Remember last month, when I wrote about JPMorgan Chase gambling heavily on high-risk credit derivatives, and Jamie Dimon said it was all fine?
JPMorgan Chase disclosed on Thursday that a trading group had suffered “significant” losses in a portfolio of credit investments, with the chief executive, Jamie Dimon, estimating losses at $2 billion in a conference call.
“These were egregious mistakes,” Mr. Dimon said on the call. “They were self-inflicted and this is not how we want to run a business.”
And yet, apparently this is exactly how you run a business, Jamie!
The troubles at the unit, the so-called Chief Investment Office, which makes trades to balance the bank’s assets and liabilities, are expected to weigh on the bank’s broader earnings.
For example, the corporate group, which includes the Chief Investment Office, is now expected to lose $800 million in the second quarter, the company said in a filing. Previously, JPMorgan had estimated that the group would report net income of roughly $200 million.
Ultimately, JPMorgan said, the final tally will depend on the markets and other actions by the bank. Mr. Dimon added that it could “easily get worse.”
Shares of JPMorgan were down 5.5 percent in after-hours trading, dragging down other bank stocks.
The trading group has been a focus in recent weeks as questions surfaced about big bets the JPMorgan unit was reportedly making in credit default swaps. Reports emerged in April about a JPMorgan trader in London whose positions were so big that they were distorting the market.
Mr. Dimon played down the significance. In a conference call on April 13, he called the matter “a complete tempest in a teapot.”
“Every bank has a major portfolio. In those portfolios you make investments that you think are wise to offset your exposures,” Mr. Dimon said in the April call. “At the end of the day, that is our job — is to invest that portfolio wisely, intelligently over a long period of time to earn income and to offset other exposures that we have.”
Now, the portfolio is wreaking havoc at the bank. In its filing on Thursday, JPMorgan pointed specifically to problems with its bets on credit.
Now remember, these are exactly the kinds of transactions the banking industry lobbied so hard to protect.
The Chief Investment Office “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,” the company said in its regulatory filing.
“We have egg on our face,” Mr. Dimon said on Thursday. “We deserve any criticism we get.”
So if I point out that you’re a scum-sucking bottom feeder who helped crash the international economy, pushed millions of Americans into the poorhouse and that your attitude that moral hazard is only for the little people who bought the crap you so blatantly peddled to them, you’re acknowledging that you deserve it?
No, what you “deserve” is to be impoverished, left homeless and facing a long prison term. But we have a two-tiered justice system and that ain’t happening.
If I passed you on the street, it would be all I could do not to spit on you.