JPMorgan Chase's Whale Fail And Nine Other Big Bank Disasters

Officials at JPMorgan Chase announced Thursday that the bank lost billions of dollars on "egregious" credit trades gone wrong.

But the bank was certainly not the first to suffer a dramatic loss.

Late last year, risky bets on European debt pushed MF Global into bankruptcy, while UBS suffered a $2 billion loss thanks to a rogue trader. Some firms have seen disasters so large that they've needed to get help from the government or other banks.

Citigroup came to the brink of collapse in 2007 after it reported losses of about $10 billion, but was lucky enough to get bailed out by the U.S. government. In addition, JPMorgan actually became the savior of one bank in crisis when it bought Bear Sterns in 2007. Check out some more big bank fails below:

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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

[olerealist]

09:55 AM on 05/12/2012

DODD-FRANK IS ALIVE AND WELL, even though the regulation drafters are moving slowly.

Paul Volcker has suddenly become a profit and somewhat of a folk hero. J P Morgan Bank has just suffered over a 2 billion dollar loss while engaging in exactly what the “Volcker Rule” is intended to prevent, the gambling by a bank with its own capital.

This event is interesting in several ways. First, it demonstrates the wisdom behind the Rule. Apparently JPM was able to do the thing before the Volcker rule was actually implanted by the regulators pursuant to Dodd-Frank.

Secondly, it gives impetus to the school of thought that some banks, JPM, Citibank and Bank of America, for example are TOO BIG TO FAIL and should be shrunk. It demonstrates that in the modern era much banking, even by “commercial” banks has become so complicated that banks are necessarily at risk.

Jamie Dimon, JPM’s chief executive has in effect declared that the transaction (credit derivatives, etc.) leading to this loss was so complicated that he is not sure whether or not the final outcome might engender a somewhat larger loss. Due to complexity, the gambling aspect may be present irrespective of whether a transaction of a big bank violates “Volcker” or not.

So, regulators, make sure that Volcker gets promptly implemented and also, while you are at it, try to shrink or bifurcate the multi trillion dollar banks.

[yogsodoth]

12:07 AM on 05/12/2012

Can we please just let them fail this time? Let them fall victim to the "market" they're always rabbiting on about.

[olerealist]

10:01 AM on 05/12/2012

QUOTE: "Can we please just let them fail this time? Let them fall victim to the "market" they're always rabbiting on about."

COMMENT: Oh, were it only that easy!

[Mr Dee]

10:54 PM on 05/11/2012

We have laws that allow us to break up huge companies. What are we waiting for?

[mutopis]

09:48 PM on 05/11/2012

Socialism for the rich. Capitalism for the rest of us.

[MAB]

08:44 PM on 05/11/2012

I'm a part-time college professor, teaching a liberal-arts-leaning class that's mandatory for all business students. When I hear the chatter among my finance students, nothing happening on Wall Street today surprises me. Those students seem to view their future careers as a life-size gaming marathon, with real money but little personal risk. I once asked one class, "Who's ultimately responsible for the financial success of a company?" The first answer that drew heavy buy-in from others: "The accountants! They manage the reporting."

Scary.

[olerealist]

10:06 AM on 05/12/2012

QUOTE MAB: : ""The accountants! They manage the reporting."

Wrong. They only do what they are told. All they do is make it invisible.

[MAB]

12:23 PM on 05/12/2012

Uh, that was my point. Can you read? I wasn't the one who said that; my students did. Get it?