Bloomberg News has an important story today showing how press favorite Jamie Dimon’s JPMorgan Chase has ramped up risk in its chief investment office, which has become a major profit center for the bank.

The CIO is supposed to be, in the words of The Huffington Post’s Mark Gongloff, “an unassuming, harmless operation that makes sure all of the bank’s market risks are hedged. But Bloomberg, in its lede attributed to five former JPMorgan executives, says press favorite Jamie Dimon has “transformed” the office, “increasing the size and risk of its speculative bets”—something that was supposed to have been banned under Dodd Frank with the Volcker Rule, but has been lobbied down to irrelevance.

JPMorgan, of course, denies that its CIO office is now effectively a prop trading desk. But Bloomberg’s reports that it has at least moved in that direction. I like how Bloomberg quotes the bank describing what its CIO does and then contradicts it in the next with reporting (emphasis mine):

“These investments were generally associated with the chief investment office’s management of interest-rate risk and investment of cash resulting from the excess funding the firm continued to experience during 2009,” according to the company’s 10-K report for 2009, filed in February of 2010.

Profit, not risk management, guided the purchases, according to the former employees. One of the employees, who previously held a senior executive position at the bank, said Dimon even ordered some of the trades himself.

Bloomberg adds other reporting that backs up its lede, reporting Achilles Macris, who heads JPMorgan’s CIO and who came over from a bank where he oversaw a prop trading desk.

Then there’s this:

One public sign that the chief investment office does more than hedge: Its trading risk is on par with that of JPMorgan’s investment bank.

JPMorgan’s annual report for 2011 shows that the CIO stood to lose as much as $57 million on most days of the year. That compares with $58 million for the investment bank, which includes Wall Street’s biggest stock- and bond-trading units.

The bets started getting big, in 2009, which turned out to be the bottom of the financial crisis, and JPMorgan was buying collateralized debt obligations and the like. That bet turned out to be a good one, but that’s only apparent in hindsight. The concern is that the bank was acting like a taxpayer-insured hedge fund with positions so massive that “Some of Macris’s bets are now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets,” according to the former executives Bloomberg talked to.

This story comes on top of the work Bloomberg has done in the last week or so on Bruno Iksil, the JPMorgan trader whose outsized positions in the derivatives markets have gotten him nicknamed the “London Whale.”

If anybody who needs this kind of scrutiny, it’s the $2.3 trillion JPMorgan. As Gongloff wrote yesterday:

JPMorgan has a similarly huge position in another market that gets a lot less attention: the tri-party repo market, where companies take out very short-term loans to finance their day-to-day operations. This market was a death zone for Bear Stearns and Lehman Brothers during the crisis. JPMorgan and BNY Mellon sit in the middle of this market making very short-term loans, Peter Eavis of the New York Times pointed out recently, meaning they could either be crushed, or do some crushing, if that market goes haywire. A Fed task force wanted JPMorgan to cut back its lending by the middle of last year, a goal that was decidedly not met…

JPMorgan’s role in the tri-party repo market, nearly $2 trillion in size, gives it the power to decide whether rival banks live or die in the next financial crisis. And it has been close at hand for the demise of three such banks since the crisis.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.