JPMorgan Chase, the largest American multinational banking corporation has announced a whopping 2 billion dollar loss that has resulted due to a supposed “mistake” in the trade. The news has already led to the worry of analysts and traders worldwide, as the U.S Senators and politicians are pushing for stronger market & banking regulations to prevent such incidents in the future. This has led to stir in the global financial markets. Shares of JP Morgan fell over 9% on the day when the news reports arrived in. Other banking stocks were also severely hit.
”We made a terrible, egregious mistake,” Jamie Dimon, the CEO of JP Morgan Chase, said in an interview that was aired on the NBC. ”There’s almost no excuse for it.” – the CEO was reported as saying. The loss came in the past six weeks. Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank. Dimon termed the trades as “flawed, complex, poorly reviewed, poorly executed and
A piece of the 2010 financial reform law known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Dimon has said the trading involved in the $2 billion loss would not have fallen under the rule. However Democratic senators Jeff Merkley and Carl Levin have maintained that they intended the law to ban the kind of trades that resulted in the loss for JP Morgan Chase.
The incident has resulted finally in the exit of Ina Drew, the Chief Investment Officer at the bank. It was reported that Drew had offered to resign since the CEO announced the losses. Drew is one among the highest paid officials in the institution. Reports say that she was paid 15.5 million dollars during the past year.
The loss report has come hard against the CEO Dimon, who had been popularly known to be a “good banker” and “master of risk management” since the financial crisis. Dimon had also been opposing some of the harder market regulations proposed. Even as the reports poured in about the losses of the bank, Senators have now pushed for stricter banking regulations. Dimon also serves as the Director of the New York Federal Reserve Bank, which oversees the largest banks of the United States. Mr. Elizabeth Warren, Senate candidate from Massachusetts, has been demanding that Mr. Dimon step down from his position.