In what FT Alphaville called “the most excruciating bank conference call we’ve ever heard,” press favorite Jamie Dimon announced last week that JPMorgan Chase has lost more than $2 billion on bad derivatives bets made by its chief investment office. It could (meaning, it probably will) lose more than that. On Thursday, we were told up to another billion. By today, that was up to $2 billion.
These are big number, but this story is far more important than a measly two or four billion bucks (isn’t it scary how big numbers seem small after the trillions thrown around in the financial crisis?).
JPMorgan was the last man standing after the crisis, or so it would like you to think. It didn’t need bailouts from meddlesome Washington politicians, or so Dimon said. It just took them because it was its patriotic duty. Cue “Stars and Stripes Forever.”
As the only senior banker on Wall Street with half a whit of credibility left, it fell to Dimon to be frontman for its stunningly effective anti-regulation fight. He was particularly fierce about the Volcker Rule. That rule, heavily watered down by the Wall Street lobby and the Congresspeople they fund, is intended to keep taxpayer-insured banks from engaging in proprietary trading—a Wall Street for “betting.” Seriously implemented, the Volcker Rule would have prevented the massive losses JPMorgan sustained here.
Now Dimon’s and JPM’s credibility is seriously tarnished. The question is whether it’s too late to affect the financial reform he has so opposed. We’ll see.
Dimon looks particularly bad because even after the news broke, he called the issue a “complete tempest in a teapot.” Less than four weeks later that nothingburger had cost his bank nearly a tenth of its market value—$13 billion—in one day.
More important, it has shown clearly how flimsy Dimon’s anti-regulatory arguments really are.
And it’s a nice win for the business press, which uncovered the story (before Dimon understood its import, at least according to him), explained why it mattered, and kept on it. Dimon himself, when asked what he would have done differently, said that he should have paid more attention to the press reports.
Those reports kicked off when Bloomberg News broke the story with a brief piece on April 5 and The Wall Street Journal posted its already-in-the-works page-one story shortly thereafter.
I noted on April 6, Bloomberg was miffed then that the Journal didn’t credit it with the scoop. I don’t like scoop squabbles, much less adjudicating them, but the market-moving nature of this one makes it something of a different beast, and the fact that Bloomberg and the Journal are still tussling over credit shows just how big the story is.
The Journal implied in the second paragraph of a page-one story on Friday that the scoop was its own. The Journal didn’t find out about the London Whale from Bloomberg—its story was already reported, I’m told. The Journal was the first to report that Bruno Iksil was called the London Whale and that his trading made JPMorgan some $100 million a year. Its story contained the critical detail, absent in Bloomberg’s initial report, that Iskil was in the bank’s chief investment office. But in the high-stakes market-news game, first is first. The Journal scooped critical details of the story, but Bloomberg gets the credit for first reporting Iksil’s massive bets.
For the purposes of the public interest, however, which is what The Audit ultimately cares about, Bloomberg and the WSJ both win here. They were both on an important story at the same time and both have done fine work on it since (as have the Financial Times and others).
Now shake hands and play ball. It’s good work all around.
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. Follow him on Twitter at @ryanchittum.