News / Economy

JP Morgan Losses Bolster Case for New Financial Regulations

JP Morgan Chase building in New York, May 10, 2012.JP Morgan Chase building in New York, May 10, 2012.
x
JP Morgan Chase building in New York, May 10, 2012.
JP Morgan Chase building in New York, May 10, 2012.

Banks stocks took a big hit Friday after JP Morgan Chase and Company reported a $2 billion loss on a complex trading strategy that went bad. The bank's disclosure is renewing debate over the need for tougher financial regulations.


It's one of the world's biggest investment banks, and its CEO is among the harshest critics of government efforts to rein in risky financial bets. But in a late night conference call to shareholders, JP Morgan CEO Jamie Dimon told investors the bank may have taken too big a risk.


“We are reducing that hedge, but in hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored," said Dimon.
 

Dimon blamed the $2 billion loss on a complex trading scheme that was designed, ironically, to help manage the bank's credit risks. Instead, the trading blunder bolstered the argument that big banks cannot be trusted to handle risks on their own.
 

JP Morgan Losses Bolsters Case for New Financial Regulationsi
|| 0:00:00
...    
🔇
X
Mil Arcega
May 12, 2012 2:47 AM
Banks stocks took a big hit Friday after JP Morgan Chase and Company reported a $2-billion loss on a complex trading strategy that went bad. VOA's Mil Arcega reports the bank's disclosure is renewing debate over the need for tougher financial regulations.


"Well, as he [Dimon] said himself, there's egg on his face [he's embarrassed] and it does play very well, as he says, into the pundits who have been advocating the Volcker rule and also the scenario of being too big to fail," said CMC Markets analyst Brenda Kelly.


The Volcker rule is named after former Federal Reserve Chairman Paul Volcker. It would restrict the biggest U.S. banks from making risky investments that do not benefit bank customers. Volcker said such trades involving credit default swaps and other derivatives played a key role in the financial crisis of 2008.


"It was elements of a casino, a very complex casino with all sorts of inter-dependencies.  And when it came under pressure, not just from credit default swaps but otherwise, when the system came under pressure - it collapsed," said Volcker.


JP Morgan has warned investors to expect additional losses - sending a shiver through Wall Street. JP Morgan stock lost more than 8 per cent of its value. Other financial stocks also suffered big declines.


Analysts fear the scandal will impact regulations not just in the U.S., but around the world.


"Just as it will in the U.S. and in the eurozone, Asia will not be spared this push down the path of greater, tighter regulations," said Tim Condon, who is head of Asia research at ING Financial Markets.


In a statement Friday, U.S. Senator Carl Levin of Michigan, who has been pushing for new banking rules, said the bank's losses were "a stark reminder of the need for regulators to establish tough, effective standards."

You May Like

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. More

Video Sudan School Becomes Target of Aerial Attacks

Dropout rate at an all-time high in South Kordofan state because many schools have been destroyed during 3-year civil war More

Tennessee Songbirds Fly Coop Long Before Tornadoes Arrive

Researchers say birds apparently alerted to danger by sounds at frequencies below range of human hearing More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8140
JPY
USD
118.81
GBP
USD
0.6402
CAD
USD
1.1597
INR
USD
63.066

Rates may not be current.