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, CNNMoney.com 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:

CNNMoney.com: How JPMorgan made its $2B blunder

CNNMoney.com: Betting against JPMorgan

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

READ FULL CNNMONEY.COM STORY
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Filed under: Business • Economy • Finance
soundoff (154 Responses)
  1. Ella

    The crux of this, IMHO, is that we still have greedy, unethical people and not enough checks and balances. It is still all about profit and not what you did for me last quarter – but how much did you make me last HOUR. Additionally, no one person should have the ability in an organization to squander that amount of money...

    May 16, 2012 at 12:58 pm | Report abuse |
    • Ryan in Texas

      The Federal Gov't squanders $3,500 BILLION every year!
      JPMorgan will MAKE BILLIONS this year.
      Their job is to risk money so they can get a return. No risk, no return. A home loan, car loan, college loan – those are all risks – they don't always get paid back.
      I have no idea how risk would even work if you never lost.

      May 16, 2012 at 1:12 pm | Report abuse |
  2. redwine9991

    DID BIG BANKS DESTROY AMERICA’S ECONOMY?

    ARE BIG BANKS FINANCIAL TERRORISTS?

    ARE BIG BANKS PEOPLE?

    WHY AREN’T BIG BANKS PEOPLE IN JAIL?

    DO WE LIVE IN CORRUPT SYSTEM?

    May 16, 2012 at 12:59 pm | Report abuse |
    • Sodomite

      Yes to all.

      May 16, 2012 at 1:14 pm | Report abuse |
    • Julie

      Big banks are corporations. Corporations, according to Mitt Romney, are people. People can be jailed. Therefore, big banks can be jailed.

      May 16, 2012 at 1:29 pm | Report abuse |
  3. JournalGirl

    When are we going to wake up as a nation and learn? There are 435 lawmakers and about 1 billion voting-able U.S. Citizens. IF we stick together and not let both sides plus the media divide us, we could see real change.

    May 16, 2012 at 1:00 pm | Report abuse |
    • Ignorance is bliss

      1 billion U.S. voting age citizens? I think your figures are ever so slightly off.

      May 16, 2012 at 1:05 pm | Report abuse |
    • Sodomite

      1 billion? Check your stats, dear.

      May 16, 2012 at 1:15 pm | Report abuse |
  4. smsusaf

    They lost 3% of thier own money who cares, what about the 1 billion stolen by the Ex-Dem gov

    May 16, 2012 at 1:00 pm | Report abuse |
    • Dennis

      You're joking, right? It wasn't their money, it was investors money, and they won't just "absorb" a 2 BILLION dollar loss, that statement is a bunch of crap; those losses will be passed on to their customers, so the ever-holy bottom line doesn't suffer. We live in one of the most corrupt systems to ever exist, it's just that we're all too damn stupid to believe it...

      May 16, 2012 at 1:07 pm | Report abuse |
    • ed

      chuckle x-Dem gov. " allegedly "stold ,,,,,,, he may just have been "mentally bewildered" as to axactly how's the $1.5BILLION in customwer dollars went somewhere's......... Much Mirth ain't the US of A a truly great country.

      May 16, 2012 at 1:09 pm | Report abuse |
  5. Guy

    Is Yoda now reporting for CNN?

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

    May 16, 2012 at 1:01 pm | Report abuse |
  6. Ryan in Texas

    No risk -no reward.
    The Democrats proposed a law that would make shorting stocks illegal.
    Yes, they think that would make the price of stocks only go up – reducing all risk to the consumer of owning stocks.
    You can't make this stuff up – they really proposed it!
    Seriously, what is the deal with this story? They will MAKE billions this year. They didn't use taxpayer money to do it, nor did they use FDIC insured funds to do it? They took some risk and lost. Now they are not suppossed o ever take any risks? A home loan is a risk!!!

    May 16, 2012 at 1:02 pm | Report abuse |
    • BkyBridge

      Ok Jamie. Now go enjoy your $23 million and stop bothering people.

      May 16, 2012 at 1:11 pm | Report abuse |
    • Reality

      Hey Ryan... I don't think they'll absorb it... their customers will absorb it... which is at the end the true issue.

      Think about it... if it were really easily absorbed; why make the press conference? Something is up here.

      May 16, 2012 at 1:15 pm | Report abuse |
  7. Da_Pops

    2 Billion and the FBI is investigating .. F-22 Raptor – In March 2012, the GAO increased the estimated cost to $412 million per aircraft (per Wiki) ... Now they are grounded for faulty oxygen? 4 F-22 = what JP Morgan lost, yet we have $62B sitting idle.. maybe the FBI should investigate Lockheed-Martin?

    May 16, 2012 at 1:03 pm | Report abuse |
  8. Ella

    Some of these exotic investment vehicles just need to be outlawed. Profiting from other people's misfortune is the equivalent of blood money. Many years ago I heard about firms trading 'weather futures'. Just how far away from the actual item of value do you want to get? I think all this fictional money investment needs to stop. These things are not goods or services – but just educated bets. In most states, this kind of gambling is illegal. Why do we permit it as a form of so called business? Once again – ethics and greed at work.

    May 16, 2012 at 1:03 pm | Report abuse |
    • conradshull

      Most "exotic" investments are not all that exotic. Most can be explained to a layman of average intelligence in under 20 seconds.

      May 16, 2012 at 1:11 pm | Report abuse |
    • conradshull

      All investment is an "educated guess".

      May 16, 2012 at 1:12 pm | Report abuse |
  9. jfk1971

    If this weren't so serious it would be a joke. I feel like I'm reading a headline ouf ot Pravda. Congress better start to rein this in.

    Maybe, just maybe, someone at the FBI should be investigating who leaked national security information, and has thereby ruined years of infiltration work let alone endangered the life of the man who undertook this job, regarding the latest underwear bomb attempt instead of embarking on this witch hunt to serve their political masters in the WH and the DOJ.

    May 16, 2012 at 1:04 pm | Report abuse |
  10. Phillip Anthony Biondo

    I am the rebirth of Jesus Christ. Vote Phillip Anthony Biondo for President 2012 of the Fraternity Party! Brandon Gilligan USN for VP. Free College like k-12. Free Healthcare. All safe drugs, as determined by doctors, prescription and illegal will be legal. Invest in Intel and Amg: Superhuman computer making even smarter superhuman computer designing fusion spaceship. God of the Universe, colonate the Milky Way. Homeless shelters, Raman noodles, and a multivitamin for the poor. Environmentally intelligent policy, Big Bang in Physics, Evolution in Biology, Strong Military, Technological Singularity in 2045. Alcohol and Tobacco are terrible drugs, go to the psychiatrist they will remain legal use at your own risk. I'm suing the U.S. government for Violation of freedom of Religion for sacred medicine as illegal actually causes depression as a result from being illegal. Cannabis, dmt, peyote, and psilocybin mushrooms do not qualify as schedule 1. Any intelligent human knows we are Sapiens, a species of Ape closely related to Chimpanzees. If that Sheriff is right that Obama’s birth certificate is a forgery than is he even eligible for reelection? Everyone go Meditate in full lotus. JGA: No one can use nuclear weapons.

    May 16, 2012 at 1:05 pm | Report abuse |
  11. D-Bag police

    This D-Bag needs to be removed from the company.

    May 16, 2012 at 1:08 pm | Report abuse |
  12. Y E

    Why? What crime was committed here?

    May 16, 2012 at 1:08 pm | Report abuse |
  13. RillyKewl

    Awesome news!
    Can accountability finally be had?

    May 16, 2012 at 1:09 pm | Report abuse |
  14. conradshull

    This is none of the US Government's business.

    May 16, 2012 at 1:09 pm | Report abuse |
  15. Bill in VA

    This is stupid government meddling. It is not a crime to lose money. It is nobody's business except the owners...the shareholders. Losing money happens in business all the time. Even with this, JP will likely be profitable for the quarter and if not, there is no doubt it will be profitable for the year. Why isn't anyone investigating JC Penny? They actually lost money this quarter? No one investigated GM when they were losing billions and we had to give them OUR money.
    We need the FBI to be on the hunt for criminals not people who make bad business decsions.

    May 16, 2012 at 1:09 pm | Report abuse |
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