After JPMorgan Chase & Co.’s (NYSE:JPM) stock declined 17% since the May 10th announcement by CEO James Dimon, declaring a $2billion hedge trading loss, the company will have to revamp their image in order to come back from an incident that was, according to Dimon, “embarrassing”
The following is our rough coverage of the 2021 Sohn Investment Conference, which is being held virtually and features Brad Gerstner, Bill Gurley, Octahedron's Ram Parameswaran, Glenernie's Andrew Nunneley, and Lux's Josh Wolfe. Q1 2021 hedge fund letters, conferences and more Keep checking back as we will be updating this post as the conference goes Read More
After the announcement last month, Dimon will appear before the Securities and Exchange Commission today to explain the blunder that cost the company $2bn. As a result of the blow, the company has spent time and money protecting their interests within in the government.
The sour hedges originated in the Chief Investment office, under direction from new Basel requirements, investment companies were required to decrease risk in hedge investments, which, according to Dimon, resulted in “complex and hard-to-manage risks”.
The Senate Banking Committee will decide today, based on the sole testimony of CEO Dimon, whether or not the company will be the first of many banks based on Wall Street that will be forced to follow tighter rules provided by the Volcker Rule.
The Volcker Rule, a section of the 2010 Dodd-Frank financial reform bill that tightens regulations on banks, is a section of the bill that limits the money that an investment company can use towards its riskiest investments. Under this rule, all government-insured deposits cannot be used towards investments that are considered risky.
Lobbyists have spent years trying to weaken the rule, but the Volcker Rule is set to be formally adopted next month, and become one of the ‘premiere’ financial reforms under President Obama. This rule could have drastic affects on banks: the Volcker Rule essentially limits banks from using their own capital to make risky trades, decreasing the capital they have to take chances that lead to increased profits.
In a pre-prepared testimony, Dimon said that money lost will come from shareholder’s pockets, and no money lost came from customers, tax-payers, or clients. He closes the testimony reiterating that JPMorgan Chase & Co’s mission was to serve clients, both foreign and domestic.