Friday, May 11, 2012
JP Morgan loses US$2 billion bet as risky trades unwind
The Wall Street banking giant JP Morgan Chase has revealed a shock US$2 billion dollar loss caused by a financially disastrous hedging strategy.
Listen to my analysis broadcast on The World Today.
The surprise losses have been linked to risky bets made by a trader in London that, according to insiders, became too big to unwind without rocking financial markets.
In a humiliating admission, JP Morgan chief executive Jamie Dimon has described the errors as "egregious" and "self-inflicted".
The scandal comes as US banks rebuild their shattered reputations after speculative bets on the US housing market sparked the global financial crisis.
As recently as last month, JPMorgan executives told investors they were "very comfortable" with positions held by the bank, raising questions about how much was known by senior management - and when.
The revelations are also likely to fuel debate about president Barack Obama's sweeping reforms of Wall Street.