May 11, 2012 JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimonsaid the firm lost about $2 billion on synthetic credit securitiesafter an egregious failure in its chief investment office,which the bank says focuses on hedging. This portfolio has proven to be riskier, more volatile and lesseffective as an economic hedge than the firm previously believed, the New York-based company said today in a quarterly securitiesfiling. JPMorgan declined 5.5 percent to $38.50 in extended tradingat 5:55 p.m. Custom Printed Notebook
in New York. The chief investment office has been transformed in recent yearsunder Dimon into a unit that makes bigger and riskier speculativebets with the bank s money, according to five former employees,Bloomberg News reported April 13. Some bets were so big thatJPMorgan probably couldn t unwind them without losing money orroiling financial markets, the former executives said. Bloomberg News first reported April 5 that London-based traderBruno Iksil had amassed positions linked to the financial health ofcorporations that were so large he was driving price moves in the$10 trillion market. After the Bloomberg report, Dimon on a conference call said thenews coverage was a complete tempest in a teapot. Paper Greetings Cards
The losses disclosed today were a little bit to do with thearticle in the press, Dimon said, without specifying who in thebank oversaw the trades. I also think we acted a little bit toodefensively to the reports. Flawed, Complex Synthetic credit products are derivatives that generate gains andlosses tied to credit performance without the owner buying orselling actual debt. The losses occurred as the company sought tounwind a portfolio of the instruments used to hedge JPMorgan scredit exposure. In hindsight, the new strategy was flawed, complex, poorlyreviewed, poorly executed and poorly monitored, Dimon said. China Food Sealer Bags
JPMorgan said the losses were partly offset by gains from the salesfrom its available-for-sale credit portfolio, resulting in a netloss for the firm s corporate division, which includes the CIO, ofabout $800 million after taxes. The losses could widen or narrowduring the rest of the quarter, Dimon said. The bank is repositioning the synthetic credit portfolio, andthe CIO may hold certain of its current synthetic creditpositions for the longer term, the firm said.