JP Morgan’s sudden conference call to disclose, and to try to explain, the $2 billion trading loss that it racked up in only six weeks was one of the most absorbing bits of live financial theatre since the 2008 crash.
The star of the show, naturally, was Jamie Dimon, the bank’s ebullient and outspoken chief executive, who has been out in front leading the industry’s defence of "too big too fail” banks and pushing back against new capital requirements.
Dimon isn’t given to mincing his words and he certainly didn’t this time, as I noted on Twitter while listening:
'"Bad strategy, badly executed and poorly monitored" that was intended to hedge against stressed credit markets.'
'Lost $2 billion in six weeks. "We made these positions more complex. This strategy was badly executed and badly monitored".'
"Could easily get worse this quarter and there will also be a lot of volatility next quarter... my general counsel is sitting right here".
Dimon strongly indicated that the bank reacted disastrously to media coverage of Bruno Michel Iksil, a trader, who works in the bank’s chief investment office in London and is known as "the London whale”.
Last month Dimon told the media that coverage of Iksil’s sales of credit default swaps was "a tempest in a teapot” and the structured credit position was being carefully overseen.
What happened next is unclear, but Dimon implied that JP Morgan made a cackhanded attempt to adjust and de-risk its credit book, but instead brought on abrupt and severe losses. It is left with a credit position that will remain extremely volative, probably for the rest of this year.
All in all, if Dimon had wanted to hand ammunition to his opponents, he could not have come up with much more, as he noted at the end:
"It plays right into the hands of a bunch of pundits out there, but that's life. We'll have to deal with it." And that's it. Wow.
This story is definitely not over.
Copyright the Financial Times 2012.