Dimon's Wall Street colleagues shrug at his bank's big loss
JPMorgan Chase Chief Executive Jamie Dimon plans to testify before Congress on Wednesday about his firm's $2 billion trading loss. His Wall Street colleagues...
NEW YORK — JPMorgan Chase Chief Executive Jamie Dimon plans to testify before Congress on Wednesday about his firm's $2 billion trading loss. His Wall Street colleagues don't understand why.
"Occasional losses are inevitable," said Blackstone Group's Stephen Schwarzman, 65, CEO of the largest private-equity firm. "Publicly excoriating JPMorgan serves no purpose except to reduce people's confidence in the financial system."
The loss has sliced $27 billion from JPMorgan's market value since the May 10 disclosure, while triggering at least five federal probes and two Capitol Hill hearings scheduled with Dimon.
It also renewed debate about whether curbs on trading by bankers were tightened enough after their wrong-way bets pushed the system to the brink of collapse in 2008.
Many executives, lobbyists and analysts said the public stir is an overreaction to a minor misstep. "I kind of shrug," said Bill Archer, a former co-chairman of Goldman Sachs' capital-markets committee and now a partner at buyout firm Veronis Suhler Stevenson. "That's just the way the world is."
JPMorgan shares have dropped 17 percent since the New York-based bank, the largest in the United States, disclosed the losses on credit derivatives held by its chief investment office. Dimon had shifted the unit from a conservative manager of unused cash into a profit center that bet on riskier assets, former employees have said.
But execs who say the loss is small for a firm that earned $19 billion last year are missing the warning it represents about unwieldy large lenders, said Richard Sylla, a financial historian at New York University. "Even a great banker like James Dimon can't really manage such a huge operation. They convince themselves that everything is fine because they're making money."