2008 Global Financial Crisis: JP Morgan Chase

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Recommended: Background of 2008 financial crisis

The 2008 global financial crisis was one of the most trying financial moments for many firms across the world. Following the housing bubble and based on the fact that many banks and financial institutions almost collapsed in the crisis, large firms in many industries were significantly affected, especially those that relied on financial aid from banks. At the same time, the inflow of their customers encountered a significant decline as many people had to cut their spending as the national and global economies encountered a serious crisis. JP Morgan Chase is an American-based multinational financial services firm headquartered in New York. It is one of the largest banks in the US and is rated as the sixth largest bank in the world based on …show more content…

The bank received a total of $25 billion from the Troubled Asset Relief Program (Global Economic Crisis: Impact on Finance). However, it was fortunate for JP Morgan that it fell behind its competition in the lucrative and disastrous subprime-mortgage-securities-selling business. An analysis of JP Morgan in the late 1980s had identified significant problems with the application of financial innovation in the mortgage market (Nayak 4). For instance, unlike the corporate loans, the housing market did not have a long-term data that could allow the financial institutions to reliably enumerate the risks associated with the bundled mortgage securities. At the same time, JP Morgan could not get to terms with what to do with the senior portions of the mortgage securities. The packaged mortgage securities were a potential problem if retained in the bank books, yet they were hard to offload. JP Morgan also wondered how other banks like Citigroup had managed to deal with the defect in the mortgage securitization …show more content…

According to the Financial Crisis Inquiry Commission, JP Morgan suffered huge losses with the super-senior securities and the bank had exposed itself to multibillion-dollar risks. The commission blamed the rating agencies that had released the securities AAA ratings (Nayak 12). The commission also reported that there were almost insignificant financial models that could have predicted the huge decline in the housing market, especially in the US. The JP Morgan financial analysts had identified the issues with the quantifying risks in the mortgage security market. Jamie Dimon also came up with a new goal of the firm for the diversification of the trading departments into the initially-set mortgage-backed securities (Nayak 20). This is an area that had proofed profitable to the competitors in the previous financial

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