How Jamie Dimon Gamed the System and Lost Billions
May 27, 2012 • 10:36AM

The New York Times yesterday ran an extensive story on how armies of Federal regulators, posted at JP Morgan Chase offices in Manhattan and London, failed to detect the high-risk operations that led to the early May admission by CEO Jamie Dimon that the bank had lost at least $2 billion on a bad derivatives bet out of its London office. The total cost to JP Morgan Chase shareholders is expected to easily exceed $20 billion before the complex derivatives contracts unwind, and the losses could be spectacularly bigger.

Forty examiners from the Federal Reserve Bank of New York and 70 staffers from the Office of the Comptroller of the Currrency, permanently posted at JPMC offices, failed to pick up on the high-risk bet that went foul—for one very simple reason. CEO Jamie Dimon, "Barack Obama's favorite banker," successfully intimidated regulators into dropping the ball. The New York Times' Jessica Silver-Greenberg and Ben Protess put it in the most polite language: "The bank pushback also suggests that JPMorgan had sway over its regulators, an influence that several said was enhanced by the bank's charismatic chief executive, Jamie Dimon, long considered Washington's favorite banker." And here is the kicker of understatement: "Now, as regulators scramble to determine whether the chief investment office took inappropriate risks, some former Fed officials are asking whether the investigation should be spearheaded by the New York Fed, where Mr. Dimon has a seat on the board."