A year ago in May 2012 JP Morgan made a loss on credit derivatives trading, which chief executive Jamie Dimon blamed on errors,sloppiness and bad judgement” and warned “could get worse”. Understanding JP Morgan Loss .
Here are some of the findings by The U.S. Senate Permanent Committee on Investigations, which launched an inquiry into the trading loss last fall, is looking into the how different divisions of the bank wound up on opposite sides of the same trade, said one of the people familiar with the matter. source Reuters
The committee is expected to release their investigation reports in few weeks based on the below assumptions :
* Investment bank bet against CIO in derivatives market
* Bank said to have discussed merging opposing trade books
* Opposing bets could fuel claim JPM is too big to manage
It was widely known that a group of about eight credit-focused hedge funds, such as Blue Mountain Capital Management and Saba Capital Management, were on the other side of the trades that JPMorgan’s London-based Whale team made on an index tied to corporate default rates. But the role JPMorgan’s own investment bank may have played in the messy unwinding of the derivatives trade has not come out until now.
The Federal authorities are currently investigating whether some employees in the CIO deliberately used misleading valuations to try to conceal some of the losses.
It is not uncommon for large banks to hold opposing positions in the same market. That is sometimes done as a way of hedging a position or because different trading desks formulate opposing views about a trade.
Still, the revelation that the bank was taking two sides on the same trade also is likely to rekindle the debate about whether banks such as JPMorgan Chase are too big to manage and should be scaled back.
The story was published on the Reuters I am still not able to understand he role of Risk Officers since May 2012.
- 2012 Most read post – The JP Morgan series (sandyyadav.com)