June 29th, 2012
Econintersect: This morning (28 June 2012) reports appeared at The Huffington Post, The New York Times and The Washington Post (Associated Press) which said that the losses from JP Morgan’s purported hedging positions could reach as high as $9 billion. The source of the report appears to be an internal memo by JP Morgan written in April. The New York Times stated in its article that some still believe the losses may still be contained in the $6 to $7 billion range. Econintersect received several severely critical comments a few weeks ago when the figure of $7 billion was mentioned based on information from confidential sources. Those sources now appear to be vindicated.
Follow up:One expert openly questioned the statements made about hedging operations by Jamie Dimon. From The New York Times:
“Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner.
The NY Times article summarized Dimon’s statements:
In testimony before the House Financial Services Committee last week, Mr. Dimon said that the London unit had “embarked on a complex strategy” that exposed the bank to greater risks even though it had been intended to minimize them.
Yves Smith has made some pointed comments that are more aligned with Mark Williams.
One commentary has asked if there are Ponzi scheme elements in derivative structures such as JP Morgan has represented to be hedges.
By noon CNBC had a report that, according to a person familiar with the matter, JP Morgan managers are now confident that losses can be contained to the $4 to $6 range.
- JPMorgan Trading Loss May Reach $9 Billion (Jessica Silver-Greenberg and Susanne Craig, The New York Times, 28 June 2012)
- JP Morgan Trading Loss Reportedly May Reach $9 Billion (The Huffington Post, 28 June 2012)
- JP Morgan Chase shares fall as NY Times as trading losses may reach as much as $9B (Associated Press, Washington Post, 28 June 2012)
- Jamie Dimon Tells a Whopper (Yves Smith, GEI Opinion, 16 June 2012)
- JP Morgan: Eight Challenging Questions (Desputatio Sapiens, GEI Opinion, 24 June 2012)
- JPM Loss, Once Feared to Be $9 Billion, Likely to Be Less (Kate Kelly, CNBC, 28 June 2012)