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This Is Uncomfortable

JPMorgan trading losses could total as much as $9 billion

Kai Ryssdal Jun 28, 2012
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Kai Ryssdal: One can only believe JPMorgan CEO Jamie Dimon is thanking his lucky stars the Supreme Court chose today to release its health care ruling, thus sucking up much of the news media’s attention. Sadly for him, the New York Times has been digging into the banks’ $2 billion loss from a month or so ago. And it turns out $2 billion might be the least of Mr. Dimon’s problems.

Jessica Silver-Greenberg wrote the story in the times today. Good to have you here.

Jessica Silver-Greenberg: Good to be here.

Ryssdal: So you are reporting this morning that this trade that happened over in London by the JPMorgan trader could be a whole lot worse than we thought — from $2 billion to almost $9 billion, conceivably. How does this happen?

Greenberg: Well, OK. To start with the caveat, which is always fun, the $9 billion is the worst case scenario. So that’s if basically the market turns against them, if the most volatile positions that they’re supposed to get out of prove more expensive and more costly to get out of than they initially expected. So we are talking kind of nightmare, apocalyptic scenario.

Ryssdal: Talk to me about just a bad dream scenario. What’s a more realistic possibility here?

Greenberg: Well, so there’s all kinds of different estimates that are floating. And of course, Jamie Dimon himself has said that these estimations of losses fluctuate day-to-day because of course they’re based on this mercurial market, and the people on the other side of this trade. But JPMorgan’s going to disclose its earnings July 13th, I believe, and at that point, most expectations are that the loss currently stands on that bungled, botched — whatever you want to call it — trade between $4 billion and $6 billion, although what we’ve been hearing is that it’s more likely around $5 billion.

Ryssdal: Did you talk to people in your reporting who were involved on either side of these trades? I mean, how do you know what you know?

Greenberg: Yeah. I did, is the short answer. So we talked to a bunch of credit traders, we talked to hedge funds, we talked to traders within JPMorgan — both current and former. So that is where we’re getting a lot of the outlines of this trade, that Mr. Dimon has done a lot to try to keep under wraps. In part because any more publicity or knowledge about the intricacies of this trade mean that it could cost the bank more money to get out of.

Ryssdal: One has to imagine that Jamie Dimon, the CEO of JPMorgan Chase, is 1) tearing his hair out, 2) waiting for a call from the Senate Banking Committee saying, ‘Hey Mr. Dimon, come on down to Washington to talk to us again.’

Greenberg: Well, the Senate didn’t exactly throw him hardball questions first time around.

Ryssdal: That is very true, that is very true.

Greenberg: But I will say that the timing of this loss is not good. In part because it’s happening as these debates are raging in Washington about how much banks should be reined in, in terms of the risky bets that they make with taxpayer-insured money, right? Taxpayer-backed money, federally insured money. So Jamie Dimon has been a very vociferous critic of the regulations that are being hashed out in Washington, and so that means that this really undercuts his credibility in terms of how much force he has to say, ‘No, no, we’ve got this under control, we can manage our risk and we certainly don’t need any further restrictions on what we can do.’

Ryssdal: Jessica Silver-Greenberg at the New York Times. Jessica, thanks a lot.

Greenberg: Thank you.

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