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Fallout From JPMorgan Chase’s $2 Billion Loss

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Posted on May 11, 2012
swanksalot (CC BY-SA 2.0)

JPMorgan Chase & Co. weathered the 2008 financial crisis without reporting a loss. But a failed hedging strategy that recently cost the company $2 billion has called into question the ability of its leaders to manage risk and intensified the debate on banking reform.

The loss challenges JPMorgan CEO Jamie Dimon’s opposition to the Volcker rule, a reform proposed by economist and former Fed Chairman Paul Volcker, that would curb banks’ abilities to use their own money to make speculative investments through what is known as “proprietary trading.” Economists believe such dealings contributed to the 2008 financial crisis. —ARK


Regulators and lawmakers are now likely to push Dimon for more details about the trades. Those details will guide how regulators now view the issue and its impact on the Volcker rule, said Karen Petrou, managing partner of Washington-based Federal Financial Analytics.

If the trades were meant to hedge against specific risks as opposed to clearly being done as a proprietary bet on the markets, it may not play as clearly into the Volcker rule debate as supporters of the crackdown want it to, she said.

Dimon said he remained opposed to the Volcker rule.

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By Petunia, May 14, 2012 at 1:39 pm Link to this comment

The bank has 77 TRILLION of exposure to derivatives. It almost seems unimportant that they ONLY lost 2B.

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By DBM, May 14, 2012 at 2:50 am Link to this comment
(Unregistered commenter)

Nothing but nothing but go-to-jail sentences
commensurate with the “throw away the key” terms thrown
at minor drug offenders and small-time criminals will
get bankers to change their behaviour.

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By Hmmmmmmmmm, May 12, 2012 at 7:26 am Link to this comment

I smell a fee increase.  Are we sure they didn’t do this on purpose so they could justify
another fee hike?

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THX 1133 is not in the movie...'s avatar

By THX 1133 is not in the movie..., May 12, 2012 at 12:35 am Link to this comment

Gee, what a surprise, yes?
(chuckle) We just never seem to learn…

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By diamond, May 11, 2012 at 3:08 pm Link to this comment

Regulate derivatives. Regulate the banks and all of the financial sector. Until that happens banks will continue to play roulette with other people’s money - the more their customers lose, the more they win. If nothing is done the global financial crisis will be just the curtain raiser on the real financial Armageddon.

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By litlpeep, May 11, 2012 at 11:47 am Link to this comment

Dimon’s opposed to the Volker Rule (along with all the usual 13 suspects and a few more).  So is Geithner (thus the rule is not a rule), and so is Obama opposed.

What’s to worry?

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By Bobi6, May 11, 2012 at 11:35 am Link to this comment
(Unregistered commenter)

Maybe Jamie from Queens could just pay for the losses out of his own pocket. It’s only $2 B or perhaps $3 or $4 billon. What the heck, it’s only money.

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By John Poole, May 11, 2012 at 11:02 am Link to this comment
(Unregistered commenter)

Ah, yes -regulation of the banks and Wall Street by the government is needed to
restrain risky financial gambles. Meanwhile any regulation of the Pentagon
corporation’s risky gambles is off the table.

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