Below is a post I wrote to Mlsoft last December 8th. Look at some of the other things that were going on in May 2002.
http://www.investorshub.com/boards/read_msg.asp?message_id=615086 >>>Mlsoft, This is over a year after 9/11. I assume you are talking about what would happen in the event of a interruption of services due to a terrorist act. I think those issues have been put behind us from what steps I have heard taken by the NYSE and others. What caught me eye is when they said"
"Several commenters suggested formation of an industry group to explore the specific changes that would need to occur to enable the two clearing banks to substitute for each other in the event that the services of either were interrupted or terminated ."
Now look at the date here:
On May 13, 2002, the Board and the SEC issued a White Paper on Structural Change in the Settlement of Government Securities. The White Paper expressed concerns about operational, financial,and structural vulnerabilities associated with the status quo, in which all of the most active market participants are critically dependent on one of two clearing banks for settlement of their trades and financing of their positions. The White Paper requested comment on whether structural change was needed to address the vulnerabilities.
"financing of their position"- doesn't sound like a mere short term interuption of service due to a terrorist attack to me.
It was in May that JPM started it's fall. You may recall that the market started to show concerns about JPM and it's derivatives exposure about this time. We also had the Co-head of JPM's investment bank to leave the firm on May 23.
Excerpt: " Could a failure at J.P. Morgan Chase (JPM, news, msgs) crash the entire financial system? That’s a scenario with credibility on Wall Street, which helps explain the recent trouncing of financial stocks.
If you own stocks, you probably don’t even want to consider this question. Who wants to hear about the chance that complex financial instruments -- derivatives -- could cause an implosion that could send the stock market reeling? After the pain of the last 30 months, who wants to hear about the possibility that the worst isn’t over? " 10-8-2002
Some other links of interest on this subject: http://www.goldseek.com/cgi-bin/stocks/news/CliveMaund/1032711538.php excerpt-"Another massive problem facing JP Morgan is that they have, by some estimates, more than $20 trillion of derivatives on their books. Yes, that’s TRILLION not BILLION. I don’t know about you, but I can’t even imagine a sum of money so vast, and, you know, I think that might be at the root of the problem. I don’t think the management at JP Morgan could comprehend it either, it’s so vast it’s almost meaningless. “You’d like another $150 billion in dollar call spreads? Consider it done, Mr Rodriguez – shall I book that to Burkina Faso Leveraged Investments Ltd as usual?” Compared to the gigantic derivative exposure, the $12 billion of loans to cable and telecom companies seems trifling. Given that, with respect to derivatives, about 2% of a bank’s total exposure is viewed as being at risk, this means that JP Morgan is potentially liable to the tune of $400 billion, which is considerably larger than the bank’s stock market capitalisation of $37 billion."
http://www.goldseek.com/cgi-bin/news/GATA/1020902582.php excerpt: May 7, 2002 "This morning I received a phone call from the best of sources in South Africa. The source has a friend who spent some time recently with two J.P. Morgan Chase senior bankers. The friend was told by the Morgan people that they have "lost control of the gold market and that the gold derivative department was a mess." The two Morgan people felt it was so bad that J.P. Morgan Chase -- the bank itself -- might not make it through the year. They suggested that my source buy $330 February gold calls."
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