Oopsy daisy! JPMorgan Chase has joined the giant trading loss club, losing a whopping $2 billion in trading involving the same kinds of derivatives that figured into the financial crisis of 2008. The announcement last night sent the stock tumbling, regulators reeling and competitors under scrutiny. “For a bank that earned nearly $19 billion last year, the trading loss, which could go higher, will not cripple it in any way. Still it demonstrates how a market blunder can shake even a financial giant that celebrates its ‘fortress balance sheet,’” wrote the New York Times’s DealBook.
The egregious derivatives trade was set up as a hedge, the bank said, and since its implosion, questions have been raised about the difference between hedges and trading, as the Volcker rule aims to do. Only it turns out the Volcker rule probably wouldn't have stopped this trade.
As J.P. Morgan’s Jamie Dimon scrambles to maintain face, DealBook calls out other bankers who could find themselves under regulator’s gun:
- Bruno Iksil, a London-based J.P. Morgan trader, the so-called "London whale” who initiated the bets.
- Ina Drew, J.P. Morgan head of the chief investment office.
- John Hogan, J.P. Morgan’s chief risk officer, who has been criticized for the bank’s failure to act on suspicions of Bernie Madoff’s legitimacy.
- Douglas Braunstein, J.P. Morgan’s chief financial officer, who last month said the bank was “very comfortable with the positions we have” and called Iksil’s trades a “tempest in a teapot.”
RBS will slash 500 jobs – 25 percent of its headcount in the Netherlands. [Reuters]
Credit Agricole’s Q1 profit fell 75 percent on Greek debt. [WSJ]
Fortress will close its commodities fund after losing 13 percent in the past four months. [Businessweek]
Public exchanges lose out as trading moves to dark pools and wholesalers. [Businessweek]
Terra Firma’s Guy Hands is contributing $32 million of his own money to for employee bonuses. [Financial Times]
Goldman is shedding hedge fund and private equity investments to stay a step ahead of upcoming Volcker rules. [Financial Times]
Warburg Pincus raised $5 billion for its 11th global fund. [Reuters]
Bulltick Capital Markets, the brokerage behind Mexico’s mini "flash crash" in April, closed. [WSJ]