J.P. Morgan Chase & Co. has taken $2 billion in trading losses in the past six weeks and could face an additional $1 billion in second-quarter losses due to market volatility, Chief Executive James Dimon said Thursday in a hastily arranged conference call after U.S. markets closed.
The losses stemmed from derivatives bets gone wrong in the bank's Chief Investment Office, which manages risk for the New York company.
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.P. Morgan, the U.S.'s largest bank by assets, said in its quarterly regulatory filing that a plan it has been using to hedge risks "has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed."
Mr. Dimon said the so-called synthetic hedge, using insurance-like contracts known as credit default swaps, was "poorly executed" and "poorly monitored." He said that the bank has an extensive review under way of what went wrong, and that there were "many errors," "sloppiness" and "bad judgment" on the bank's part.
Trust our financial titans! No need for that pesky Volker Rule! Financial regulation bad, free market good!
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2 comments:
Okay, I feel comment-y today. I have no reason to defend Jamie Dimon or JPM, but let's not forget that they did lose $2b, which stings a bit. In addition, at least JPM is not one of the banks that have
limped along post-bailout without addressing its problems. JPM took TARP money only because it was forced to, because the US needed it to be hyper-capitalized so it could absorb several insolvent institutions and help stabilize a growing crisis in 2008. Not saying they are heroes, but they did save us from a failure of Bear, which would have been catastrophic (see Lehman failure).
--Susan C.
Comments always welcome; I sometimes wonder if anyone is out there :)
I think that it's fair to point out that JPM played a productive role in the bailout, although it was far from guiltless in creating the bubble.
Anyway, my point is not to suggest that JPM is *worse* than the others, or even *equal* to them, but that it did not learn the lessons of the crash--and if they didn't, who has?
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