JPMorgan takes a $2 billion fall

Mitchell Hartman May 11, 2012

Jeremy Hobson: Stock markets around the world are reacting this morning to a surprise announcement from a guy known as the “King of Wall Street.” JPMorgan Chase CEO Jamie Dimon announced yesterday that his bank just lost $2 billion on some bad bets.

Marketplace’s Mitchell Hartman reports.

Mitchell Hartman: The fallout from JPMorgan’s surprise announcement of big troubles in its derivatives trading is just beginning. First, financial, as CEO Jamie Dimon said in the conference call:

Jamie Dimon: We’ve already said it could get worse, and it’s going to go on for a little bit unfortunately, that’s number one.

Dimon acknowledged there could be another billion in losses this quarter due to “volatility” in markets. Dimon insisted that the derivatives bets taken wouldn’t have violated tough new banking regulations that go into effect this summer. The so-called Volcker Rule would restrict the ability of banks to trade with their own money.

Bank analyst Nancy Bush says this debacle for a huge Wall Street bank is also a debacle for those opposing tighter bank regulation.

Nancy Bush: Any push-back to a Volker Rule is now dead. And remember Jamie was the leader of this charge. I think it’s made it much harder for the industry to say, you know, it’s not dangerous.

Simon Johnson at MIT’s Sloan School of Management says critics of Wall Street’s freewheeling ways before the financial crisis couldn’t have a better weapon now.

Simon Johnson: The counter-argument that some people on Wall Street have been making is that no, you don’t need the Volker Rule because we’re all much more sophisticated than we were before and the financial crisis weeded out bad practices. But now we’re talking about supposedly the best bank on Wall Street with regard to risk management.

In coming weeks, the bank will surely try to stem its losses and clean up the mess.

I’m Mitchell Hartman for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.