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.
 


"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

UN Fears Rights Violations in China-backed Projects

UNHCHR investigates link between financing development and ignoring safeguards for human rights More

Boko Haram Violence Tests Nigerians’ Faith in Buhari

New president has promised to stem insurgency; he’s scheduled to meet with President Obama at White House July 20 More

Social Media Network Wants Privacy in User’s Hands

Encryption's popularity in messaging is exploding; now it's the foundation of a new social network 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.
Making Music, Fleeing Bombs: New Film on Sudan’s Internal Refugeesi
X
Carolyn Weaver
July 06, 2015 6:47 PM
In 2012, Sudanese filmmaker Hajooj Kuka went to make a documentary among civil war refugees in Sudan’s Blue Nile and Nuba Mountains region. What he found surprised him: music was helping to save people from bombing raids by their own government. VOA’s Carolyn Weaver has more.
Video

Video Making Music, Fleeing Bombs: New Film on Sudan’s Internal Refugees

In 2012, Sudanese filmmaker Hajooj Kuka went to make a documentary among civil war refugees in Sudan’s Blue Nile and Nuba Mountains region. What he found surprised him: music was helping to save people from bombing raids by their own government. VOA’s Carolyn Weaver has more.
Video

Video Rice Farmers Frustrated As Drought Grips Thailand

A severe drought in Thailand is limiting the growing season of the country’s important rice crop. Farmers are blaming the government for not doing more to protect a key export. Steve Sandford reports from Chiang Mai, Thailand.
Video

Video 'From This Day Forward' Reveals Difficult Journey of Transgender Parent

In her documentary, "From This Day Forward", filmmaker Sharon Shattuck reveals the personal journey of her transgender father, as he told his family that he always felt he was a woman inside and decided to live as one. VOA’s Penelope Poulou has more.
Video

Video Floodwaters Threaten Iconic American Home

The Farnsworth House in the Midwest State of Illinois is one of the most iconic homes in America. Thousands of tourists visit the site every year. Its location near a river inspired the design of the house, but, as VOA’s Kane Farabaugh reports, that very location is now threatening the existence of this National Historic Landmark.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.

VOA Blogs

World Currencies

EUR
USD
0.9084
JPY
USD
122.73
GBP
USD
0.6431
CAD
USD
1.2639
INR
USD
63.444

Rates may not be current.