FBI launches probe of JPMorgan loss

The FBI has opened a probe into trading losses at the biggest US bank, JPMorgan Chase & Co, stepping up the pressure on the bank after the US Securities and Exchange Commission and the Federal Reserve said they were also looking into the bets that led to the losses.

This comes after the bank’s chief executive Jamie Dimon, five days ago, announced a $2bn trading loss by the bank.

At the bank’s annual shareholders meeting in Tampa, Florida, on Tuesday, pressure mounted on the bank to reclaim some of the millions of dollars it paid to the executives who oversaw the trades.

However, shareholders voted against a proposal to split the CEO and chairman roles, backing Dimon at the bank’s annual meeting.

Dimon has led US banks in fighting the proposed Volcker Rule, which would ban so-called proprietary trading, when banks trade on their own accounts. Banks are also resisting curbs on their hedging activities.

He said JPMorgan would pursue more disciplinary action against those who were responsible.

“We will do the right thing. That may well include clawbacks,” Dimon said after the annual meeting.

While timeframes for such action were not revealed, a source familiar with the FBI investigation, opened by the agency’s New York office, described it as being at a preliminary stage.

John Liu, New York City comptroller who oversees the city’s $400m stake in JPMorgan, also joined calls for a “clawback” of compensation from executives responsible for the trading losses on Tuesday.

‘Stupid’ and damaging

Dimon told US network NBC’s Meet the Press programme that the big loss incurred by the New York-based bank, which triggered a slide in banking shares on Friday, was “stupid” and damaging, but not bad enough to stop the company from making a profit this quarter.

Asked if JPMorgan’s losses had given regulators new ammunition to clamp down on Wall Street after the US government spent billions to bail out financial institutions during the 2008 crisis, Dimon replied: “Yes, absolutely. This is a very unfortunate and inopportune time to have had this kind of mistake.”

President Barack Obama said on Monday that the huge trading loss at JPMorgan Chase, demonstrated the need for Wall Street reform.

He said that the bank was one of the best managed banks and that Dimon was one of the smartest bankers, but as they still made such a loss, this needed to be investigated.

“We don’t know all the details. It’s going to be investigated, but this is why we passed Wall Street reform,” Obama said on ABC’s The View.