This loss still has me a little puzzled because the full details haven't been disclosed to the public yet. But the fact that people are already resigning says that it's pretty bad. The real issue that has caught my attention is the discussion that has followed concerning financial regulation. Is regulation really the answer?
President Obama recently stated that JPMorgan is one of the most well managed banks in the U.S. If thats the case then what happened? The trade itself was based on a hedge of the current markets. So my speculation is that it was a hedge against the Eurozone or the energy markets. Regulation has nothing to do with the success or failure of any trade in this nature.
Many firms hedge their investments in multiple forms and JPMorgan isn't any different. The $2 Billion trading loss doesn't match with the overall $17.5 Billion loss that includes the investors loss in the stock of JPMorgan. In other words a segment of behavioral finance comes into play with this situation.
The $2 Billion loss will not cause JPMorgan to fold like BearStearns nor will it cause them to have to be acquired by another firm. The general public has become so fearful in recent years with losses in the financial industry that any abnormality can transpire into panic. JPMorgan is a well managed and compliant company that will be around for years to come this is not the end. So, no bailout is needed nor has one been requested.
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