Report: JPMorgan trading losses may reach $9B

People walk past the JP Morgan Chase Building on Park Avenue May 15, 2012 in New York. / Timothy A. Clary/AFP/Getty Images

(AP) NEW YORK - Shares of JPMorgan Chase & Co. (JPM) tumbled in premarket trading Thursday as a published report said that the bank's losses on a bad trade may be as much as $9 billion - far higher than the estimated $2 billion loss disclosed last month.

In May, JPMorgan said the loss came from trading in credit derivatives that was designed to hedge against financial risk, and not to make a profit for the New York bank.

The New York Times, citing sources it did not identify by name, said that the losses have grown recently as JPMorgan has been unwinding its positions. The newspaper said its sources were current and former traders and executives at JPMorgan, which is the largest bank in the U.S. by assets.

The New York Times story cites an internal report that JPMorgan made in April that showed the losses could reach $8 billion to $9 billion, in a worst-case scenario. But the newspaper went on to say that because JPMorgan has already been unwinding its positions, some expect that the losses will not be more than $6 billion to $7 billion.

A JPMorgan representative declined to comment.

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At the time of the loss, JPMorgan CEO Jamie Dimon apologized to shareholders. And just days after the loss was disclosed, Chief Investment Officer Ina Drew left the company. Drew oversaw the trading group responsible for the trade.

JPMorgan has lost about $23 billion in market value since the losses came to light on May 10.

The loss has heightened concerns that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis in the fall of 2008.

In a hearing before the House Financial Services Committee last week, Dimon was dismissive when asked if JPMorgan's losses could total half a trillion or a trillion dollars. He replied bluntly: "Not unless the Earth is hit by the moon."

While Dimon avoided putting an exact number on the bank's trading loss, he did say that JPMorgan will have a solidly profitable quarter. JPMorgan plans to give more details related to its losses when it reports second-quarter earnings on July 13.

The company's stock dropped $1.49, or 4 percent, to $35.29 in midday trading. Its shares are down 24 percent since hitting a high of $46.49 in late March.

[ppaulville]

Who cares? It's a private company that should be able to incur losses (or even go out of business) if it makes bad deals. And if it does something illegal, its customers or the government can sue. The government shouldn't be involved in the business of private banking companies (other than a regulatory function), nor should the CEO have to be grilled in front of Congress every time he puts loose change into a Salvation Army bucket. I don't care what Morgan does with its money, and the government shouldn't either.

[lesserof2evil]

Are you really that stupid? Do you think a stock market where companies like JP Morgan can do whatever they want without accountability is healthy? Yes you can sue them after the facts, but how good will that do if the company is bankrupt. Not only that the real criminals (CEOs and high-level executives) more often than not get off with billions of dollars of investor money. YOU DON'T CARE? ARE YOU REALLY THAT STUPID?

[bc-1948]

This is a company that took 25B from the government (taxpayers) to keep it from going under. It does matter - because a bank this size has direct input on the health of governments around the world.

[lesserof2evil]

Any idiotic republicons still believe Wall Street regulation is not needed?

[marychgo]

There's a reason Warren Buffett called derivatives "investments of mass destruction." Those of us who don't own JPMorganChase stock can be grateful that this loss -- however large it may be -- doesn't directly affect us, but this debacle makes it clear why a strong Volcker Rule or restoration of Glass-Steagall or a breakup of the TBTF banks is absolutely essential! And why a broadly-defined financial transaction tax is a fantastic idea!

[starving1968-3]

The JP Morgan bigwigs don't care about "losses".

The money being lost is "only" the pensions, the 401k's, and the life savings of their customers, and - more importantly to them - their end of year bonuses won't be affected, regardless of how much money the bank makes or loses.