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.
.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!