JPMorgan Chase & Co. (NYSE:JPM) shocked Wall Street last Thursday evening by announcing that one of its business units had suffered significant losses trading derivatives since the beginning of April.
Although the amount of loss will not be known until all positions are unwound, the current estimate is $2 billion.
Although $2 billion is unlikely to have a significant impact on a bank as large as JPMorgan, the news immediately had an immediate impact on the share prices of JPMorgan and its peers in after-hours trading. When there is uncertainty, investors often sell first and ask questions later.
The real news might be about the future of financial regulation. JP Morgan’s CEO Jamie Dimon had been considered one of the masters of risk management – JP Morgan generally avoided, and actually was able to take advantage of, the 2008 financial crisis.
After the mostly successful evisceration of The Dodd-Frank Wall Street Reform and Consumer Protection Act Street by Wall Street itself, Dimon had been active in trying to further reduce regulations on the financial sector. His credibility was based on a career of successful risk management, but mainly from his leadership of JPMorgan during the financial crisis. The timing of Dimon’s humiliation will likely slow down these efforts.
In latest news, it looks like three of the top executives involved in the loss will resign from JP Morgan. And a prominent Senate candidate has called for Dimon to resign from the board of directors of the Federal Reserve Bank of New York.
This story is developing.