JPMorgan Reports $2 Billion Loss on Synthetic Positions

[marmar]

(Bloomberg) JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the firm lost about $2 billion on synthetic credit securities after an “egregious’” failure in its chief investment office, which the bank says focuses on hedging.

“This portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed,” the New York-based company said today in a quarterly securities filing. JPMorgan declined 5.5 percent to $38.50 in extended trading at 5:55 p.m. in New York.

The chief investment office has been transformed in recent years under Dimon into a unit that makes bigger and riskier speculative bets with the bank’s money, according to five former employees, Bloomberg News reported April 13. Some bets were so big that JPMorgan probably couldn’t unwind them without losing money or roiling financial markets, the former executives said.

Bloomberg News first reported April 5 that London-based trader Bruno Iksil had amassed positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market. ................(more)

The complete piece is at: http://www.bloomberg.com/news/2012-05-10/jpmorgan-chase-says-cio-unit-suffered-significant-loss.html

[meow2u3]

1. Max Keiser calls Jaime Dimon "Tapeworm"

Also known as "I steal; therefore I am"

Mad Max is funny.

[Turbineguy]

2. These engineered financial instruments

may be their own undoing. How much were they trying to protect?

[FarCenter]

3. Hedge funds and the Whale, credit index edition

http://ftalphaville.ft.com/blog/2012/04/06/951941/hedge-funds-and-the-whale-credit-index-edition/

Maybe $100 billion notional value. VAR? Who knows.