THE BLOG
07/24/2013 12:50 pm ET Updated Sep 23, 2013

What's Next for Jamie Dimon?

AP

Could things get any worse for JP Morgan?

Jamie Dimon thinks so.

The chief executive of the nation's largest bank is bracing for as much as a year of regulatory headaches, according to people who have spoken to him, marring what Dimon and his top lieutenants believe is the firm's exceptional financial performance.

Dimon has told people that in the coming days, the firm is likely to fork over as much as $500 million to settle federal regulatory claims that it manipulated various markets where energy prices are set.

But the regulatory woes go beyond that to include various part of the far-flung bank, from how the firm originated mortgages, to the sins committed by Bear Stearns, the investment bank purchase by JP Morgan during the financial crisis, to whether the bank manipulated aluminum prices by hoarding the metal.

The amount of regulatory pressure on JP Morgan is so acute that Dimon has told people he expects many more months of regulatory actions and settlements involving a banking franchise once thought to be the best in the business.

A spokesman for JP Morgan didn't return repeated calls for comment.

"(Dimon) feels put upon... that the bank is getting unfairly targeted," said one banking official with knowledge of the matter. "But he also knows this is how it's going to be for a while."

The regulatory heat began to focus on JP Morgan most acutely in 2012, when the firm disclosed that its London office lost $7 billion trading complex securities known as derivatives. It was supposed to be a unit that was established to minimize risk at the big bank; in fact Dimon initially called the trading a "tempest in a teapot."

But after the disclosure of the huge loss, the press labeled the trader responsible for the loss as the London Whale. When it became clear the trader wasn't hedging but taking enormous risk, Dimon was forced to apologize and regulators began to more closely examine JP Morgan's operations.

Since then, Dimon has complained that he's experiencing one of the most trying periods of his Wall Street career. Dimon, of course, earned kudos for helping JP Morgan successfully avoid the risk taking that led to the 2008 financial crisis, where every major bank, except JP Morgan, faced imminent collapse were it not for a massive government bailout. In the immediate aftermath, Dimon was considered the most able risk manager on Wall Street.

But now Dimon concedes that regulators are taking a dim view of the big bank, even as it posts record profits. People close to Dimon say the regulator pressure is the only thing that he believes will stop shares of JP Morgan from rising to as high as $70 over the next 12 months.

"Jamie believes this is easily a $70 stock were it not for the regulatory issues," said another person close to the bank.

These people also say what's making Dimon so depressed these days is that he feels powerless to do anything about the regulatory attention. He has already ousted people involved in areas that have drawn regulatory scrutiny, and over the years, he has lost key people who left JP Morgan because they saw little room of career advancement since Dimon himself is just 57. Despite all the pressure from regulators, Dimon shows no signs of the leaving the firm, these people add. Nor does he show signs that he will downsize the bank anytime soon.

With that, Dimon is telling people the only thing left to do is wait out the regulatory pressure and keep cranking out strong earnings. Meanwhile, the big bank's press people are getting the brunt of the internal criticism, or in the words of one person with knowledge of the matter, "they are getting heat from senior management who have no one else to blame."