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. Misha

    Now why exactly is the FBI getting involved ? What laws are alleged to have been broken ? Is this a political stunt by the government ? Is this a foreshadowing of the type of purges and investigations performed in Soviet era Russia or current era China ?

    I thought America was a place where political use of law was not condoned. Hmmmm.

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

      If you're serious in your belief that this investigation is the harbinger of a communist-type dictatorship, then I'd like a lot of what you're smoking please. One of the biggest banks takes a multi-billion dollar loss – the same type that got us started on a roller coaster in 2008 – and you think an investigation isn't in order? Someone has to watch these people in order that their desire for profit doesn't bankrupt the nation as a whole.

      May 16, 2012 at 12:51 pm | Report abuse |
    • Greenspam

      FBI investigates to see if any law is broken. How would FBI know if any law is broken without investigation?

      May 16, 2012 at 12:54 pm | Report abuse |
    • Wow

      How, Misha, do you propose you identify if a law was broken without an investigation?

      May 16, 2012 at 1:02 pm | Report abuse |
  2. Daveinil

    Are these the same FBI agents that are supposedly invesigating the Trayvon Martin case looking for a civil rights violation? The Justice department is so blatantly political under Holder that it's laughable.

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

      "The Justice department is so blatantly political under Holder that it's laughable."

      UUUUUUUUUUUUUHHHHHHHHHHHHHH, "blatantly political"??? Alberto Gonzales and Harriet Miers ring a bell? Seriously, get a clue.

      May 16, 2012 at 12:51 pm | Report abuse |
    • Wow

      Yeah. Same exact ones. They have pretty full plates. Shanequa and Devhan.

      May 16, 2012 at 1:04 pm | Report abuse |
  3. coy4one

    I'm sure that this is no major concern...JP Morgan Chase will just find ways to up fees to their customers and get it all back within a month or two.

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

      Then their customers can vote with their funds and take them elsewhere. They don't need an FBI investigation to do that.

      May 16, 2012 at 12:48 pm | Report abuse |
    • Olivia

      Agreed! That was one of my thoughts when I initially heard about this on the news. They will just charge the loss to their customers. Soon people will go back to saving money under their mattresses.

      May 16, 2012 at 1:05 pm | Report abuse |
  4. meaz23

    Why does Mitt Romney have his staff bring young boys to his hotel room late at night?

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

      To protect them from Barney Frank?

      May 16, 2012 at 12:49 pm | Report abuse |
  5. R

    what about the massive lost on C (Citigroup)... I lost so much money. Where is the investigation in to that?

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

      R– you won't get any $$$ from Citigroup unless your Barney Frank or Chis Dodd's relative..

      May 16, 2012 at 12:53 pm | Report abuse |
  6. BOKinLarksville

    Let me get this straight.. It's a big election year.. A "too big to fail" bank did wrong yet again.. Politicians take lots of money from banks, and/or sit on their board.. Politicians want votes from people who are getting screwed by banks.. Idea: Dog & Pony show to make public think politicians actually care about them.. This bogus investigation will result in a couple of people being let go with severance packages larger than the average Joe earns in a lifetime..

    May 16, 2012 at 12:48 pm | Report abuse |
  7. asdf

    Is Eric planning to walk lots of tax payer money across to the banks and then charge them with a white collar crime? Oh wait him and his Boss and moron W Bush already have done that but let them keep it.

    May 16, 2012 at 12:50 pm | Report abuse |
  8. Barry G.

    The approval rating of Congress is at an all-time low.

    This low rating our Congress now has–and the low regard the American people have for our politicians–is fitting and well deserved. After all they have sworn to serve the people who elected them, yet they serve the interests of the lobbyists.

    May 16, 2012 at 12:51 pm | Report abuse |
  9. Sharky

    Yeah, right. Everyone knows JPM can break as many laws as they want and just pay off congressmen.

    May 16, 2012 at 12:51 pm | Report abuse |
  10. Da_Pops

    @Kimberlee.. read your FDIC regulations.. this was JP Morgan's OWN money.. not yours, not the taxpayers, not the government... it would be like going to a casino, putting down a $1K bet and losing.... then the FBI would investigate you? We should spend more time investigating all of the Big Zero's Big Government waste GSA, TSA, ICE – the section chief in El Paso has a Jordanian Dimplomatic Passport – wth?) ... we could really use the FBI to investigate all those REAL crimes.. not the fact that captialism works

    May 16, 2012 at 12:52 pm | Report abuse |
  11. Steve K

    I think I agree with Neil Cavuto on his show last night. When will the FBI start an investigation into the 15 trillion dollars of debt our government has gotten us into and yet seems oblivious to it and has every intention of increasing that amount significantly. 2 Billion? Geez! I guess our elected officials have nothing better to do that go after the splinter at JP Morgan when they have a tree sticking in them! The ultimate hyprocrisy if you ask me.

    May 16, 2012 at 12:53 pm | Report abuse |
    • Da_Pops

      AMEN Steve.. AMEN...

      May 16, 2012 at 12:55 pm | Report abuse |
  12. dan


    otherwise the rich will just say "FINE, you dont wanna play??? we'll just pack up the fun & move it away where YOURE NOT INVITED...!!!!"

    May 16, 2012 at 12:53 pm | Report abuse |
  13. D. Lenz

    I am no expert on Financial Regulation like Dodd-Frank, but can someone explain to me what JPM Chase did that was so illegal? As far as I can tell, they didn't touch retail deposits, and this was just an investment gone wrong. The only people it affects are shareholders, and that seems like fair-game to me. What am I missing?

    May 16, 2012 at 12:56 pm | Report abuse |
  14. Joe

    Why is the government involved? JPMorgan is not a publicly owned company....besides, the government loses billion every month and I dont see anyone probing them

    May 16, 2012 at 12:56 pm | Report abuse |
    • TheMovieFan

      Look up JPM on NYSE.

      May 16, 2012 at 12:58 pm | Report abuse |
  15. Tom in Orlando

    Thinking that this investigation will accomplish anything is like believing that the popular vote can elect a president...

    May 16, 2012 at 12:57 pm | Report abuse |
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