Jamie DimonAfter 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.


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.

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.

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.


Increase your money and finance knowledge from home

Asset Allocation

Learn the most important step in structuring an investment portfolio.

View Course »

Behavioral Finance

Why do investors make the decisions that they do?

View Course »

Add a Comment

*0 / 3000 Character Maximum

9 Comments

Filter by:
maa2626

lets review-- a federal budget has not been passed for three years, we are in debt to the tune of 15 trillion dollars, fed is printing mad money, and the feds want to investigate Dimon?

June 26 2012 at 10:37 PM Report abuse rate up rate down Reply
Sue

is there a reasoin dimon isn't in jail?

June 26 2012 at 8:27 AM Report abuse rate up rate down Reply
lizbet1207

All that to lose and then pay out millions to the person in charge. Yet, the average worker at JPMC does not receive a decent pension. Wow!

June 26 2012 at 6:59 AM Report abuse rate up rate down Reply
jadomz

more proof that the motley fool is really a complete f...ing idiot. Is he really so stupid as to think that because they exited 70% of the position, they didn't take a massive loss? Had they not sold and cut their losses, they could have lost as much as 7 BILLION !!!!

June 26 2012 at 3:08 AM Report abuse +1 rate up rate down Reply
1 reply to jadomz's comment
rfortun218

Absolutely! Only one reference deep in the article to "we don't know yet the extent of the loss". Not quite objective reporting, it seems to me.

June 26 2012 at 5:44 AM Report abuse +1 rate up rate down Reply
Craigermt

And in the last month FACEBOOK has lost 30 billion in value. Is anyone out there asking why or demanding an apology? In the last 3 years the US government has lost over 5 TRILLION worth and no-one is apologizing. Investing IS gambling and that is all there is to it. Obama bet 500 million on Solyndra and no one batted an eye when it failed. If JPMorgan made 2 billion on a bet, would congress be demanding an explanation? No! They just will do what they think might help them get re-elected. Time to vote ALL incumbents out of office. Sure, we might vote in some idiots, but how will we know the difference?

June 25 2012 at 10:59 PM Report abuse +1 rate up rate down Reply
jwmgrand

Dimon was asked by a Congressman last week ........Why is it always CAPITALISM on the way up and when the security or calculated risk goes to hell, it turns into Socialism with the taxpayers having to pay , to bail out the banks bad guess work out ! ALL bad RISKS STILL using FDIC insured Money that the tax payers must insure ... it like they are betting with the casinos money ... either way they win ... taxpayers lose and pay for it on the way down , Stop the Madness and reregulate every banking law or we will get suck with the bill again while the ELITE ..... just say Gee were sorry .....but did not see the risk . While living Large on your bail out !

June 25 2012 at 7:31 PM Report abuse -2 rate up rate down Reply
drbuckles

JP Morgan has $70 trillion of derivative debt and $1.8 trillion of assets. Does sound like a Banks that is on the brink? Yes, and the 3 billion dollars they are saying are their losses are really working out to be a $18 billion loss. However, the tax payers are shelling out $14 billion a year still to this vampire, so losses, what losses..........10 banks are in debt to the tune of $700 trillion dollars in derivatives. Soon if congress doesn't get their act together it won't matter the whole ponzi scheme is coming down. I left the market years ago and now have liquid assets, land, and a little gold.................

June 25 2012 at 3:58 PM Report abuse rate up rate down Reply
yvcarudnj

The next time around and will eventaully come ....let these whales get beached and die....with out their golden parahcutes and......

June 25 2012 at 3:51 PM Report abuse rate up rate down Reply
Linda

More smoke and mirrors . . . . TRUTH: Chase still has over $70 TRILLION (YES TRILLION) in derivative exposure. See http://www.distressedvolatility.com/2012/05/top-5-banks-that-dominate-derivatives.html

June 25 2012 at 2:12 PM Report abuse rate up rate down Reply
Donna Marie

Split them up! THey are too big!

June 25 2012 at 12:01 PM Report abuse +1 rate up rate down Reply