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Troubled JPMorgan trading unit raises more questions

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Playing games with the books may not have been invented by JPMorgan or Wall Street, but Wall Street has certainly had their fair share of questionable accounting practices. Lehman Brothers and the infamous "Repo 105" is just one example.

In addition to the many other investigations at JPMorgan over the now $3 billion trading loss, they may have to explain the accounting discrepancy between pricing of derivatives on one set of books versus another set of books elsewhere in the company. This highly questionable practice raises even more questions about the overall management of the previously highly regarded Jamie Dimon.

It sounds like cowboy banking and accounting is alive and well. Bloomberg:

The JPMorgan Chase & Co. (JPM) unit responsible for at least $2 billion in losses on credit derivatives was valuing some of its trades at prices that differed from those of its investment bank, according to people familiar with the matter.

The discrepancy between prices used by the chief investment office and JPMorgan’s credit-swaps dealer, the biggest in the U.S., may have obscured by hundreds of millions of dollars the magnitude of the loss before it was disclosed May 10, said one of the people, who asked not to be identified because they aren’t authorized to discuss the matter.

“I’ve never run into anything like that,” said Sanford C. Bernstein & Co.’s Brad Hintz in New York, ranked by Institutional Investor magazine as the top analyst covering brokerage firms. “That’s why you have a centralized accounting group that’s comparing marks” between different parts of the bank “to make sure you don’t have any outliers,” said the former chief financial officer of Lehman Brothers Holdings Inc.

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