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Jamie Dimon Complains More, As JPMorgan Chase Losses Eclipse $30 Billion

Posted: 05/21/2012 12:23 pm

Champion American complainer Jamie Dimon complained on Monday about Wall Street regulation, while also insisting he not be described as a complainer. All the while, his bank's losses, partly resulting from lax regulation, continued to grow.

An initial $2 billion trading loss has likely resulted in a total loss of more than $30 billion, when you include a 19 percent drop in the bank's stock price. By itself, the trading loss alone might balloon to more than $6 billion, according to one estimate.

To strengthen the Cognitive Dissonance Vortex he had created, the JPMorgan Chase CEO's comments came as the ink was still drying on news reports that reminded everybody of why the Wall Street regulation he complains about constantly is necessary in the first place. Namely, the Wall Street Journal reported that a top risk-management officer at JPMorgan apparently had a spotty track record of risk-management. And CNNMoney said estimates of the bank's initial $2 billion loss due to poor risk-management have tripled to at least $6 billion.

But first, to the Dimon Complain-Bot 9000: Speaking at the Deutsche Bank Securities Global Financial Services Investor Conference in New York, Dimon rolled out several of his standard complaints about post-crisis efforts to regulate the financial sector, according to the Wall Street Journal's Deal Journal blog, which live-blogged his comments.

On the Volcker Rule, which -- if it is ever actually put in place in any real way -- would prohibit banks with federally insured customer deposits from being able to blow billions of dollars on stupid market gambles, Dimon warned that regulators should be very careful not to "throw the baby out with the bathwater." Typically in this analogy, which he has used more than once before, Dimon implies that JPMorgan is the squeaky-clean baby and other banks are the nasty bathwater. But now that JPMorgan Chase has done exactly the sort of thing the Volcker Rule was designed to stop, the analogy is less effective -- the baby a bit scummier, if you will.

Dimon also issued his usual dire warnings about how regulation would harm American banks and drive business overseas to places where regulations aren't so horribly constraining. But, amazingly, Dimon also said of regulation: "Please don't anyone write I am complaining about it."

This is the man who has honed complaining about regulation to a fine art. He is the Mozart of Complaining. If you haven't seen it, you should really take a few minutes and watch Hunter Stuart's Huffington Post video mashup of all of the times Jamie Dimon has complained about regulation.

Ironically, the regulations he hates most might have saved his bank at least $2 billion, and possibly $5 billion or even $7 billion. Bad bets on unregulated credit derivatives cost the bank an initial $2 billion, and now Morgan Stanley estimates the losses will rise to $5 billion by the end of the year, the Financial Times's FT Alphaville blog writes. That is $2 billion more than Dimon has publicly estimated, but increasingly nobody believes Dimon on this.

In fact, CNNMoney suggests the losses may have already hit $6 billion or $7 billion, citing traders in the derivatives market, where JPMorgan and its enormous bets are still trapped, being eaten alive by hedge funds.

Dimon, in his comments on Monday, said the bank wasn't going to keep updating everybody on its losses. An easier amount of money to track is the amount of market value that has been vaporized since this episode began. JPMorgan stock has tumbled nearly 19 percent since May 10, erasing nearly $30 billion in shareholder value.

Adding insult to injury, Dimon said that the bank was going to cancel its plans to buy back its stock -- despite the shares now being available at a steep discount -- in order to make sure the bank's capital will be ready to meet new global regulatory requirements.

These developments may not undermine Dimon's arguments that the bank has a "fortress balance sheet," but they won't make shareholders happy. And clearly the bank's reputation for risk management is getting worse by the day.

Today's blow: The guy in charge of managing risk at the unit responsible for the loss is in the spotlight for some past episodes of questionable risk management, the WSJ writes, citing people familiar with the matter:

Irvin Goldman, who was installed as chief risk officer for the Chief Investment Office this past February before being relieved of his duties this month, suffered between $10 million and $15 million in losses on one bet in 2008 in his prior role as a trader for the bank, these people said.

J.P. Morgan halted Mr. Goldman's trading in late 2008 and put him on leave when it learned that regulators were separately probing trading practices at Cantor Fitzgerald, where Mr. Goldman had served as an executive until late 2007, the people said.

Goldman, who declined to comment to the WSJ, has not been accused of any wrongdoing.

But, hey, look on the bright side: The Telegraph reports that Ina Drew, the woman in charge of the unit responsible for the loss, will go away with $32 million in cash and going-away prizes.

 
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