WASHINGTON -- JPMorgan Chase CEO Jamie Dimon admitted on Sunday that a $2 billion loss on derivatives trades had jeopardized the bank's credibility and given regulators a fresh opportunity to target Wall Street.
Dimon told NBC's "Meet the Press" program that the big loss incurred by the New York-based bank, which triggered a slide in banking shares on Friday, was damaging, but not bad enough to stop the company making a profit.
The Wall Street boss has led US banks in fighting the application of the new Volcker Rule, named after former Federal Reserve chairman Paul Volcker, which would ban so-called proprietary trading, when banks trade on their own accounts. Banks are also resisting proposed curbs on their hedging activities.
Asked if JPMorgan's losses had given regulators new ammunition to clamp down on Wall Street after the US government bail out of several financial institutions during the 2008 crisis, Dimon replied: "Yes, absolutely. This is a very unfortunate and inopportune time to have had this kind of mistake."
He denied that the unexpected losses from a hedging scheme -- designed to lower investment risk, but which spectacularly backfired -- had placed the company in jeopardy, though unwanted ramifications could follow.
"It's a question of size. This is not a risk that is life-threatening to JPMorgan," said Dimon, who late Thursday told analysts that the loss could increase to $3 billion through the end of June due to market volatility.
"This is a stupid thing that we should never have done, but we're still going to earn a lot of money this quarter. So, it isn't like the company is jeopardized.
"We hurt ourselves and our credibility yes, and we've got to fully expect and pay the price for that."
The interview with Dimon was conducted Friday after JPMorgan shares closed down 9.3 percent, wiping $14 billion off the market value of the bank.
The shock loss came over the past six weeks in the New York bank's risk management unit, the Chief Investment Office, and involved trading in credit default swaps, a so-called "synthetic hedge."
The losses were a humiliation for Dimon -- one of Wall Street's best known titans -- and for the bank, after it proudly came through the financial crisis in far better shape than many of its rivals.
Politicians who have called for the tightening of bank regulation and tougher controls on proprietary trading -- when banks' trade on their own accounts -- have seized on JPMorgan's losses.
On Sunday, Barney Frank, a Republican congressman and former chair of the House Financial Services Committee who drew up the Dodd-Frank financial reform bill after the 2008 crisis, said banks were not being unfairly targeted.
He said "we have stopped... them from losing money in ways that would cause damage to the rest of the system," while accusing Republicans of trying to reduce funding for the government agency that monitors derivatives trading.
Dodd-Frank was signed into law by President Barack Obama in 2010 with the intention of preventing high risk activities on Wall Street, which four years ago culminated in a global recession, from impacting the wider economy again.
Although the reforms imposed new regulations for banks, hedge funds and private equity activities, some lawmakers have said the rules do not go far enough.
Frank said the Volcker rule on proprietary trades, which Wall Street leaders and some lawmakers have argued would amount to an unnecessary block on its freedom to conduct business, "is still being formulated."
"It's a complicated thing," Frank added.article source: interaksyon.com
