May 16th, 2012
11:58 AM ET

FBI opens investigation into JPMorgan trade loss

FBI Director Robert Muller said the bureau has opened a preliminary investigation into a major JPMorgan Chase trading loss.

"All I can say is that we have opened a preliminary investigation," Robert Mueller said in response to questions at an FBI oversight hearing on Capitol Hill.

The company had made a surprise announce that it has suffered trading losses of $2 billion since the start of April.

The loss, while massive on the face of it, is expected to be easily absorbed by JPMorgan, which is the nation's largest bank by assets. Even this quarter, the bank is expected to turn a multi-billion dollar profit.

The group that suffered the losses is part of the bank's so-called corporate unit, and had been making trades designed to hedge against risk, which is a fancy way of saying it operates as a kind of insurance agency, reported. When a big bet is made, the office tries to find ways to mitigate the risk to the bank should the bet go south.

Over the past few months, the unit has staked out a very large position in insurance-like bets called credit default swaps, the same type of instrument that caused so much havoc in 2008.

CEO Jamie Dimon, who on Monday a $23 million compensation package approved, told analysts and reporters the losses were caused by "errors," "sloppiness" and "bad judgment."

In the wake of the financial crisis, critics have made the case that the biggest banks are still so large, so complex, and their desire for profits so great that they remain a systemic risk to the global financial system.

Dimon, in full damage control mode, was forced to hold a hastily-arranged conference call to announce the loss, and followed that with an appearance on Meet the Press, where he admitted the company had made a mistake.

"This is a terrible mistake," Dimon said. "In this job, you hope they're small and few and far between. This one is far too big."

Read more on JPMorgan: How JPMorgan made its $2B blunder Betting against JPMorgan

Fortune: The hedge funds that are profiting off JPMorgan's bad trade

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Filed under: Business • Economy • Finance
soundoff (154 Responses)
  1. saywhat

    Even then I wonder if heads would really roll. Oversight is needed on Wall Street as we have been shown time & again.

    May 16, 2012 at 12:01 pm | Report abuse |
  2. GN

    Did the compensation package approve the CEO? If not, there's some shenanigans going on in the last sentence/paragraph.

    May 16, 2012 at 12:09 pm | Report abuse |
    • Boseph Heyden

      I think they're trying to present the article in some sort of proper English grammar. And, if that is the case, they need to add some more th's to the end of a lot of those words.

      Also, this is why I decided against doing work for Chase. It's sad that people will lose jobs over this because yet another person that works at a bank got his or her job because they played golf with the right people.

      May 16, 2012 at 12:23 pm | Report abuse |
  3. jane stephen

    we'll be lucky to get "water downed " oversight dodd-frank is stiill in review and may never see the light day. ditto for the vollcker act and its its implementation. . great to see what tons of money from wall street and the banks can buy!!

    May 16, 2012 at 12:10 pm | Report abuse |
  4. jim

    "FBI opens investigation into JPMorgan trade loss" ... why is my tax money going to something like this?? What a waste!!!! What will be the outcome of this, besides absolutely nothing???

    Such a joke !!!!!

    May 16, 2012 at 12:13 pm | Report abuse |
    • Steve

      I'm sure on top of the private loss that only affects most likely wealthy investors in JP Morgan, we'll now have 10's of millions, maybe 100's of millions in FBI investigation costs that now go on the taxpayers dime. It serves the political grandstand well.

      May 16, 2012 at 12:23 pm | Report abuse |
  5. Mike

    So, what about John Corzine and MG Global? Oh that's right. He's an Obama butt sniffer who brings in the cashe for the Forward and Downward effort.

    May 16, 2012 at 12:14 pm | Report abuse |
  6. absitomen

    And then TSA makes the headlines and it's paraded on Andersons for some mere what was it $160 mil?

    May 16, 2012 at 12:15 pm | Report abuse |
  7. saywhat

    You are not that off the mark. I agree.

    May 16, 2012 at 12:15 pm | Report abuse |
  8. snowdogg

    Why would the FBI get involved? The sheeple stockholders rolled over and gave this guy the OK.

    May 16, 2012 at 12:16 pm | Report abuse |
  9. dd

    Why doesn't the FBI investigate Obama for the massive losses he caused taxpayers with loans to solar firms he was told would fail? Obama has made the US Government look a 1000 times dumber than Chase. Why doesn't the media tell the truth about Obama's economic, business incompetence – or CORRUPTION?

    May 16, 2012 at 12:17 pm | Report abuse |
    • smarter than you

      The FBI is investigating that. Don't you read the news?

      May 16, 2012 at 12:45 pm | Report abuse |
  10. Buddy

    Does anyone proofread articles anymore? Nice engrish.

    May 16, 2012 at 12:18 pm | Report abuse |
  11. iceload9

    Why is the FBI investigating and not the SEC? Or is investigation by the SEC just a joke?

    May 16, 2012 at 12:18 pm | Report abuse |
  12. 2/8

    Let the paper shredding begin!

    May 16, 2012 at 12:18 pm | Report abuse |
  13. CC

    Why the FBI? The SEC would be the logical agency to investigate this-but maybe JPMC has bribed them?

    May 16, 2012 at 12:18 pm | Report abuse |
    • C. A. L.

      Excellent question. Why aren't the journalists asking the same question?

      May 16, 2012 at 12:28 pm | Report abuse |
  14. JWH

    Talk about sloppiness and errors - who wrote this story? The company made "a suprise announce"? And hastily-arranged is not hyphenated.

    So, I can only assume most of the facts in this story are as sloppy as the writing/editing.

    May 16, 2012 at 12:20 pm | Report abuse |
  15. Steve

    JP Morgan is a private company. They answer to their investors and account holders. $2B sounds like a lot but they deal in hundreds of billions. This is just more administration grandstanding and getting government involved where it doesn't belong. Investments are gambles by their nature. The government can't provide guaranteed investments. Sad to know valuable FBI resources will be wasted on investigating how an investment manage did a bad job.

    May 16, 2012 at 12:21 pm | Report abuse |
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