JPMorgan Trading Loss Roils Markets, Raises Fears About Bank Risks
(NEW YORK) -- JP Morgan Chase & Co. is rocking the financial markets with the disclosure that its in-house trading operating lost $2 billion in the past six weeks, raising new questions about whether the big banks that caused the financial meltdown have sufficiently changed their ways.
Chief Executive Officer Jamie Dimon said the trading loss was an "egregious" failure in a unit managing risks, but he added in a call with analysts after the markets closed Thursday that just because the bank did something "stupid" that doesn't mean other firms are having such trouble.
"There were many errors, sloppiness and bad judgment," Dimon said. "These were grievous mistakes, they were self-inflicted."
Congress and the FDIC have been grappling with how to prevent "too big to fail" institutions from taking big risks knowing that the U.S. Treasury is there to back them up.
JPMorgan, the largest U.S. bank, traced its big loss to the firm's chief investment office, run by Ina Drew. His unit made losing bets on "synthetic credit securities" -- the same kind of instruments that nearly led to a collapse of the financial system in 2008, prompting a nearly $1 trillion government bailout.
Global markets fell on Friday after the big surprise trading loss at JPMorgan Chase shook investor confidence, while political chaos in Greece continued to cast uncertainty over its future in the euro currency bloc.
JPMorgan stock plunged almost 7 percent in after-hours trading, and the unexpected loss at one of the world's most venerated banks undermined investor confidence. British banks were hit hard -- Barclays, which has a large investment banking arm, was the biggest loser in London trading, down 2.9 percent by midmorning.
In Europe, the FTSE 100 index of leading British shares dropped 0.3 percent at 5,525, while Germany's DAX fell 0.3 percent too to 6,498. The CAC-40 in France was 0.7 percent lower at 3,107.
The euro was up 0.2 percent at $1.2952, though still near four-month lows against the dollar.
Wall Street headed for a lower opening on Friday, with both Dow futures and S&P 500 futures down 0.5 percent.
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