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

Post by:
Filed under: Business • Economy • Finance
soundoff (154 Responses)
  1. b

    it will be another slap on the wrist and told don't get caught again

    May 16, 2012 at 12:37 pm | Report abuse |
  2. I don't recall

    Only 2?

    No need to sweat. They will make it up next week.

    May 16, 2012 at 12:37 pm | Report abuse |
  3. Arran Webb

    The FBI is involved because at baseline banking is now a public enterprise – unfortunately the bankers have realized this and will attempt to steal as much as they can before leaving and retiring in a developing country with enclaves for multi-nations. Like the Nazi did in Argentina and Brazil after WWII.

    May 16, 2012 at 12:37 pm | Report abuse |
  4. Sussay

    If given a chance, I could really screw up for $23 million - any takers?

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

      I'll do it for 5 Mil.

      May 16, 2012 at 12:50 pm | Report abuse |
  5. Is this English?

    "CEO Jamie Dimon, who on Monday a $23 million compensation package approved..."

    Who's editing this??

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

      It's like the tech support – they have someone in India checking things ;')

      May 16, 2012 at 12:39 pm | Report abuse |
    • Charles

      Clearly, Yoda editing it was.

      May 16, 2012 at 12:45 pm | Report abuse |
  6. Kymberlee

    I'll wait for a prosecution, although oddly, this may not be one of them. It was a really stupid error, but the current laws have enough holes to drive a bus through. Otherwise this is just politicking.

    If they want to investigate, try those millions of Forged mortgages used to evict people. I'd go to jail for forgery yet nothing has been done. Then there was Goldman-Sachs literally betting against their own investors, but with Goldman-Sachs Geithner in power nothing will be done.

    Morgan is not the Worst. This was stupid but they're actually better managed than many and not as predatory as Goldman-Sachs. G-S is the one that needs the investigation. They even spiked food and gas prices because the government gave them a special dispensation to speculate in commodities.

    I'll believe there is more than jawboning and electioneering when I see a bankster marched off in irons. It's been three years – time enough for that to have happened if they wanted to do something. This close to an election, I don't buy it.

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

      There's no evidence that JP Morgan did anything illegal here. This was not their customers money they lost it was the banks money, And there are probably thousands of investors that made money from JP's loss. MF Global on the other hand did use customer money to pay off bad investments and Corzine should be prosecuted.

      May 16, 2012 at 1:36 pm | Report abuse |
  7. ArizonaYankee

    More government intervention by the socialists Democrats. This one is none of their business. They file a suit without any facts....Obama / Holder / Democrats = the destruction of America....

    May 16, 2012 at 12:39 pm | Report abuse |
    • Kymberlee

      I think an u nfunded war in Iraq, based on lies, followed by a tax cut Instead of proper funding, had something to do with our economic woes. But hey, keep getting all your facts from the balloonheads at Hateradio.

      May 16, 2012 at 12:41 pm | Report abuse |
    • lloyd roberts

      Yeah, well the democrats built the dam that supplies water to your desert oasis for air conditioning, farming and drinking. Don't hear you all complaining about that

      May 16, 2012 at 12:47 pm | Report abuse |
  8. Bob

    How about providing at least a little bit of information about what exactly it is that the FBI is going to probe??

    May 16, 2012 at 12:40 pm | Report abuse |
  9. Ron

    I don't know why people are getting excited about this, this was the banks money, not customer money, even with the loss the bank will earn over 20 billion this year. Where the FBI needs to concentrate is MF Global and Corzine who we know broke the law by using customer money to pay off bad investments.

    May 16, 2012 at 12:40 pm | Report abuse |
  10. Daveinil

    Obama political theater at it's finest! Another distraction from jobs and the economy using the vilification of Wall Street and big banks.
    Why is $2 billion considered "massive" when it only represents 1% or less of JPmorgan's assets and is not investor money?
    Why did Obama's White House visiting buddy Jamie Dimon scurry right out to the cameras beating his chest and hollering "Mea Culpa".
    Why is the FBI jumping on the band wagon when no one is alleging fraud or embezzlement, only stupidity in hedging their positions and the sacrificial lambs have already been served up?
    Why was this not prevented by the wonderful Dodd-Frank law Obama signed 2 years ago?
    Why, if it was so terrible, is Jamie Dimon still running the company, getting his $23 million compensation and still best buddies with Obama? (The last one is easy, it's because he's still bundling contributions for Obama like Hamilton James, CEO of one of those evil hedge funds.)

    May 16, 2012 at 12:40 pm | Report abuse |
  11. D

    And the point is what?

    Give them a few million in fines...IF they choose to reveal what they find or actually do a real investigation? Sorry, citizens have zero confidence in these paper invesitgations.

    I would much rather have them say that they just don't care than patronize us with these goofy invesitgations.

    May 16, 2012 at 12:41 pm | Report abuse |
  12. HenkV

    OK, FBI: I have some more work for you. With the $1.5 trillion that our 435+100 representatives in DC steal from our children every year that adds up to $2.8 billion per person PER YEAR.
    Could you please investigate this also?
    Thank you, our children.

    May 16, 2012 at 12:43 pm | Report abuse |
    • Trickster

      I agree 1000%!!!!!!

      May 16, 2012 at 12:48 pm | Report abuse |
  13. Da_Pops

    Since when is a crime to lose money ? If JP Morgan lost $2B, then someone else made $2B -Since when is that a crime? it didn't vanish into thin air (unlike Solindrya). It's called Capatilism folks... that is what has made this country great!!! They broke no crimes, $2B is a drop in the bucket of their net worth, SOOOOO all of this is just Political Grandstanding ... The Big Zero is distracting everyone away from the real issues... Let's paint the BIG Banks as EVIL and no one will snap to the fact that he it trying his damnest to turn the United States of America into the Nanny States of America.

    May 16, 2012 at 12:43 pm | Report abuse |
    • Kymberlee

      Because Morgan is federally insured by the FDIC, so if they fail, the taxpayer takes it in the neck, again. At one time Depositor's banks were Separated from Casino banks by Glass-Steagall, to protect the taxpayer. But Congress, in its infinite greed for banker bribes, killed that worthy law – led by Chris Dodd (D) and Phil Gramm(R), so it was bipartisan greed and stupidity.

      May 16, 2012 at 12:47 pm | Report abuse |
    • Ron

      Actually Kymberlee only the deposit side of the Bank is insured, this was done on the investment side using the banks own money which is not insured by the FDIC. JP Morgan will still earn about 20 billion this year so their investors will still make a ton of cash.

      May 16, 2012 at 1:03 pm | Report abuse |
  14. Barry G.

    The banks should never have been allowed to merge with the investment firms–but we can thank Regan and Clinton for allowing tihs.

    When greed is allowed to go unchecked and Wall St. Banks and investment firms can send lobbyists to DC to buy out senators and congress, we're in trouble.

    May 16, 2012 at 12:44 pm | Report abuse |
  15. TheMovieFan

    This is one of the most egregious examples of class warfare that I have seen in recent memory. Jamie Dimon was only doing his job and the board of JP Morgan Chase confirmed that on Monday. Just let the markets decide and let the board of directors do what is best for them and let us all get on with our lives.

    May 16, 2012 at 12:44 pm | Report abuse |
    • Kymberlee

      The only class warfare is the one that was declared on the Middle Class about thirty years ago. Wake up!

      May 16, 2012 at 12:48 pm | Report abuse |
1 2 3 4 5 6 7