Two weeks ago, JP Morgan Chase announced a $2 billion writedown of its investment balance sheets due to risky derivatives trades gone wrong.
And last Friday, the most eagerly anticipated tech IPO in a decade, Facebook, failed to thrive and closed just under its opening price of $38 a share. Technical glitches on its opening day resulted in a “locked market” for many investors as their buy and sell orders could not be executed. The following Monday (May 21) NASDAQ announced the possibility of monetary compensation for losses that investors may have suffered due to being locked out of the market on Friday. This announcement created a near-run as investors dumped millions of shares of Facebook in order to qualify. As of the close of business Tuesday May 22, Facebook sat at $31 a share, a loss of 18%. Angry investors and baffled financial experts are now looking at how financial giant Morgan Stanley handled the valuation of shares in the days leading up to the IPO.
I have a question: wasn’t the Dodd-Frank Wall Street reform bill supposed to prevent these kinds of things, especially with respect to derivatives trading? And come to think of it, how was MF Global able to raid investor equity accounts in order to cover its short term debts, thereby losing hundreds of millions of dollars worth of investor’s money last year? I thought we “fixed” Wall Street. I guess I was wrong.
Yet another signature accomplishment of the Obama Administration ends up being relatively worthless. Why am I not surprised.