Latest Press: JPMorgan Loss As Large As $9 Billion

Tyler Durden's picture


We have long said that the maximum potential loss of the JPM CIO trade based on the blow out in IG9 10 year (and associated trades complex), which has about a $200 million DV01, is far beyond not only the $2 billion that Jamie Dimon estimated on May 10, but above our own estimate which was $5 billion on that same day. Today, the NYT "according to people who have been briefed on the situation" which translated means just more media propaganda because all the news on the topic in the past month has been leaks by axed parties, says that 'Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation." Also according to the NYT, and roundly refuting what the other leak had told Bloomberg and other media outlets, "The bank’s exit from its money-losing trade is happening faster than many expected. JPMorgan previously said it hoped to clear its position by early next year; now it is already out of more than half of the trade and may be completely free this year." Obviously, this refutes media "reports" also based on "people familiar" or "conflicted sources" that JPM has unwound its trade, either by novating, or by transferring it over to helpful hedge funds. Bottom line: take everything with a grain of salt until Dimon himself gives an update in two weeks, as this could easily be an upper bound loss estimate starwman to set expectations very low, sending the stock soaring when the "final" announce loss comes in at ~$5 billion, courtesy of other well-known "masking" techniques such as loan loss reserve release and DVA benefits.


As JPMorgan has moved rapidly to unwind the position — its most volatile assets in particular — internal models at the bank have recently projected losses of as much as $9 billion. In April, the bank generated an internal report that showed that the losses, assuming worst-case conditions, could reach $8 billion to $9 billion, according to a person who reviewed the report.


With much of the most volatile slice of the position sold, however, regulators are unsure how deep the reported losses will eventually be. Some expect that the red ink will not exceed $6 billion to $7 billion.


Nonetheless, the sharply higher loss totals will feed a debate over how strictly large financial institutions should be regulated and whether some of the behemoth banks are capitalizing on their status as too big to fail to make risky trades.


JPMorgan plans to disclose part of the total losses on the soured bet on July 13, when it reports second-quarter earnings. Despite the loss, the bank has said it will be solidly profitable for the quarter — no small achievement given that nervous markets and weak economies have sapped Wall Street’s main businesses. To put the size of the loss in perspective, JPMorgan logged a first-quarter profit of $5.4 billion.


More than profits are at stake. The growing fallout from the bank’s bad bet threatens to undercut the credibility of Mr. Dimon, who has been fighting major regulatory changes that could curtail the kind of risk-taking that led to the trading losses. The bank chief was considered a deft manager of risk after steering JPMorgan through the financial crisis in far better shape than its rivals.


“Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner.


A spokesman for the bank declined to comment.

In other words: the world's largest prop trading deks, with a $200 million DV01, as Zero Hedge readers have now known for just under two months.

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Thu, 06/28/2012 - 07:13 | 2567664 ghengis86
ghengis86's picture

Suck it Jamie, you smarmy piece of shit!

Thu, 06/28/2012 - 07:16 | 2567670 CPL
CPL's picture

Tick tock tick tock.


Times up.  Pencils down.  Get some popcorn.  The show will be starting soon.

Thu, 06/28/2012 - 07:24 | 2567694 popcorn is fresh
popcorn is fresh's picture

and seasoned :-)

Thu, 06/28/2012 - 07:31 | 2567709 Firing Pin
Firing Pin's picture

Couldn't happen to a nicer group of banker dirtbags.

Thu, 06/28/2012 - 08:24 | 2567839 economics9698
economics9698's picture

Fuck a 4.5% asset loss, that one had to hurt.

Thu, 06/28/2012 - 09:18 | 2567986 veyron
veyron's picture

Damn I called 10B on the ZH chat when it came out ... Off by a billion :(

Thu, 06/28/2012 - 10:01 | 2568163 rosiescenario
rosiescenario's picture

.......don't speak too soon.............

Thu, 06/28/2012 - 10:09 | 2568212 Matt
Matt's picture

is that a typo in the source article, or did JPM move the earnings report from Thursday the 12th to Friday the 13th?

Thu, 06/28/2012 - 10:37 | 2568504 lineskis
lineskis's picture

If JPM goes Spanish, it will soon be an 18B loss...

Thu, 06/28/2012 - 12:23 | 2569167 SILVERGEDDON

There is no asset losses here. These are not the asset losses you are looking for. Move along. Klingon cocksucker bankers from Uranus are God. They can do no wrong. Until SHTF. THEN, I RECKON SOME RECKONING WILL BE DONE. The Hamptons will be Ground Zero for the Hunger Games. 

Thu, 06/28/2012 - 07:32 | 2567711 GetZeeGold
GetZeeGold's picture



Have we counted in Blythe's silver losses.......or does that come later?


Thu, 06/28/2012 - 07:39 | 2567727 CPL
CPL's picture

If it's ever admitted Silver goes to $500 and gold hits $30k.  Same day.


Of course paper money won't even be an option at that point.  Who would accept it except central banks?  Pocket lint would have more value.


Of course it won't be admitted, it will be ignored until it becomes a math problem that can no longer be contained with lies.  All those derivatives storm out of the gates from their tended pens and flood the world with all the debt.  Nothing built on fiat faith will be standing by the end of it.

Thu, 06/28/2012 - 08:49 | 2567906 exi1ed0ne
exi1ed0ne's picture

I've been thinking a lot about the eventual silver suppression release. I'm not entirely convinced that we will see outrageous numbers, and if we do it will be temporary due to normalcy bias. Sure, it will be a higher plateau, but the pop won't be permanent and certainly won't destroy paper money overnight. Fiat will eventually destroy itself due to it's nature, rather than from an outside influence.

My reasoning is that all the evidence is already there about the paper market shenanigans thanks to the work of folks like ZH and GATA. Multi-year investigation in silver is a big tell as well. There is also the EXTREME apathy of just about everyone I talk to. Only one person ever invested in Au or Ag in all the years I've been talking about it to all my loved ones. People just don't understand money, including a lot of bankers I've known.

Bottom line, if it gets reported in the MSM at all, there might be a bit of a pop that will be pushed down again.

The only things IMHO that can push PMs to that level:

1) Time - managed melt-up we have been seeing
2) The Fed finally discovers a transfer mechanism (by design or by accident) that transmits some non-trivial percentage of the money sloshing around into the pockets of the masses. However, that is more along the lines of fiat destroying itself with Au and Ag gains as a side effect.
3) Loss of confidence in paper markets, but that is not likely to happen due to who is left playing in them. Again, price increases are a side effect.

I stack when my limited means allows (stupid coin shop on an island and my leaky boat!), but I am not buying to become overlord in a Mad Max world. It is simple, has resulted in some nice gains, and is not something that can be taken from me with a few punches of the keyboard. Although if Mad Max happens I've totally got dibs on the midget with the pigs.

Thu, 06/28/2012 - 09:18 | 2567984 tarsubil
tarsubil's picture

The most important thing for the dollar these days seems to be the management of perception. The fall should be pandemonium. People will be jumping out of windows.

Thu, 06/28/2012 - 08:24 | 2567840 Shocker
Shocker's picture

Seems like every few days, it moves up a Billion or 2. I guess when you get to that point whats an extra $500 million or so.

Thu, 06/28/2012 - 08:32 | 2567859 GetZeeGold
GetZeeGold's picture



A billion here....a billioni there.....pretty soon you're talking about real money.


If you lose too much just get a damn bailout.


Thu, 06/28/2012 - 07:37 | 2567721 bdc63
bdc63's picture

Excuse me if I don't hold my breath ... I already fell for this once with Corzine.  Jamie will come out of this smelling like a rose ...

Thu, 06/28/2012 - 09:53 | 2568133 eclectic syncretist
eclectic syncretist's picture

What difference does it make?  As per BS bernanke fed policy, all JPM has to do is belly up to the discount window for a potentially infinite amount of 0.75% loans and plow it into guaranteed government bonds carry trades.

Thu, 06/28/2012 - 09:26 | 2568012 vast-dom
vast-dom's picture

when this first became public I called $12B for a reason. Watch this newest claim of $9B go up by at least $3B more. 100% guaranteed.

Thu, 06/28/2012 - 07:36 | 2567719 azzhatter
azzhatter's picture

He may have to pawn the cufflinks

Thu, 06/28/2012 - 07:49 | 2567755 GetZeeGold
GetZeeGold's picture



He may have to relocate to France and hang with his buddy Jon.


Thu, 06/28/2012 - 07:56 | 2567764 SheepRevolution
SheepRevolution's picture

10! 10!  Give me a 10!

Thu, 06/28/2012 - 07:41 | 2567732 Apathetic or Wh...
Apathetic or Whatever's picture

It makes no difference how much $ is lost, JD will remain untainted. Much like the rays of the sun shining on a pile of shit.

Thu, 06/28/2012 - 07:43 | 2567738 imamonkey
imamonkey's picture

doesn't suck - he gets sucked ...

Thu, 06/28/2012 - 07:46 | 2567749 battle axe
battle axe's picture

Winning, Tiger Blood. 

Thu, 06/28/2012 - 07:14 | 2567668 cossack55
cossack55's picture

The NHT (New Hades Times) states that Hell is creating a special "9th Circle" just for Jamie, Lloyd, Hank and a few others.

Thu, 06/28/2012 - 07:33 | 2567707 blindfaith
blindfaith's picture



PLEASE !! He will get away Scott Free with the help of the crooked Congressmen he had bought and paid for.

Dimon, all the Corporate Executives and everyone of the traders need to be tired for TREASON against the United States.  THAT will put an end to all this shit these fuckers have brought to our country.  THEY ARE TRAITORS and more dangerous to the USA than any AlQuad crap.  Any the government agencies and Congressmen who have allowed this to go on for the last ten years should be tried as accessories to the facts.

Thu, 06/28/2012 - 08:44 | 2567889 azzhatter
azzhatter's picture

anyone who witnessed the organized fellatio performed by congress knows Jamie is a made man

Thu, 06/28/2012 - 07:38 | 2567723 Firing Pin
Firing Pin's picture

Whaaaa???? I thought Lloyd was doing God's work..??? 

Thu, 06/28/2012 - 07:40 | 2567731 CPL
CPL's picture

Doesn't that depend on whom you worship in one's own tenants of faith?

Thu, 06/28/2012 - 08:35 | 2567864 ThisIsBob
ThisIsBob's picture

So's the Pope and many of his guys.

Thu, 06/28/2012 - 07:15 | 2567669 game theory
game theory's picture

...from The Matrix:


Agent Smith: Damn it.
Agent Brown: The trace was completed.
Agent Jones: We have their position.
Agent Brown: The sentinels are standing by.
Agent Jones: Order the strike.
Agent Smith: They're not out yet.


Thu, 06/28/2012 - 07:16 | 2567671 fonzannoon
fonzannoon's picture

Nice job ZH. You guys are awesome.

Thu, 06/28/2012 - 07:39 | 2567728 blindfaith
blindfaith's picture



You bet !!!!!  Tyler and gang are ther only real heros left in this pathetic muppet show of finance and government.


Tyler, thanks for that story the other day where this slimy MS was moving the deritives from HoldCo to MS bank where the taxpayers can, once again, stand by and get fleeced while playing with their Iphone.  I sent that link to many people and NOT ONE FUCKING reply, not one.

Thu, 06/28/2012 - 08:36 | 2567866 buckethead
buckethead's picture

No shit.... Tyler said it would be exponentially larger than advertized, and although my understanding of the machinations is nil, I expect to see that number steadily increase. (Simply based on the predictive history of ZH)

Thu, 06/28/2012 - 07:16 | 2567672 distopiandreamboy
distopiandreamboy's picture

I'm sure this is an isolated case...

Thu, 06/28/2012 - 07:16 | 2567673 No Euros please...
No Euros please we're British's picture

Oh dear, I hope they're not forced to close their positions in gold and silver to cover that.

Thu, 06/28/2012 - 07:39 | 2567726 bdc63
bdc63's picture

They are not allowed to close that position until the FED tells them to ...

Thu, 06/28/2012 - 07:49 | 2567740 blindfaith
blindfaith's picture



Thanks to the Executive Directive by President George Bush ( which has yet to expire or be recinded) not one of the TBTF banks has to cover any SHORT no matter how underwater they are....As a matter of National Security".  Then you have the master of deciet buying welles fago soon after like some nice daddy-war-bucks.

How do you like those apples!

Thu, 06/28/2012 - 08:38 | 2567873 buckethead
buckethead's picture

Interesting.... could you direct me to the documentation of this executive order?

Thu, 06/28/2012 - 10:35 | 2568044 hangemhigh
hangemhigh's picture


could you direct me to the documentation of this executive order

(Kirby/GoldSeek article contains entry from Federal REgister)

Thu, 06/28/2012 - 13:55 | 2569987 buckethead
buckethead's picture

Thank You.

Thu, 06/28/2012 - 07:18 | 2567674 tocointhephrase
tocointhephrase's picture


Thu, 06/28/2012 - 07:16 | 2567675 koaj
koaj's picture

as the great nelson munz would say "Ha Ha"

Thu, 06/28/2012 - 07:19 | 2567677 The Axe
The Axe's picture

Tyler great job..especially your chart on JPM change in VAR last week..with foretold the loss

Thu, 06/28/2012 - 07:19 | 2567678 EscapeKey
EscapeKey's picture

They'll still be profitable? No doubt the loan loss reserves will be reduced to negative this FQ.

Thu, 06/28/2012 - 07:20 | 2567680 jmcadg
jmcadg's picture

Ok, so if they're now admitting $9 billion, read $36 billion in reality.

Which is why they couldn't do the buy back scheme.

My heart bleeds Dimon.

Thu, 06/28/2012 - 07:21 | 2567682 matterhornclimber
matterhornclimber's picture

What are the regulatory commissions in the US doing the whole day'I guess licking the of the crooked

banksters and setting up new regulatory measurements for individual investors onl

Thu, 06/28/2012 - 08:05 | 2567784 marriedgeordie
marriedgeordie's picture

what the heck would you expect, when everyone at those commissions dreams of working for one of those banks someday.

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