Photo: flickr: Snake3eyes
On the JP Morgan conference call yesterday, CEO Jamie Dimon made it very clear that he wouldn’t answer any questions about what trade caused his bank’s massive $2 billion loss.The loss was disclosed within JP Morgan’s quarterly after the market closed. Dimon said that it the loss came from the bank’s Chief Investment Office, where a hedge meant to protect the bank, actually backfired against it.
But that was it. Dimon would not disclose how it backfired or with what trade.
Observers raised their eyebrows, and journalists got annoyed, but there’s an obvious reason why Dimon stayed tight-lipped — If he had detailed the trade that lost his bank so much money, traders from other institutions would get on the other side and make the losses even worse.
Or as FT Alphaville put it: “Certainly, the losses may grow, particularly if rival traders now reckon they can turn the screws.”
The positions that put JP Morgan in peril have yet to be closed. The bank’s traders are rushing to close those positions, but until they do, the bank is vulnerable.
Think about it: It’s like kicking a man when he’s down.