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. maximusvad

    As JPMorgan handles many 401k's, it's definitely in everyone's best interest to regulate/oversee what kind of trading they are doing.

    May 16, 2012 at 12:22 pm | Report abuse |
    • Really?

      Regulation has proven over the centuries to not work. The last group to oversee anything is the government. Let the free markets be the judge. Buyer beware.

      May 16, 2012 at 12:24 pm | Report abuse |
    • deathwombat

      @Really?: When you let the free market decide, people take big risks and bankrupt themselves. I take it you weren't living on Earth in 2008 when a lack of regulation allowed the big banks to make big bets on risky mortgages and destroyed the global economy.

      May 16, 2012 at 12:33 pm | Report abuse |
    • Charlie

      If you are invested in just JP Morgan then you are a fool

      May 16, 2012 at 12:35 pm | Report abuse |
    • Leslie

      Yes, REALLY! They do need to be investigated, they are too powerful! Too Big To Fail!

      May 16, 2012 at 12:37 pm | Report abuse |
    • Bob

      You obviously dont know what you are talking about. This was a proprietary trade that JPMorgan lost money on – i.e. a trade with the bank's own cash, not anyone's 401K.

      May 16, 2012 at 12:38 pm | Report abuse |
    • Lenny

      Really!! I cannot believe we still have such a moron asking for "the banks to self-regulate" like they did in 2008 right?

      May 16, 2012 at 12:41 pm | Report abuse |
    • Really?

      The reason the 2008 bust happened was that folks that had no business having mortgages could not make payments. This was due to Clinny relaxing hurdles that allowed the free market to capitalize on those poor sods and walla, house of cards fell apart.

      May 16, 2012 at 9:32 pm | Report abuse |
  2. Really?

    Really? Since when is this a case for the FBI? Come on already. What a waste of our tax dollars.

    May 16, 2012 at 12:23 pm | Report abuse |
    • PNH

      Well, I have a feeling that there are a lot of people who would have perhaps liked the feds to probe into practices of say, Lehman and the like back in 2006-2008. Could have potentially saved a lot of people a whole lot of grief.

      May 16, 2012 at 12:28 pm | Report abuse |
    • John

      They are probably making sure the losses were due to business and not embezzlement or other fraud.

      May 16, 2012 at 12:28 pm | Report abuse |
    • frago

      FBI is involved cause someone in DC lost 25 cents – they don't give a hoot if John Q Public lost a few millions

      May 16, 2012 at 12:34 pm | Report abuse |
    • Winner

      You sound like another right wing Repbulican. Regulation has been proven to work. We can always have the debate of how much is needed, but if you just think that people will find it in their hearts to do the right thing then you are kidding youself.

      May 16, 2012 at 12:35 pm | Report abuse |
    • Charlie

      Since Obama started taking over Business Operations

      May 16, 2012 at 12:36 pm | Report abuse |
  3. boyamidumb

    If being greedy and stupid were against the law, two thirds of Wall Street and all of Washington would be in jail!

    May 16, 2012 at 12:25 pm | Report abuse |
  4. ras666

    Hey FBI, how about looking into congressional members' insider trading habits?

    May 16, 2012 at 12:26 pm | Report abuse |
  5. David B

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

    The FBI investigates criminal behavior, which can result in indictments and possible prison time. The SEC civil-law investigations result only in fines, not jail. Understand the difference now?

    May 16, 2012 at 12:26 pm | Report abuse |
    • lenr1

      Possibly because the SEC did such an outstanding job with Bernie Madoff.

      May 16, 2012 at 12:40 pm | Report abuse |
    • Frank

      True, but the SEC also investigates financial crimes such as Insider trading, ponzi schemes, etc. which could lead to prison time. So why is the FBI involved?

      May 16, 2012 at 12:42 pm | Report abuse |
  6. mouth123

    HMMMMMMMM Guess some of Obama's friends/family must have lost a few bucks.

    May 16, 2012 at 12:28 pm | Report abuse |
  7. CarbonCopy

    @Really? Regulation does not work? Honestly, I think you are full of it. Provide articles/studies by respected non GOP backed sources, or your comment can be viewed as rhetoric. Provide proof or it is a FOX lie regurgitated by a blind lemming.

    May 16, 2012 at 12:29 pm | Report abuse |
  8. Wade

    WOW talk about idiot Obama and Holder going over the top again. This is a 2 trillion dollar company. they lost 2 billion of their OWN MONEY. Cal. lost 16 billion of TAX PAYERS money and no one says a word! This is pure abuse of power for political reasons by Obama.

    May 16, 2012 at 12:30 pm | Report abuse |
  9. Arran Webb

    Probably all these insiders have done is get their own personal money our first before it collapsed – this is normal behavior for a banker with inside knowledge. They love money – even more than their trophy wives. But then their trophy wives love money also – a marriage made in bullion.

    May 16, 2012 at 12:30 pm | Report abuse |

    Someone explain to me why is this a case for the FBI to inverstigate.

    May 16, 2012 at 12:31 pm | Report abuse |
    • Arran Webb

      Because it has come to light that bankers are crooks and need closer supervision.

      May 16, 2012 at 12:32 pm | Report abuse |
  11. Jeffq

    What a joke. The FBI investigates banking...This is Obama's way of proving to America that he really wants to hold bankers accountable. Unfortunately someone will be a scape goat. Mark my words...."There will only be 1 indictment." We all know it takes more than 1 person to lose 2 BILLION (possibly 4 BILLION now). The best way to handle this case is to regulate this bank! We all know our judiciary system is broken, so the only way the people get justice is by regulation of these crooked banksters. This is actually Obama's best case scenario. He now gets a do over on how he handles bankers.

    May 16, 2012 at 12:32 pm | Report abuse |
  12. jay12312

    The rich and powerful don't go to jail so don't waste the money on any investigation that will not yield anything.

    May 16, 2012 at 12:32 pm | Report abuse |
  13. John

    People don't understand the difference between history and political labels. The reason the USSR fell was because the government dictated how to do everything. There was a story of a toaster factory, where the design was flawed and non of the toasters worked, but no one in the factory had the power to make changes and they just had to keep making broken toasters. Telling people they can't dump waste into lakes and streams does not fall into the same category. Politicians will point to simple X,Y graphs to prove regulation causes economic loss, but those same models have no way to account for the harm to society that some companies practices cause. It really isn't as simple as saying "regulation is bad for business".

    May 16, 2012 at 12:34 pm | Report abuse |
  14. Arran Webb

    The financial system has collapsed – what we have now is an orderly transition where the bankers will extract their own money over a 3-5 years and then banking will become again a service industry for capitalists rather than a brokerage service for political campaigns.

    May 16, 2012 at 12:35 pm | Report abuse |
  15. templescroll

    even though admitting to errors, it doesn't stop these massive banking empires from cashing in on their 'mistakes' utimately making the taxpayer their money pot.

    May 16, 2012 at 12:35 pm | Report abuse |
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