JPMorgan’s Dimon Says Bank’s Trading Loss Self-Inflicted

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the bank made egregious mistakes and that the losses of about $2 billion tied to synthetic credit securities were “self-inflicted.”

“We’re accountable, and what happened violates our own standards and principles about how we want to operate the company,” Dimon said in a conference call today. “This is not how we want to run a business.”

The bank fell 6.2 percent to $38.20 at 5:26 p.m. in extended trading in New York after disclosing the losses at its chief investment office. Dimon said the New York-based lender made the trades to guard against credit risk (JPM).

“In re-hedging the portfolio, it was a bad strategy, badly executed and poorly monitored,” Dimon said.

Dimon told analysts they should assume his bank keeps regulators informed about its finances and that the trades may not run afoul of the so-called Volcker rule, which seeks to limit banks’ bets with their own funds.

“We do believe you need to have the ability to hedge in a CIO-type position, and that Volcker allows that,” he said. “This trading may not violate the Volcker rule, but it violates the Dimon principle.”

Dimon said that while the changes in prices contributed to the losses, he didn’t want to cite what he called the excuse of “market dislocation” and he said other banks may have been spared losses from the disruption.

“Just because we’re stupid doesn’t mean everybody else was,” Dimon said. This “puts egg on our face and we deserve any criticism we get.”

Editors: Dan Kraut, Steven Crabill

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at Dkraut2@bloomberg.net