UPDATE May 11, 2012 JPM’s long-term issuer default rating was cut by Fitch to A+ from AA-.
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JPMorgan Chase & Co. (JPM) said it lost about $2 billion tied to synthetic credit securities after positions taken by its chief investment office were riskier than expected.
“This portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed,” the New York-based company said today in a quarterly securities filing. JPMorgan declined 5.5 percent to $38.50 in extended trading at 4:51 p.m. in New York.
From its 10-Q filing:
Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO’s synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO’s AFS securities portfolio. As of March 31, 2012, the value of CIO’s total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value.
The Firm is currently repositioning CIO’s synthetic credit portfolio, which it is doing in conjunction with its assessment of the Firm’s overall credit exposure. As this repositioning is being effected in a manner designed to maximize economic value, CIO may hold certain of its current synthetic credit positions for the longer term.
Synthetic credit securities are bets on hypothetical credit instruments with credit default insurance. This is a credit derivative, and “synthetic” usually means there is no real asset in the instrument, but is a bet made on the performance of another instrument.
You thought they ended this stuff after the bailout?
Well they get free money from the Fed, so why not keep on going to Vegas.
The only Good Regulation is Bankruptcy from your Actions, it is the only way to learn a lesson.
This was seen yesterday:
JP Morgan Chase CEO Jamie Dimon recently suggested that the United States has a “royal straight flush,” a name for the best hand you can have in poker. Dimon cites the world’s strongest military, best businesses, most entrepreneurial workforce and deepest capital markets. And, he says, things would be even better were it not for government policies. Some readers at the proverbial table nodded in agreement, while others thought he might be bluffing a bit.
http://news.blogs.cnn.com/2012/05/09/overheard-on-cnn-com-can-you-describe-u-s-economy-with-poker-metaphors/
Well maybe, but its so-called leading bank isn’t necessarily one of the cards making up said (alleged) royal straight flush… there he goes again…
How sick and tired so many of us are of these guys beating their breasts and saying “We’re #1″. Then TSHTF. Just do it, Jamie. Win, win big, win honestly. Then let others sing your – and your country’s- praises. That behavior would define a class act. This sort of stuff- not quite the word many would use…
Good. Maybe now they can close down some of those branches they have all over the city. They are totally unnecessary. You can’t drive a mile in any direction without hitting one. That shows extreme lack of fiscal prudence. But you can bet your butt they show that building and everything in it as an asset, and likely lend out money at 10:1 leverage based on that ‘value’. It’s obscene. Shut them down. I’m sick of seeing all of them. Put something in those spaces that actually produce things!
Will this be coming out of my paycheck?
Jim-
Probably not. It sounds as though these were gambling losses, and for every dollar JPM lost, some other entity made the same profit.