A surprise $2 billion trading loss by a division of JPMorgan Chase triggered calls Friday for tougher regulation of banks…
|DANIEL WAGNER, AP Business Writer|
Stock in the bank, the largest in
The disclosure, a surprise to stock analysts, quickly revived debate about whether banks can be trusted to handle risk on their own in the age of "too big to fail."
"The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least
Frank, the retiring Democratic leader of the
Dimon has been among
"This just tells you that we are a long, long way from getting our arms around this whole `too big to fail' issue," said Rossi, now executive-in-residence at the
"This is actually worse than
The head of the
Experts and industry officials were skeptical that the trading was designed to protect against
The bank appeared to have been betting for its own benefit, a practice known as "proprietary trading," said Rossi and other former bank executives.
Dimon said the type of trading that led to the
The Federal Reserve said last month that it would begin enforcing that rule in
"These instruments are not regularly and efficiently priced, and a company can wake up one day, as AIG did in 2008, and find out they're in a terrific hole. It can just blow up overnight," said Greenberger, a professor at the
On Friday, bank stocks were hammered in
Stock analysts said that bank stocks were hurt mostly because of regulatory fear, not because there was reason to believe other banks would discover similar losses.
"The regulatory and political environment is already a headwind, and clearly this doesn't help,"
The trading loss was an embarrassment for
The loss came over the past six weeks in a portfolio of the complex financial instruments known as derivatives, and in a division
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," Dimon told reporters on Thursday. "There were many errors, sloppiness and bad judgment."
Dimon said the losses were "somewhat related" to that story, but seemed to suggest that the problem was broader. Dimon also said the company had "acted too defensively," and should have looked into the division more closely.
Hedge funds were betting that the index would lose value, forcing
Partly because of the
The loss is expected to hurt
"We will admit it, we will learn from it, we will fix it, and we will move on," Dimon said.
He acknowledged that more losses are possible as
AP Business Writer
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