Jamie Dimon Quickly Filets the London Whale's Costly Trades

John Grgurich
Jamie Dimon
Jamie Dimon

After all the media, regulatory, and congressional commotion surrounding JPMorgan Chase's (JPM) $2 billion-plus loss on a massive derivatives bet made in its London office, it now looks like CEO Jamie Dimon's infamous "tempest in a teapot" comment may have been accurate after all.

Financial Times is reporting that JPMorgan has already exited 70% of the "London Whale" derivatives positions that had gotten the bank into such hot water.

Such a quick exit isn't what anyone had expected, including maybe Dimon himself, making a case for the superbank being far more nimble than its critics give it credit for.

The London Whale Surfaces

Press reports first surfaced in April that a JPMorgan trader based out of the bank's chief investment office in London had taken such massive positions in the derivatives market that they were "moving the market," causing hedge fund managers there to nickname the then-unknown trader "the London Whale."

Dimon initially wrote off the press reports as "a tempest in a teapot," but a month later he was making the press rounds himself, forthrightly acknowledging that the initial reports had been right and apologizing for what he termed an "egregious" mistake caused by "sloppiness and bad judgment."

Since Dimon broke his own story, hardly a day has passed without him or the bank being somewhere in the news.

On the regulatory side, three separate federal agencies jumped almost immediately into the fray, including the Federal Bureau of Investigation. And Dimon has now testified twice before Congress on the matter.

Those baying for further regulation of the banks have used this incident as an opportunity to bay for more. Never mind that there's a raft of post-crisis U.S. legislation already coming into effect. Or that the global Basel III banking rules are also making their presence felt domestically. Or that there's a bill currently making the rounds in Congress calling for the outright breakup of JPMorgan, along with five of America's other biggest banks.

Critics say that Dimon should have seen this coming. And that if he didn't, then maybe JPMorgan and similarly sized banks are not only "too big to fail" but also too big to manage.

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While They're Zigging, We'll Be Zagging

But at the very least, the speed at which the bank has turned this nagging London situation around is breathtaking.

One of the first things Dimon himself said regarding JPMorgan's positions there was that the bank was going to take its time unwinding them. Dimon himself hinted that JPMorgan might take the rest of the year to do so.

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Everyone in the industry assumed that by moving too quickly, the bank could only exacerbate its losses. But the derivatives index JPMorgan had made its outsize bets on is now reporting that $31 billion was traded on it this past Tuesday -- a record. There were also 238 trades that day, versus a normal daily average of less than 50.

So when Dimon said his bank would be moving slowly and taking its time to sort everything out, it's very possible he was just being sly and trying to throw his rivals off. It looks like Tuesday was his big move to get his bank out of trouble.

Of all the Wall Street CEOs, Dimon has argued the most vociferously against the surging post-crisis banking regulation, and Congress has generally given him the berth to do so. JPMorgan came out of the financial crisis smelling the best by far of all the big hybrid banks, and Dimon has consequently enjoyed the reputation of being a top-notch risk manager who can stay on top of a bank even as big as JPMorgan Chase.

%Gallery-150387%We have yet to find out exactly what sort of losses, if any, the bank may have incurred with this big exit. And the bank isn't 100% extricated yet.

But while the London Whale incident has certainly tarnished Dimon's shiny image, the speed with which he and his team have seemingly safely turned things around makes the case that even a leviathan like JPMorgan Chase can move quickly enough, craftily enough, and competitively enough when in skilled hands.

John Grgurich is a regular contributor to The Motley Fool, and holds no positions in JPMorgan Chase. The Motley Fool owns shares of JPMorgan Chase.

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