Measured by assets, J.P.Morgan is the largest U.S. bank. Measured by reputation, Jamie Dimon, its CEO, has walked on water right through the financial crisis of the past five years. Last night the bank reported $2 billion-plus “trading” (also called gambling) losses. Read the events, courtesy the Wall Street Journal:
Tracking the Trading.
+ April 5: The Wall Street Journal reports a trader at J.P. Morgan known in the market as the ‘London Whale’ made large bets on credit derivatives. J.P. Morgan says his unit is meant to ‘hedge structural risks.’
+ April 10: WSJ reports the J.P. Morgan trader had stopped making trades.
+ April 13: J.P. Morgan reports first-quarter earnings. CFO Doug Braunstein says the bank is ‘very comfortable’ with the unit’s positions. CEO James Dimon calls media coverage on the matter a ‘tempest in the teapot.’
+ May 10: J.P. Morgan says it has taken $2 billion in losses so far. Mr. Dimon calls the strategy ‘flawed, complex, poorly reviewed, poorly executed and poorly monitored.’ Among the things he says he should have paid more attention to, Mr. Dimon deadpans: ‘newspapers.’
Now ask yourself how can Jamie Dimon call the matter a “tempest in the teapot” and less than a month later report $2 billion plus of losses and, this morning their stock will be down at least 8%. That’s called lying. That’s called defrauding shareholders — at least in my book. Questions:
+ What is the bank doing gambling on derivatives, anyway?
+ Am I correct? They gambled on European bonds doing better? I thought that’s what brought MF Global down?
+ How can Jamie Dimon take this whole thing so flippantly? For one, he lied, he failed manage the bank and his shareholders are about to lose billions.
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