjusting the value of their hard-to-value mortgage-backed security portfolios.


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