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FBN’s Liz MacDonald and Ray Hennessey break down the massive investment mistake by the nation’s largest bank by assets.
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-- that oil.
But our top story this morning is the dramatic conference call from JPMorgan Chase CEO Jamie Dimon it revealed.
Billions of dollars in losses for the company Liz -- been following this story we were both listening to that conference call.
And when he said in egregious mistake we are to blame you don't hear that very often from a CEO on Wall Street -- Yeah that's right Adam and what's happening is this happen and the unit -- supposed to protect the balance sheet essentially.
It's what's called a chief investment officer the treasury unit.
And what Jamie Dimon said on a conference call he essentially said look.
This doesn't violate the vocal rule which is that politically controversial.
Rule about prohibiting proprietary trading for a company's own books.
But he did say it violates the diamond principle of what he's talking back to its.
-- just because we're stupid doesn't mean everybody else's meeting that it was said basically probably a math -- -- -- modeling error -- risk.
At the banks so that tells me that.
Possibly other banks -- may not be affected by this but what is basically scary for JPMorgan investors is -- Jamie Dimon said.
On the conference call -- -- coming quarters when it comes to unwinding these trades and more volatility coming ahead take a listen.
Productive some stupid going to hold as long as necessary inventory and willing -- -- volatility.
Therefore the volatility throughout this quarter and next quarter so will be it could -- does this much -- billion dollars or more.
-- -- -- go to work hard to have -- not -- negative at all but it is risky and it will be for a couple quarters.
So basically what is essentially saying here Adam is it it this possibly wasn't driven by the market.
-- by the market it was move in by then getting their math and their modeling wrong in trying to unwind these trades this housing unit and is expected to lose.
Just 200 million dollars in the fact that it's multiples of that and the fact they're gonna have to unwind these trades.
In coming quarters and he's saying -- volatility means you gotta watch out we -- have via -- Iraqi period deficit coming.
Had -- they've come clean about the mistake -- unwind the trades fire sell price is no one's gonna wanna buy this yet but in my point earth.
Hey -- know about Bank of America analyst guy -- house the asked Jamie Dimon it's is -- going to be easy for you to get out of these trades -- essentially crickets over silence.
And then Jamie -- made that statement about the we're gonna hold onto an inventory meaning can unwind it immediately.
-- we hold on that inventory for quite awhile right sounds like okay we're gonna check in with you again -- we -- follows JPMorgan -- -- but right now.
Ray Hennessey the director of business news for the Fox Business Network joins us and then -- let's put this into perspective.
This bank had what four billion dollars in profit just in the first quarter this two billion dollar loss which will grow Jamie Dimon said it will grow.
Really doesn't threaten them does it.
-- I -- no no one's talking about any problems fundamentally with that with the help of JPMorgan the good news is.
The JPMorgan more than other banks could he could handle loss like that -- only bank that could've made this trade.
And the only bank they -- it handled it the trade going wrong but I still think there's a little concerned about.
If if JPMorgan can have a problem like this you know you think of it Jamie Dimon Jamie Dimon prides himself.
On being a very very Smart risk taker so when the risk goes -- we you know when they -- the risk -- -- -- goes bad.
A lot of places with that that don't have that reputation you wonder whether or not that that happens -- as well as you said.
It's it's probably contain -- just JPMorgan and and the good news for the financial markets is that you know JPMorgan can handle I think that's why Adam.
You're seeing some of the these selling that to happen after hours -- JPMorgan kind of debate -- the morning goes on you're seeing the world markets which which sold off a little on this.
Really not and not panic -- in and not having a bigger say I think there DC this is contained I think there you also.
-- a lot of people still have a lot of respect for Jamie Dimon and you want somebody like that.
You know leading the ship when they when they have you know -- like this he handled this very very well just from a leadership standpoint.
He came -- you said you know he took he took responsibility.
You know I would hate to be working for him today.
But I wouldn't mind being invested with him today and I think that that's what you're seeing in this stock price in the futures.
As a US taxpayer that's where this question is coming from.
Why is this loss not considered proprietary trading Whittier head -- -- your trading directly into some kind of asset.
It's trading is trading is trading call it what you like.
Well yeah and I and actually it's an interesting question that that the people who were formulating what the Volcker Rule is which I think is what you're getting -- Are struggling with too you know what's -- proprietary trade but to hedge aren't they the same thing.
And that's kind of the -- -- and legal language that that's going into this.
The irony is is I think that if you -- a pure vocal rule as Volcker in Beijing did when it was first have proposed.
These kind of trades are not be allowed in and JPMorgan oddly enough wouldn't of had the -- is that it that it had but.
I I think it's a question that they're dealing with in DC and and that's.
-- that's got -- called Jamie Dimon worse than anything else because.
It's not just the money right the money's important you hate to lose a couple billion dollars when your bank like JPMorgan.
And I don't want to minimize that but at the same time.
Dimon has been the most articulate opponent of the Volcker Rule and and more bank regulations in this call to break up the banks.
Now he's the poster boy and more than anything else he could just I I could just hear it in his head last night is he's he's talking on this conference call.
Where it would that's got a call him just personally because he's the one that the other -- -- look to.
You know -- leadership on this he's the one who was who was the one saying we don't we can handle our problems we can hand dollar risk we don't need to do Washington interfering in this.
Will now everybody's looking at and say hey you're the one -- -- chiding us.
What's on your balance sheet -- and and that's just -- just knowing him in.
Reputation only that's got a really really -- him to make him angrier about how this all went out ray -- we're going to be talking about the JPMorgan Chase story and how it's going to affect all of us going forward -- do that throughout the morning but right now gotta say thank you very much sir as we --
