Dent in crown - Oman Daily Observer

By Daniel Schnettler — DUBBED the king of Wall Street, Jamie Dimon, the chief executive of JPMorgan Chase, was forced to announce that the America's biggest bank had racked up losses of about $2 billion in risky trading since the beginning of April. "There are many errors, sloppiness and bad judgement," said the normally ebullient Dimon, considered one of the most successful bankers in the United States.
"We deserve every critic that we get," he said in a hastily called telephone conference last Thursday. Since then Dimon has watched shares in his bank take a pounding, with the stock plunging by 9 per cent early on Friday trading in New York, after falling by more than 6 per cent in late electronic trading on Thursday following the surprise announcement.
"Obviously, mistakes have been made in the risk management of the bank," said Thomas Hartmann-Wendels, economics professor at the University of Cologne. "I do not think that a single trader has attempted to deliberately violate rules."
The news set up a rough day's trading for other Wall Street firms, with shares in JPMorgan Chase's key investment bank rivals such as Wells Cargo and Bank of America slumping by about 3 per cent as the trading day got under way.
This in turn helped to drag down New York's Dow Jones Industrial Average by 0.4 per cent. Traders said the drop in banking stocks also reflected investors' concerns that other big US finance houses might have run up similar losses.
Indeed, JPMorgan Chase now adds its name to a list of other big banks that have found themselves being forced to reveal big trading losses. These include France's Societe Generale and Switzerland's UBS.
JPMorgan Chase's admission about the trading losses could not have come at a worst time for the global banking system.
Investors are already concerned about the exposure of several international financial houses to the euro zone's debt crisis. In addition, there are worries about the global economic outlook amid signs that the growth in key economies might have lost momentum in recent months.
JPMorgan Chase said the losses occurred in the highly complex synthetic credit securities business, which are derivative investments tied to credit performance.
As a result, its statement late last Thursday helped to rekindle memories of the banking sector speculation that paved the way for the 2008 financial crisis.