JPMorgan Chase Admits $2B Loss in ‘Riskier’ Trading

JPMorgan Chase, the nation’s largest bank, said today in a surprise after-market announcement that one of its trading units has lost $2 billion in recent weeks from a hedge strategy “proven to be riskier, more volatile” than previously believed.
The unit, labeled the Chief Investment Office (CIO), is the type of proprietary trading division that came under scrutiny in the Dodd-Frank Wall Street reform of 2010 – although regulators have yet to implement curbs on risky trading by banks with their own cash, known as the Volcker Rule.
JPMorgan CEO Jamie Dimon said in a conference call that the losses were caused by “sloppiness” and “bad judgment.”
In regulatory filing today, the bank said the trades involved the CIO’s “synthetic credit portfolio.”
The losses in the credit securities were about $2 billion, but the bank estimates losses at the unit at $800 million, the poor trades offset by $1 billion or so in gains on securities sales.
“Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed,” JPMorgan said.
CEO Dimon has spearheaded bigger and riskier speculative bets with the bank’s money, five former employees of the bank said earlier this year, according to Bloomberg.
However, Dimon said during the conference call that these losses amounted to a “unique thing we did.”
In its regulatory filing, JPMorgan said it is “currently repositioning CIO’s synthetic credit portfolio, which it is doing in conjunction with its assessment of the Firm’s overall credit exposure.”

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