NEW YORK CITY-Banks were posting losses in pre-market trading, believed linked to the admission Thursday evening by JPMorgan Chase of a $2 billion trading loss. CEO Jamie Dimon admitted to the loss in a conference call, sending a shock through the shaky recovery of the US financial markets and threatening a drop in confidence to match last year’s second half stumble.
The locally-based bank, which had just started to see profits rise again after a slide to $28.38 per share in the second half of 2011, is looking at a more than 8% drop in share price to about $37 in pre-market trading. Other large banks are also looking at pre-market losses, including Bank of America (2% slide) and Citigroup Inc. (almost 4% drop).
Dimon admitted the losses are linked to mistakes with hedge trading, though he wasn’t specific. He did say that there will be an executive investigation and people may lose their jobs.
Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations and co-author of the Merkley-Levin language establishing the Volcker Rule, said in a statement late Thursday that the loss is the latest evidence that hedges are often risky bets that so-called 'too big to fail' banks have no business making. “Today’s announcement is a stark reminder of the need for regulators to establish tough, effective standards to implement the Merkley-Levin language to protect taxpayers from having to cover such high-risk bets,” he said.
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