News / Economy

JPMorgan Trading Losses Prompts New Probe, Concerns About Wall Street

Law enforcement secure grounds of JP Morgan Chase annual stockholders meeting in Tampa, Fla., May 15, 2012.Law enforcement secure grounds of JP Morgan Chase annual stockholders meeting in Tampa, Fla., May 15, 2012.
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Law enforcement secure grounds of JP Morgan Chase annual stockholders meeting in Tampa, Fla., May 15, 2012.
Law enforcement secure grounds of JP Morgan Chase annual stockholders meeting in Tampa, Fla., May 15, 2012.
JPMorgan is facing increasing pressure to explain recent losses.  Last week, the world's largest bank disclosed a loss of at least $2 billion from trades that were supposed to protect the firm from risk.  Now the FBI is looking into whether any laws were broken, and shareholders are looking for assurances that it won't happen again.

Just days after JPMorgan Chase reported the loss, Jamie Dimon, the bank's embattled CEO, apologized to shareholders. "This should have never happened.  I can't justify it.  Unfortunately, these mistakes were-self inflicted," Dimon said.

On Tuesday, the FBI said it was launching a probe. And, on Wednesday, lawmakers held a hearing to determine if new regulations are needed.  New laws that go into effect in July would limit some banks from making proprietary bets with publicly-insured money.

Financial strategist Peter Cardillo blames the new regulations on Wall Street's appetite for high-risk gambles. "There's no question, derivatives have turned Wall Street into a casino. There's no question about that," Cardillo said.

Although Cardillo has concerns about a rush to over-regulate, Treasury Secretary Timothy Geithner says the JPMorgan fiasco makes a powerful case for stronger financial oversight.

"The test of reform is not whether you can prevent banks from making mistakes, errors of judgement  Risk management, that's going to happen.  That's inevitable.  The test of reform should be do those mistakes put at risk the broader economy, the financial system or the taxpayer?," Geithner said.

Ironically, JPMorgan's Dimon has been among the harshest critics of Wall Street reform.  But shareholder Peter Skillern wonders who's watching their CEO -- who also happens to be the company's chairman.

"So who oversees that unit?  Jamie.  Who oversees Jamie?  Jamie. That's the problem.  He's his own boss," Skillern said.

Despite their concerns, shareholders demonstrated support for their chairman -- voting against a proposal to split his position into two separate jobs.  Outside, protesters threw eggs at a picture of Dimon and expressed a litany of complaints against what they call the "fat cats" of Wall Street.

"The big banks need to be broken up, as well as reducing principal for homeowners that are underwater with their mortgages and clearly for them to stay out of, keep their money out of politics, which is really destroying our democracy right now," one protester said.
 
JPMorgan's trading blunder has already prompted several resignations.  Analysts say more employees are likely to lose their jobs.

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