$2 billion wiped from US top bank in 6 weeks

JPMorgan's Dimon faces investors after big loss

GMT 08:28 2012 Tuesday ,15 May

Arab Today, arab today JPMorgan's Dimon faces investors after big loss

JPMorgan Chase shares dropped 12.2% following reports of the huge loss
Washington - AFP

JPMorgan Chase shares dropped 12.2% following reports of the huge loss JPMorgan Chase chief executive Jamie Dimon will face shareholders' wrath Tuesday after admitting that the top US bank lost $2 billion in derivatives trading in just six weeks. A day after JPMorgan let its chief investment officer go in the wake of the huge loss and the bank's shares took another sharp fall on the stock market, Dimon will head to Tampa, Florida to answer to investors at the bank's annual meeting.
After having outperformed most of its competitors since a year ago, the 12.2 percent drop in JPMorgan shares since the revelation of the loss late Thursday put the bank into the lower ranks of the industry, jacking up pressure on Dimon for a clearer explanation of what happened.
"It's important to remember that our company is very strong and well capitalized, with leading franchises across our businesses," he said in a statement Monday.
"We maintain our fortress balance sheet and capital strength to withstand setbacks like this, and we will learn from our mistakes and remain diligently focused on our clients, who count on us every day."
The statement came with the announcement that Ina Drew, head of the chief investment office (CIO), the unit responsible for the derivatives trade debacle, was "retiring" after 30 years at the bank.
"Ina Drew has been a great partner over her many years with our firm. Despite our recent losses in the CIO, Ina's vast contributions to our company should not be overshadowed by these events," said Dimon.
Late Thursday Dimon revealed that the CIO racked up at least $2 billion in losses over six weeks trading the bank's own assets in the complex derivatives market.
The trading scheme, originally aimed to hedge risks, appears to have evolved into a big, aggressive and complex bet on the direction of the economy that went spectacularly wrong.
 On Monday the Wall Street Journal said more heads were likely to roll, pointing to three key players in the CIO's London operations.
In a contrite but unshaken television interview Sunday, Dimon downplayed the loss.
"This is a stupid thing that we should never have done, but we're still going to earn a lot of money this quarter," he told NBC.
"It's a question of size. This is not a risk that is life-threatening to JPMorgan."
Even so, the White House and members of Congress stepped up pressure for tighter bank regulation of the banks, including a broad ban on the speculative proprietary trade that has hurt many of them in the derivatives markets.
The White House said the loss was more evidence of the need to place tough controls on banks seen as systemically "too big to fail."
"This event even only reinforces why it was so important to pass Wall Street reform, why it is so important to fully implement Wall Street reform," said Jay Carney, spokesman for President Barack Obama.
"Ever since it passed, there's been millions and millions of dollars spent by Wall Street lobbyists to try to water down, delay, and render ineffective those rules," he said.
"It only reinforces why the president was right to take on this fight and why we need to make sure it's implemented."
Dimon, who has led the fight against the tighter controls, especially the pending Volcker Rule against proprietary trading, conceded Sunday that the loss had jeopardized JPMorgan's credibility.
"This is a very unfortunate and inopportune time to have had this kind of mistake," he said.

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