JPMorgan Chase trades with your money?

[jacknapier]

Is it true that if you have a bank account (like a normal run of the mill checking/savings account) with Chase bank that they day trade with your money? I was reading somewhere that this was one of the problems the whole system had to wrestle with back in 2008.

 

[wackypete2]

I don't know all the regs. They've changed a lot since I was in banking. Deregulation led to depositor's money being used for super-risky investments and banks began failing at an alarming rate. From what I understand now, here in the US, there is still a percentage of deposits that must be backed by some type of liquid security or cash. Banks must also adhere to a loan-to-deposit ratio to assess liquidity.

Peter

 

[scose-no-doubt]

pension funds sub contract out management of funds to the likes of JP

 

[jacknapier]

I'm guessing this was part of the reason Glass-Steagall was enacted in the first place. I really don't think that too many people with savings/checking accounts would approve of their money being used that way. I wonder if loosening these restrictions or at least, deregulation, was initiated by the bigger banks to squeeze out their competition.

 

[NVP]

Is it true that if you have a bank account (like a normal run of the mill checking/savings account) with Chase bank that they day trade with your money? I was reading somewhere that this was one of the problems the whole system had to wrestle with back in 2008.

what?..... as opposed to most Banks trading Divisions gambling with the Taxpayers money .....

 

[D70]

This feels like a thread for people who have just escaped from a time warp continuum.

 

[Vicorka]

Broker/bank combination is not good for the bank's client on my opinion. For the big bang makes no problem to see where the main clients are trading and play accordingly... There is no problem for them "pump and dump" their clients... As for every business, their main goal to make money for themselves.

Of course they use money of their client in legal way to trade. If they cannot do it directly they can find indirect way - lend the money to one of their portfolio manager who will do it for them.

 

[vincegata]

Because of the Volker rule (part of Dodd-Frank law) banks cannot trade with the depositors' money, so banks spin off their proprietary trading divisions into hedge funds to comply with regulation.

 

[Vicorka]

That is correct. Would it be nice if you could take your neighbour's money and lend it to your wife... And if there is no money to return the Government would bail you out...

 

[chinabean]

lol, D70 is right, GFC.....london whale........ erm!!

Maybe not so much day trading though....also you don't make billions every year and not have any money in the bank (no pun intended)......

For what it's worth, I'm fairly certain that banks won't be able to just spin off their prop desks and create a hedge fund but stay invested. If i understand current proposals, banks won't be allowed to own hedge funds. And in reality they won't be able to "sell" the prop desk as it's only people so a buyer would be better off just offering said traders a standalone package to join their fund....