Did The Fed Just Give Us A Very Big Clue Just How Big JPM's CIO Loss May Be?

Tyler Durden's picture


Earlier today we mocked Jamie Dimon for announcing the cancellation of his firm's stock buyback program, just two shorts months after March 13, when none other than JP Morgan forced the Fed to scramble and release the full stress test ahead of schedule, after Jamie Dimon decided to frontrun the full FRBNY stress test release (whose sole purpose was to determine under what worst case scenario the Fed was ok with allowing JPM and various other Bank Holding Companies to proceed with dividend raises/stock buybacks) and announce just that - a dividend increase and a stock buyback. Well, in addition to some well justified egg in Dimon's face, today's results actually have some far more troubling implications. Because while we now know that the buyback is over, what we still don't know, because Jamie Dimon refuses to tell us, is just how big the CIO P&L loss as of close today. Yes, there are many speculations but nobody knows for sure. Zero Hedge was the first to suggest based on reverse engineering of what the potential loss drivers may well have been, and subsequently the slower media corroborated, that the total loss would be orders of magnitude greater than the $2 billion announced on May 10. But how many orders? Well, for what may be a critical clue, we go to the Fed's stress test itself. Presenting Exhibit A - page 73 of 82:

This is from the "Comprehensive Capital Analysis and Review 2012" for JP Morgan, conducted by the NY Fed. Specifically, these are, among others, the permissive gating conditions, which if met, would still enable JP Morgan to proceed with the then announced buyback. The highlighted section above speaks for itself:

  • the cumulative "realized losses/gains securities (AFS/HTM) and Trading and Counterparty Losses" amount to $31.5 billion for the pendency of the stress test.
  • In other words $31.5 billion is how much pain JPM is allowed, in the NY Fed's view, to suffer before losses and dividends/buyback would jeopardize the capital structure, and the buyback process should be halted
  • Once again, as a reminder, the buyback process was halted today.

While we do not know the combined loss on these two line items, what we do know as of this morning is that the prohibitive threshold for buybacks was passed just two months after it had been permitted.

Does this imply that the CIO losses, as conferred by JPM to the Fed in private, have a statutory loss potential of over $31.5 billion through Q4 2013? Or is the hit to just this quarter so substantial, that spreading the loss over a period of time has become meaningless, and the Fed has barred JP Morgan from any other future buybacks, i.e., capital outflows, until such time as the trading/realized loss has been offset and the hit to the balance sheet has been undone?

Something tells us that we won't be the only ones asking these questions.


UPDATE: The Independent is noting this morning Europe-time, that the losses at JPMorgan could have grown to $7bn:

Rival traders reckon that the losses could be as high $7bn. "The markets know pretty much what JP Morgan has and in what sizes," said one trader.


The main index on which Mr Iksil's credit default swaps trades were based has calmed down in recent days, which suggests that JP Morgan has decided to trade out of its positions gradually rather than take one massive hit.




According to JP Morgan traders, in [Ina Drew's] absence there were regular shouting matches between her subordinates in New York and London. "The strife distracted everyone because no one could push back," one trader told The New York Times.


[ZH: We suspect the apparent 'calmness' is simply a reflection of the moderation in the skew in HY9 and IG9 - but does not reflect the noise that we are seeing in various other credit indices such as HYG, JNK, IG18, and HY18 all of which have traded a long way from 'fair-value' recently as JPM reached for any and every liquid hedge (and at the same time caused the NYFed to postpone the MLIII auction) and also the fact that it is highly unlikely that JPM was actually able to trade out of the now super-illiquid tranche positions that were the cause of these market technicals - leaving basis risk even larger on this hedge of a hedge]

IG9 10Y skew almost normalized...


as is IG9 5Y


but this has caused 'problems' in the on-the-run indices...

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Tue, 05/22/2012 - 00:12 | 2449761 Seasmoke
Seasmoke's picture

Jump Jamie , you fucker

Tue, 05/22/2012 - 03:52 | 2450093 BeetleBailey
BeetleBailey's picture

...and the chump even lied to his own daughter! The horror!

His response of "every five to seven years" as to his own daughters query as to what is a financial crisis, was off by a full year!

Hang the fuck!

Tue, 05/22/2012 - 12:32 | 2451375 liverdiefree
liverdiefree's picture

And take Lloyd with you

Tue, 05/22/2012 - 00:13 | 2449764 AC_Doctor
AC_Doctor's picture

Choke of a bag of dicks, Senor Dimon...

Tue, 05/22/2012 - 00:15 | 2449771 Bay of Pigs
Bay of Pigs's picture

Whatever evil befalls JPM it won't be enough. Not nearly enough.


Tue, 05/22/2012 - 00:23 | 2449796 Psyman
Psyman's picture

They are about to be visited by the evils of tax payer funded bailouts and record bonuses this Christmas!

Tue, 05/22/2012 - 01:06 | 2449877 FlyoverCountryS...
FlyoverCountrySchmuck's picture



The TV told me that Obama said, 'THE ERA OF BAILOUTS IS OVER!'

How can this be????

Tue, 05/22/2012 - 01:48 | 2449926 tenpanhandle
tenpanhandle's picture

And he was, er... right.  It is far past the point to blame Bush with his bailouts, so, the Bush bailouts are over.  Now we will move forward with "prosperity through fairness".  The wealth of the middle class and the rich consist of ill-gotten-gains and therefore should  patrioticly be given to Jerry Brown who will then distribute this wealth to the deserving, thusly, making the needy  (and close friends) the recipients of these ill-gotten-gains.  While two wrongs don't make a right, they certainly make a left. 

The Teleprompter has spoken!  Omen.

Tue, 05/22/2012 - 00:15 | 2449772 Terra-Firma
Terra-Firma's picture

leave gambling to the gamblers and banking to the bankers. I prefer cautious retrained growth of prudent and scared bankers to the reckless misguided and profligate risk taking of central bank liquidity soaked self absorbed bangelers.

Tue, 05/22/2012 - 01:33 | 2449900 walküre
walküre's picture

We all prefer that to be the case but it wasn't and it isn't going to happen for if the banks were to be cautious, the entire ponzi villa would simply come crashing down faster than the hours it took for the alleged collateral damage on WTC7 to collapse that building magically into its footprint.

Bankers in shackles are useless to the system. Abuse, manipulation and fairy tale returns are encouraged by the political class that lives off the scum and their scams.

Tue, 05/22/2012 - 09:02 | 2450441 goldfish1
goldfish1's picture

Let's reset the 1% to max of $500,000. That might take some of the larceny incentive away.

Tue, 05/22/2012 - 00:15 | 2449773 Milton Waddams
Milton Waddams's picture

I imagine Bernanke sighing while shaking his head in disappointment as he pulls out his checkbook and asks Jamie 'how much do you need this time?'

Tue, 05/22/2012 - 00:24 | 2449797 wee-weed up
wee-weed up's picture

Bernanke double face-palm!

Tue, 05/22/2012 - 00:30 | 2449806 WonderDawg
WonderDawg's picture

To which Jamie says, "Look, bitch, no one asked your opinion. Shut the fuck up and give me the money."

Tue, 05/22/2012 - 01:12 | 2449886 wee-weed up
wee-weed up's picture

And by the way... it's not his checkbook - it's OURS!

Tue, 05/22/2012 - 00:15 | 2449774 dfornika
dfornika's picture

So... about one order of magnitude then?

Tue, 05/22/2012 - 00:16 | 2449777 GoldmanSux
GoldmanSux's picture

Something tells me you will be the only ones asking the necessary questions

Tue, 05/22/2012 - 00:18 | 2449783 suckerfishzilla
suckerfishzilla's picture

This story is proof that ZH doesn't just report the bad news.  I'm suckin up junk mercury dimes like there's no tomorrow. 

Tue, 05/22/2012 - 01:53 | 2449929 tenpanhandle
tenpanhandle's picture

Can you suck a roll of mercs through a 10 ft garden hose?  JPM, AKA "10 ft garden hose" really wants to know.  Actually, I'm a little curious also.

Tue, 05/22/2012 - 02:01 | 2449940 tenpanhandle
tenpanhandle's picture

Sorry folks.  I guess thats about it for me.   I think it must be a humidity problem or something.  Afterall, they say that so far its the hottest year ever.  Only in the man made global warming croud can a rise in temperature from 10 below zero to 5 below zero be considered getting hotter. 

Tue, 05/22/2012 - 00:19 | 2449784 cherry picker
cherry picker's picture

If the post is halfway on target, how many others are out there like JPM and if there are many, when it hits it will make Lehman look like child's play.

My neighbor is a pro gambler and makes a living playing on sites dedicated to such endeavers.  He is disciplined and spends 10-14 hrs a day at his trade four days a week.  It is his money he is working with and risking.  I respect him in how he makes his living, unlike those who play with anothers coin and when they lose, expect Bennie to fill their coffers again.

Tue, 05/22/2012 - 10:15 | 2450813 Da55id
Da55id's picture

So, you're saying he's in the stock market?

Tue, 05/22/2012 - 00:19 | 2449785 lotusblue
lotusblue's picture

Great dig Tyler! Corressponds with the rumors floating around.

I wouldn't have put it together.

There will be blood.

Tue, 05/22/2012 - 00:21 | 2449790 Psyman
Psyman's picture

The blood of the sheep (tax payers, depositors) is a delicious feast for the vampiric banksters.

Tue, 05/22/2012 - 04:51 | 2450121 Mary Wilbur
Mary Wilbur's picture

I'm afraid I'm one of the sheep.

Tue, 05/22/2012 - 09:06 | 2450455 goldfish1
goldfish1's picture

Sheep's on the menu, better stay close to your shepherd.

Tue, 05/22/2012 - 00:20 | 2449789 Psyman
Psyman's picture

No big deal, they'll just get a tax payer funded bailout.  Or rehypothecate depositor funds.


Nothing to see here, move along.

Tue, 05/22/2012 - 01:24 | 2449891 Axenolith
Axenolith's picture

No WAY they'll get a bailout, ZERO chance unless the Kenyan goober is prepared to 100% be a 1 termer.  The Admin will walk on fire, screw farm animals, grandmas and demons to prevent a bailout before November and if there is one, it will be the indication that TPTB are rotating in a new sheep herder, and B.O. needs to get the classified ads out.

Tue, 05/22/2012 - 02:13 | 2449958 tenpanhandle
tenpanhandle's picture

no way.  A massive bailout will occur, timed just right, to be felt right at November.  Gas prices will hit $2.89 a gallon and the voice of a 16 year old virgin, being held against her will in a polygamist compound in Utah, will reverberate throughout the land.


Tue, 05/22/2012 - 02:15 | 2449959 tenpanhandle
tenpanhandle's picture

If Obama had a daughter, it would look just like her.

Tue, 05/22/2012 - 00:21 | 2449791 Sabibaby
Sabibaby's picture

Ecomonics and Math don't mix so don't combine them and everything will be ok. 

Tue, 05/22/2012 - 00:21 | 2449792 Gamma735
Gamma735's picture

Why is there so much opaqueness in banking?  Is it because they don't want was seeing the Ponzi scheme?  But don't worry, JPM account holders, the Fed will rescue JPM, but not you.  

Tue, 05/22/2012 - 01:14 | 2449888 Richard Chesler
Richard Chesler's picture

Opaqueness makes it easy for corrupt presidential scumbags to praise the "smartest" banksters.

Tue, 05/22/2012 - 09:02 | 2450444 pods
pods's picture

Much easier to steal shit in the dark.

Tue, 05/22/2012 - 00:22 | 2449794 jonjon831983
jonjon831983's picture

This is bullish right? Shows the stress tests are legit!

We're ok!



Tue, 05/22/2012 - 00:22 | 2449795 world_debt_slave
world_debt_slave's picture

the only thing the Fed gives the muppets is a good reaming

Tue, 05/22/2012 - 00:29 | 2449805 oogs66
oogs66's picture

ZH jumping the shark?  Talib and Bove both idiots.  ZH been spot on, but where evidence on this ?

Tue, 05/22/2012 - 00:32 | 2449808 prains
prains's picture

Presenting Exhibit A - page 73 of 82:

Tue, 05/22/2012 - 00:39 | 2449821 oogs66
oogs66's picture

yes, JPM, under extreme stress, counterparty and otherwise would lose $22 billion and still pay a dividend.  Yes, awful on a company that makes that in more than 1 year.  of all places, never has ZH been used so much by the bears to push their agenda :(

Tue, 05/22/2012 - 00:39 | 2449822 oogs66
oogs66's picture

yes, JPM, under extreme stress, counterparty and otherwise would lose $22 billion and still pay a dividend.  Yes, awful on a company that makes that in more than 1 year.  of all places, never has ZH been used so much by the bears to push their agenda :(

Tue, 05/22/2012 - 04:45 | 2450116 Jendrzejczyk
Jendrzejczyk's picture

ZH is the shark.

Tue, 05/22/2012 - 00:34 | 2449812 JohnKozac
JohnKozac's picture

Damn! You guys are smart.

Tue, 05/22/2012 - 00:36 | 2449815 earleflorida
earleflorida's picture

excellent news !!!

and the other diamond across [barclay's plc] the pond, selling what's left in its final holdings of blk inc. for ~ $6bn. fink is nervous

note: dimon tried to fuck diamond with the lehman [n.american brokerage house] deal and billion's in useless commercial paper called racer's. the two hate each other! funny

Tue, 05/22/2012 - 00:38 | 2449817 Inthemix96
Inthemix96's picture

How much more bullshit are we going to have to put up with before this fucker goes down?

Goes to show living your life a good and respectible way was bollocks, what we all should have done was live like demon and his ilk, rob plunder steal and then get a gold plated tax payer funded bail out.

Fuck this, this is a game I no longer want to play.

When this finally ends, there is going to be some serious payback, and to you mr fucking big shot dimon, the world is waking up you cunt, do you think all that money will help you at the end? When all is said and done you provide nothing, fuck all, you help no one but yourself and steal off the backs of the rest of us.

You and your other parasitic friends will get exactly what you deserve, and I for one will laugh out loud when your recompense comes due, and don't worry son, you deserve it. Every bit of it.

Tue, 05/22/2012 - 01:46 | 2449921 Axenolith
Axenolith's picture

Dude, quite a bit, they weaseled out of paying the financial piper 105 years ago by sacrificing ~250,000 of our boys on the alter of European war loans...

Tue, 05/22/2012 - 02:04 | 2449942 Inthemix96
Inthemix96's picture

True that axe.

Thing is theres this thing now called the interweb. Even dickheads like me can find out pretty much whatever we want to, people are learning and waking up.

ZH has given me more knowledge than I care for to be honest, there are some things I have learned that are not good for ones blood pressure.

Jamie fucking dimon is one of them.

Tue, 05/22/2012 - 00:39 | 2449819 Clashfan
Clashfan's picture

Terrific read, thanks.

"two shorts months" --?

"substantial, that" --lose the superfluous/erroneous comma

Can't you guys edit these pieces after they've been posted to remove errors like this? This is one I'd really like to share with certain people, yet I know they will be bothered by such errors. It's frustrating.

Seriously, though, still a fantastic piece, the type I just don't find anywhere else on the web. I offer sincere gratitude.

Tue, 05/22/2012 - 00:50 | 2449842 garypaul
garypaul's picture

Losing the comma would turn the adjective 'substantial' into a verb thus causing ambiguity in the meaning. Learn English!

Tue, 05/22/2012 - 03:06 | 2450060 Clashfan
Clashfan's picture

Gary, I'm not sure how you see that it becomes a verb? Here?


==Or is the hit to just this quarter so substantial, that spreading the loss over a period of time has become meaningless, and the Fed has barred JP Morgan from any other future buybacks, i.e., capital outflows, until such time as the trading/realized loss has been offset and the hit to the balance sheet has been undone?==


Turning substantial into a verb is impossible, first off. Second, so and that are correlatives. Look them up and see how they're punctuated. Blessings, man.

Tue, 05/22/2012 - 07:24 | 2450232 fredquimby
fredquimby's picture

Or is the hit to just this quarter so substantial, that spreading the loss over a period of time has become meaningless, and the Fed has barred JP Morgan from any other future buybacks, i.e., capital outflows, until such time as the trading/realized loss has been offset and the hit to the balance sheet has been undone?

You cannot put a , before and and there should be no comma after or before i.e.


Humpf, these Americans really don't know their grammar do they Clashfan ;)

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