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Fail Whale: Seven And A Half Things To Know

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JPMorgan Chase's London Whale took $2 billion in credit-derivative losses.
JPMorgan Chase's London Whale took $2 billion in credit-derivative losses.

Thing One: Fail Whale: Jamie Dimon, scourge of financial regulators, overnight become God's gift to financial regulators.

The JPMorgan CEO has been the swaggering Alpha banker in the industry's fight against post-crisis regulatory efforts, complaining and vaguely threatening about the dire consequences of regulation on an almost daily basis. Last night? Not so much! Instead he was spending most of his breath explaining to investors and reporters how a supposedly benign trading desk in London, run by a man known to other traders as "the London Whale," had taken a $2 billion loss on credit derivates in six weeks. It's a hit to JPMorgan's reputation and profit. Funny thing: Some of the constraints of the very Dodd-Frank financial reform act Dimon hates could have prevented it.

"It is a high irony that the too-big-to-fail bank at the forefront of a relentless effort to stop Dodd-Frank is JPMorgan itself," University of Maryland law professor Michael Greenberger wrote in an email to 7.5 Things last night.

So now the fallout begins. Obviously champions of reform are heartened this morning, writes Nelson Schwartz of The New York Times. Bank stocks took a beating overnight, and the beatings will continue until morale improves -- not because of worries about losses, but because of worries about regulation, writes David Reilly of the Wall Street Journal. Wall Street's former golden boy, the one who argued he didn't need any bailout money, is now tarnished, writes the WSJ's Robin Sidel. Meanwhile, some people at JPMorgan might be in for some extended gardening leave, and Michael de la Merced of the NYT takes a look at who they might be, including the London Whale himself, Bruno Iksil. Max Abelson of Bloomberg profiles the head of the London office at the center of the debacle, Ina Drew.

Ultimately, though, reformers have to fear that this will make little difference in the long run. As Peter Goodman pointed out last night, Brooksley Born had an even bigger disaster, the Long Term Capital Management blowup, to use as fodder to argue for regulating derivatives. Alan Greenspan & Co. still managed to stuff Brooksley Born into the trunk of their car and drive her to a place in the woods where she was never heard from again. The banks might have been down last night, but they'll be lobbying as hard as they can first thing this morning for the right to continue blowing up the world unfettered.

Thing Two: Red-Facedbook: You know that Facebook IPO you've been hearing about incessantly for, oh, the past year now? Well it might turn out to be a big fizzing dud. That is the warning of a Bloomberg story this morning, which reports that demand for Facebook shares is weaker than Wall Street expected. "Some investors expressed reluctance after Facebook said on May 9 that advertising growth hasn’t kept pace with the increase in users, said the people, who asked not to be identified because the process is private." Also not helping? Founder Mark Zuckerberg's spotty attendance at the road show, maybe his attire, the company's warning about its problems selling mobile ads, and a Financial Times report of a Federal Trade Commission probe of Facebook's ballyhooed Instagram purchase.

Thing Three China Slowdown: China's economy keeps showing signs of slowing down -- the last thing a shaky global economy needs right now. Reuters writes: "China's economy stuttered unexpectedly in April with lower than expected output data, softening retail sales and easing prices suggesting economic headwinds might be stiffer than thought, requiring more robust policy responses to counter them."

Thing Four: Bing Revamp: Microsoft's Bing, the search engine that nobody uses, has given itself an overhaul, writes The New York Times. One feature of the overhaul is that Bing will helpfully stalk your social networks to give you personalized search results. Hm, nope, still not using it.

Thing Five: Ukrainian Shale: Chevron and Royal Dutch Shell are about to win the right to explore for shale gas in the Ukraine, writes the Financial Times. So, hooray, more fracking and fossil fuels: "But in Ukraine, the prospect of discovering a large indigenous energy resource and weaning the country off Russian gas imports is likely to outweigh reservations about the environmental impact of fracking."

Thing Six: HIV Drug: An FDA panel approved an HIV treatment drug, Truvada, made by Gilead Sciences, for preventive use by high-risk people, the Washington Post writes. The vote was not without controversy, though: "The committee wrestled all day with safety concerns, including fears that men taking the drug would see it as an excuse to stop using condoms, and worries that healthy people would not take the drug daily."

Thing Seven: SEC Shenanigans What on earth is going on over there at the SEC? When they're not sitting around watching porn all day, they're getting investigated for sexual misconduct of some sort. And now Reuters reports that the lead investigator of its watchdog unit has been put on leave for carrying a gun to work and threatening people.

Thing Seven And One Half: Death Star Just Not Worth It: Over at WaPo's Wonkblog, University of Miami political scientist Gregory Koger wrestles with that ancient, nagging question: Is it really worth it to build a Death Star? Some would argue that the estimated $852 quadrillion is money well spent, a small price to pay for the ability to destroy entire planets with one shot. Koger disagrees: "First, the Death Star is a bit misunderstood. It is primarily a tool of domestic politics rather than warfare, and should be compared to alternative means of suppressing the population of a galaxy. Second, as a weapon of war, it should be compared to alternative uses of scarce defense resources. Understood properly, the Death Star is not worth it."

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Calendar Du Jour:

Economic Data:

8:30 a.m. ET: Producer Price Index for April
9:55 a.m. ET: University of Michican Consumer Sentiment Index for May

Corporate Earnings:

Not much to speak of.

Heard On The Tweets:

@HugoLindgren: Extreme journalism: Robert Caro on one end http://t.co/v9EvvvkZ and @TheStalwart on the other http://t.co/ZO7x2C1B Slideshow double feature!

@jestei: This story by @BCAppelbaum made me want to toss out my cell phone, lap top & Ipad and move to a remote location. http://t.co/HzrP1tdL

@amzam: Is Ben Bernanke really gonna be the guy to convince me to subscribe to @nytimes digital? http://t.co/PddQ89YT

@moorehn: Bailout dollars: priceless. RT @carlquintanilla: Greek unemployment a year ago: 15.2%. This year (Feb): 21.7%

@walterolson: 21 members of Congress who resemble Muppets [Cloture Club] http://t.co/OqnRA60y

-- Calendar and tweets rounded up by Khadeeja Safdar.

And you can follow us on Twitter, too: @markgongloff and @byKhadeeja

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