JPMorgan can still withstand such a loss, though it does highlight the inability of the bankers to manage such huge losses. Jamie Dimon spun the bad London trade as $2 billion and for a while, many in the press repeated that line even after the loss had passed the $3 billion mark.
We're four years down the road from the banking crisis and we're still seeing horrid losses and poor management by banks. Outside of the Wall Street-DC bubble, people want this problem resolved in a way that protects taxpayers, but there's too little progress. If the supposed expert on managing risk could be so wrong, who thinks the others are doing any better?
As JPMorgan has moved rapidly to unwind the position — its most volatile assets in particular — internal models at the bank have recently projected losses of as much as $9 billion. In April, the bank generated an internal report that showed that the losses, assuming worst-case conditions, could reach $8 billion to $9 billion, according to a person who reviewed the report.In addition, we're now seeing significant ratings downgrades within the US banking sector, Spain and now Brazil. We also know that China is facing significant economic challenges, so there's a lot to be concerned about in this market.
With much of the most volatile slice of the position sold, however, regulators are unsure how deep the reported losses will eventually be. Some expect that the red ink will not exceed $6 billion to $7 billion.
Nonetheless, the sharply higher loss totals will feed a debate over how strictly large financial institutions should be regulated and whether some of the behemoth banks are capitalizing on their status as too big to fail to make risky trades.
