The $2 billion loss JPMorgan CEO Jamie Dimon reported in May may now be closer to $9 billion.
Dimon told Congress as well as the press in May that the estimated loss due to bets on credit derivatives was $1 billion. Within days, that number doubled to $2 billion. Now, a week after its CEO testified in front of Congress for the second time, the bank says as it continues to unwind its position, those losses could be as high as $9 billion.
Even though the bank’s been aggressive in its efforts of backing away from the loss it’s happening much faster than anticipated. Now, bank models are projecting losses as high as $9 billion. What’s most interesting, however, is the bank produced an internal report in April that showed that the losses, in the worst-case scenario, could climb between $8 billion to $9 billion.
So does this mean the controversy will once again become front and center? Many are vehement in their belief large banks and other financial institutions should be better regulated. In fact, some have gone as far as to say the “too big to fail” banks are thumbing their collective noses to the government and the public.
Chase Bank will disclose part of the losses on July 13, the date its second quarter earnings. Still it insists it will be in the green, despite the multi-billion dollar loss.
Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank,
said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner.
Still on a Pedestal?
It appears that Jamie Dimon will finally lose some credibility in the political and financial sectors. There’s no denying a growing number of people believe he should be ousted. He’s the one, after all, who has been most vocal in his disdain for regulatory changes and this latest scandal is the worse yet – and there have been many.
It was announced in April that Dimon received a whopping 11 percent increase in pay. He now earns $23.1 million annually and last year, he was rewarded with a $4.5 million bonus and $17 million in stock options. That same month, the bank announced it would no longer offer student loans to non-customers. Only months earlier did JPMorgan Chase announce it would be raising its debit card usage fees for its middle income customers.
Last week, during his testimony, Dimon stated that London used a complex strategy that left the bank vulnerable to to risks, something the strategy was supposed to prevent. He then apologized for the trade and said it was a stupid isolated incident. He reiterated the health of his bank was solid and that it had more than enough capital to cover the bases.
Before he was dismissed, Dimon was asked what he thinks the solution is for Dodd-Frank. “Regulation is not binary. It’s not left or right, it’s not democratic or republican,” he said. Soon, he was openly speaking his mind and arguing that open hearings, such as the one he was testifying at, is bad business, even though it’s that public he serves,
These are complex things and should be done the right way, in closed rooms where you can talk about what works and what doesn’t work.
He said it was bad business. He says “we” want a safer system too, referring, one might assume, to the banking industry as a whole. He then said it’s a lot “healthier and safer today”.
For now, the Federal Reserve continues to pore over the bank’s trades with the goal of clarifying the losses as well as the original transaction.