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. Ella

    It is even more shameful that this is now the way we are all forced to plan for our retirement and must live with this crooked system and the vicious cycle that supports it. I imagine I will never be able to retire like my parents. I will always have to work or do something since it is highly unlikely I will ever have the money needed to retire. JPMC is public traded which means there are regulations they should be following...the question is...are they? Did they follow their own risk mitigation strategies? Did they properly evaluate the risk? Do they have the checks and balances to prevent this from happening again? Many of this is subjective and while we as individuals find this the article states...this is but a tiny sliver and may not represent a 'material loss' to JPMC. While it does make for a reputational loss – they are still set to make a profit for this quarter.

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

    Are you kidding me? The FBI? What the hell is wrong with this country...

    May 16, 2012 at 1:12 pm | Report abuse |
    • JPJ3016

      I don't know, something about SEC regulations maybe?

      May 16, 2012 at 1:22 pm | Report abuse |
  3. Glass Steagall

    The Glass Steagall act existed for a reason. It is time we bring it back.

    May 16, 2012 at 1:13 pm | Report abuse |
  4. Kim

    Approximately 1 day before 9-11 Rumnsfeld stated to the nation that "the enemy is closer then we think", it is right here in the pentagon". "We can not account for 2.3 TRILLION $". No politican in the US or the Prior our current VP or President
    or anyone in congress or any presidential cadidate to date has suggested investigating the unaccountability of $ 2.3 Trillion.
    We the tax payers are going to pay it! When are we as the people going to hold elected politicans accountable , responsible.
    Now the president is going to have the the FBI investigate JP Morgan for a $ 2 billion loss.
    Why didn't the president and our politicans then and now have the FBI investigate the loss of $ 2.3 TRILLION?

    May 16, 2012 at 1:13 pm | Report abuse |
    • Griffith

      Kim, consider the administration, and you'll have your answer. 9/11 was the ulimate in misdirection.

      May 16, 2012 at 4:34 pm | Report abuse |
  5. Charlie

    Business is all about risk. You take risk and some pay off some do not. Look no further than Chevrolet and their Volt. It was a risk, and it failed.

    May 16, 2012 at 1:14 pm | Report abuse |
  6. avatar

    Rest assured this needs thourough research when people ABUSE THEIR POSITION!!!!!! LEAVE OR WE WILL SHOW THE DOOR...............:)

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

    IIf JP Morgan MADE $2b since April, would the same level of scrutiny, and apology, be applied? It should since 'risk' works on the same meter for upside as it does for the downside.

    May 16, 2012 at 1:16 pm | Report abuse |
  8. Mr Dalloway

    If these people were any color other than white they would have been imprisoned a long long time ago. If anyone brings the countrydown it will be the white man.

    May 16, 2012 at 1:20 pm | Report abuse |

      this is the most racist comment of the day good job

      May 16, 2012 at 1:34 pm | Report abuse |
  9. Joex51

    this is BS last quarter they made $5.4 Billion did the FBI investigate them to see how they made so much money?
    ok they tried something and messed up should they investigate it maybe if they get answers to the questions what did you do? and why did it fail? if the answers are legit let it go if not then get into it!!! But don't make a mountain out of a mole hill and waste more of the tax payers $$$ for a political scheme.....

    May 16, 2012 at 1:21 pm | Report abuse |
  10. joenotdaplumber

    Investments are a gamble by nature. You can't change that, nor should you. All you can do is become educated and do the math to properly calculate your risk versus rewards. If you can't afford the risk of the loss don't play the farking game! Oh but credit default swap failures affect your mortgage you say? Then don't sign on the dotted line for a mortgage. Get an education, save all of your pennies, and buy your home outright. Otherwise, you're still on the hook and it's your own fault.

    May 16, 2012 at 1:38 pm | Report abuse |
    • Just Another Dave

      It's not the effect on peoples' mortgages. It's the effect on their tax bill when they (we) have to pay the bill for the government picking up the pieces.
      There is a systemic problem that for most publicly held companies there is a small bloc of people with a controlling interest. Since they own more than half the company, they decide what happens, the rest of the investors are just along for the ride or just taken for a ride.
      Another issue is that back at the time that corporations were determined to have the rights of people, an organization had to demonstrate that it provided a public good to become incorporated. Now any chucklehead selling bags of broken glass to children can become incorporated to protect their assets in the event they get sued.
      Homestead laws are far too open ended as well. One of either the Enron or Worldcomm knuckleheads got to keep his $18 million dollar home because it was his only home. I think homesteads should be limited to something like the mean cost of a home in that area, or something similar to that (maybe 150% or 200% of the mean).
      In any case,
      Finally, Glass Steagall is right about Glass Steagall. I remember back about 20 years ago when they repealed a lot of it thinking that it was an idiotic move to undo the laws made to prevent another Great Depression from happening. But because corporations are people, and can have lobbyists to sway congress, once again big business (i.e. the aforementioned controlling stockholders of major corporations) has its way.
      White collar crimes need much more severe punishment based on the swath of damage they cut.

      May 16, 2012 at 2:38 pm | Report abuse |
  11. JournalGirl

    Thanks to all for pointing out my error. I need new glasses. The population of the United States is 303,824,646 (July 2008) I am not sure how many are eligible voters are in that number. Semantics aside, we still have a voting block worthy of change.

    May 16, 2012 at 1:55 pm | Report abuse |
  12. juan

    Those who say "business is business" and "risk is risk" can't be so ignorant to know the fact that the same people who are suppose to scrutinize the system are the same people nominated for the position that once worked for the companies that want to exploit the system of "business".

    May 16, 2012 at 2:19 pm | Report abuse |
  13. Dave_in_SF

    Congress and the President made a bad $870,000,000,000.00 investment, can we throw those who voted for and signed the American Recovery Act in jail as well? Really $2,000,000,000.00 billion, on one bad investment, J.P. Morgan Chase is worth $2,000,000,000,000.00 that represents a loss of I believe 0.01%. Soylandra represents a nearly infinite increase in investment dollars losses. Obama is holding his Democrat acceptance speech in the Bank of America Stadium in Charlotte NC, and Bank of America is one of Obama's biggest corporate supporters. I wonder if there is any connection that BofA's biggest rival is getting the once over by the Administration and the Department of Propaganda at CNN, NBC, CBS, ABC, PBS?

    May 16, 2012 at 2:44 pm | Report abuse |
  14. Mr Dalloway

    I hope this thing drops dead soon.

    May 16, 2012 at 2:54 pm | Report abuse |
  15. hamsta

    so its a crime when capitalist lose 2 billion in a bad investment? but not a crime when the socialist president squanders 6 trillion? you liberbals make a lot of sense.

    May 16, 2012 at 5:27 pm | Report abuse |
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