SEC Head: 'All The Regulators Focused On' JPMorgan Loss

WASHINGTON -- The head of the Securities and Exchange Commission says the agency is focused on a surprise $2 billion trading loss by JPMorgan Chase.

SEC Chairman Mary Schapiro told reporters "I think it's safe to say that all the regulators are focused on this." She declined to make any further comment related to JPMorgan.

The trading loss was an embarrassment for JPMorgan, which came through the 2008 financial crisis in much better health than its peers. It kept clear of risky investments that hurt many other banks.

JPMorgan CEO Jamie Dimon said the type of trading that led to the loss would not be banned by the so-called Volcker rule, which takes effect this summer and will ban certain types of trading by banks with their own money.

Check out some other big bank disasters:

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• JPMorgan Chase Loses $2 Billion

  On May 10th, the U.S.'s largest bank JPMorgan Chase announced one of its London trading desks had lost <a href="http://www.huffingtonpost.com/2012/05/10/jpmorgan-chase-london-whale_n_1507662.html?ref=business" target="_hplink">$2 billion on bad bets on credit derivatives</a>.

• UBS Trader Loses $2 Billion

  Kweku Adoboli, a trader for Swiss bank UBS, lost <a href="http://www.huffingtonpost.com/2011/09/15/ubs-traders_n_963715.html" target="_hplink">$2 billion on unauthorized trades in September 2011</a>.

• MF Global Collapse

  Brokerage firm <a href="http://www.huffingtonpost.com/2011/10/31/mf-global-to-file-for-bankruptcy_n_1066902.html" target="_hplink">MF Global filed for Chapter 11 bankruptcy</a> in October 2011 after a failed $6 billion bet on European debt.

• Rogue Societe General Trader Loses $6 Billion

  Hailed as "history's biggest rogue trading scandal" at the time, French trader Jerome Kerviel was convicted in October 2010 of <a href="http://www.huffingtonpost.com/2010/10/05/jerome-kerviel-rogue-fren_n_750464.html" target="_hplink">losing French bank Societe General around $6 billion</a> due to unauthorized trades.

• Bear Sterns Bought By JPMorgan Chase

  After a run on investment bank Bear Sterns nearly caused its collapse in 2007, JPMorgan bought the firm for $2 a share the following March, <a href="http://www.businessweek.com/bwdaily/dnflash/content/mar2008/db20080316_356646.htm" target="_hplink">Businessweek</a> reports.

• AIG Largest Single Bailout

  Insurance company AIG became the recipient of the <a href="http://www.huffingtonpost.com/2012/05/08/aig-bailout-realize-15-billion-profit-taxpaers-gao_n_1498645.html" target="_hplink">largest ever government bailout for a single corporation</a> when a $182 billion rescue package saved it from a liquidity crisis following a <a href="http://www.huffingtonpost.com/2012/05/08/aig-bailout-realize-15-billion-profit-taxpaers-gao_n_1498645.html" target="_hplink">downgrade of its credit rating</a> in 2008.

• Washington Mutual Bankruptcy

  One of the biggest players in retail banking and mortgages during the housing crisis, Washington Mutual filed for Chapter 11 in September 2008, after sustaining losses on billions of dollars worth of mortgage and home loans, <a href="http://www.cnbc.com/id/46793926/WaMu_Emerges_From_Bankruptcy_Protection" target="_hplink">CNBC</a> reports.

• Citigroup Bailout

  Citigroup came to the brink of collapse after it reported losses around $10 billion in 2007, in part due to failed mortgage investments, <a href="http://money.cnn.com/2008/01/15/news/companies/citigroup_earnings/index.htm" target="_hplink">CNNMoney</a> reported. To keep the bank afloat the government issued <a href="http://www.huffingtonpost.com/2008/11/23/feds-consider-plan-to-res_n_145856.html" target="_hplink">a $20 billion bailout in November of that year</a>.

• Merill Lynch Shocks Investors With Big Loss

  After projecting a $4.5 billion loss during the third quarter of 2007, Merrill Lynch shocked investors by reporting a $7.9 billion deficit from trading mortgage-backed securities and other structured products, <a href="http://money.cnn.com/magazines/fortune/fortune_archive/2007/11/26/101232838/" target="_hplink">according to CNNMoney</a>.

• Barings Bank Collapse

  One time star trader Nick Leeson was responsible for sinking British bank Barings after losing $1 billion when an an earthquake struck Kobe, Japan in 1995, causing his investments in the Nikkei to fail as the Japanese stock exchange crashed, <a href="http://www.time.com/time/specials/packages/article/0,28804,1937349_1937350_1937488,00.html" target="_hplink">TIME reported</a>.

Comments

[gtposse]

12:30 AM on 05/13/2012

Regulators are people who are hired by the SEC to burnish their resume until they could find the right corporate job. In other words, they will not bite the hand that they are expected to be fed with. Nothing will happpen.

Statement after the investigation will be something like this, although the trading losses are large .0000000000099% of the bank's assets. We will ask (beg) Lord Dimon, if he doesn't mind, to please tighten his risk management department and possibly hire a few more RISK MANAGERS for greater oversight.

Lord Dimon response, I will say I'm going to do it so that you guys could look like you did something. Wink, Wink just remember who is the boss.

[99er2049er]

01:02 PM on 05/12/2012

Break up JP Morgan, punish the execs by firing them and taking away their bonuses. Regulate these fools once and for all, before we get another recession.

[Olderandwiser55]

12:33 PM on 05/12/2012

The irony-JPM is paying for its own investigation sine it has paid numerous fines already for other things. From July 2011 :

The Judgment, among other things,
(1) permanently enjoins J.P. Morgan from violating Section 15(c)(1)(A) of the Securities
Exchange Act of 1934 (the "Exchange Act");
(2) orders J.P. Morgan to pay disgorgement in the amount of$11,065,969, plus prejudgment
interest thereon in the amount of $7,620,380; and
(3) orders J.P. Morgan to pay a civil penalty in the amount of $32,500,000 under Section
21 (d) of the Exchange Act.

http://www.sec.gov/divisions/corpfin/cf-noaction/2012/jpmorgansecurities070811-505.pdf

[Olderandwiser55]

12:16 PM on 05/12/2012

I know it sounds good but Glass-Steagall would not have prevented this. Regulators are investigating because of new derivatives regulations under Dodd-Frank. This is a joint investigation by US and UK investigators.

[MiddleRiver]

08:39 AM on 05/12/2012

Is there any question that Glass-Steagall is needed? When our legislators are literally bribed to do the bidding of the rich, we no longer have a democracy. Shame of them. Shame on SCOTUS. Shame on lazy voters.

[2garen]

10:34 AM on 05/12/2012

I agree with you up to the lazy voters. Most voters are disenfranchised in the sense they don't know what to do about it. The voters are very busy just trying to make a living, looking for a job, keeping their families and homes together in this very volatile economy.Yes, the voters really need to still be involved...
The voters have to sift through all the disinformation to try to come up with some viable choice as who to vote for. Now with that and realize those that are running for office have to sell them selves out because campaigns are running in the millions of dollars.
We are in desperate need of campaign reform.

[MiddleRiver]

06:57 PM on 05/12/2012

I guess I expect more effort from my fellow voters, but life is busy. I agree with your main point. None of our pressing problems will even begin to get solved until we get public financing for elections. People think that it is a waste of taxpayer money, but our current corrupt system costs taxpayers so much more in inflated energy bills, higher fees on all bank services and telecom services, higher prices in general from lack of competition, higher public spending to clean up corporate pollution, etc...

[muysuave41]

08:32 AM on 05/12/2012

Sounds noble, but everyone is onto how Washington works. Make it sound like something is happening to appease your base but in the end deliver on nothing, especially when Wall Streets interests are at stake.

[goscience]

06:31 AM on 05/12/2012

These Bankers are like drug addicts, after a while their eyes get beady, their breath quickens and they start to salivate at the thought of making huge piles of money. You can hear them chanting monotonously under their breath: MONNNEEEEY, WE NEED MONNEEEY, GIVE ME MONNEEEY.

Really folks, it's an illness they can't control and calls for medication and institutionalization. There's no other way as they represent an enormous danger to themselves and the rest of us.

Let's have the US Chamber of Commerce fund the Bankers Rest Home, where our beloved banking executives can undergo caring therapy to regain control over their illness. I'm sure some sort of 12-step program can be devised.

"Hello, my names Jamie Dimon and I'm a greedy riskaholic." "Hello, my name is Lloyd Blankfein and I'm a greedy riskaholic." "Hello, my name is Mitt Romney and I think regulation of banks is killing jobs--so what if the economy periodically goes bust--if you lost your job and need to pay off your student loans you can work for me, my wife's Cadillacs need washing."

[SCJohnson]

04:49 AM on 05/12/2012

The way the SEC budget has been eviscerated over the last twelve years, I am amazed that they can focus on anything at all.

[gevan]

01:57 AM on 05/12/2012

Tell Dimon that next time he can just leave his $2 billion with me and he won't take such loses.

[duxguts]

12:30 AM on 05/12/2012

The this is that the money doesn't go anywhere....it never existed. That's the big con.

[jabailo]

12:08 AM on 05/12/2012

Who knows...maybe he transferred the money to Europe.

For some reason the monarchists here think it's in our (their) interest.

[DismayedRepub]

11:29 PM on 05/11/2012

I think the regulators should focus on barns that still have horses in them.

[zendome]

11:29 PM on 05/11/2012

Is it too big to fail or too big to survive?

[Stephanie T]

11:18 PM on 05/11/2012

REINSTATE the Glass-Steagall Act!!!!

[Olderandwiser55]

12:11 PM on 05/12/2012

Glass-Steagall would not have prevented this. It's likely JPM is in big trouble with regulators, both US and UK because of new derivative trading & reporting requirements under Dodd-Frank.

[KellyJohnson]

11:13 PM on 05/11/2012

What needs to be done is clear, but what is unclear is who actually runs our govt. That is the only question that needs to be answered.