This will have to be a quick one today, but JP Morgan’s “whale fail” is going to make for some interesting news over the coming weeks. The timing couldn’t be worse for JP Morgan and the industry generally, it seems to me. Embattled over the Volcker rule, capital requirements, and numerous other issues, this is exactly the type of event that will lead reformers to call for a crack down, just as regulators are contemplating the final content of some important pieces of financial reform. I’ll be back in the near future with more on this story and the implications for the Volcker rule, in particular. In the meantime, news stories are in the WSJ, Forbes, and the FT, among others.
As I’ve mentioned before, I’m spending quite a bit of time with the Volcker rule these days, and I’m especially interested in the implications of this news for the continuing manuevering over the final content of the rule. According to news reports, the losses originated with the credit desk in the London unit of JP Morgan’s chief investment office, which the bank says “hedges positions and invests ‘excess deposits’.” As more information on the exact nature of the trades emerges, I suspect the case will present a beautiful example of the hurdles to Volcker rule implementation – namely, differentiating from a regulatory perspective trades permitted by the hedging and other statutory exemptions from prohibited proprietary trading. Surely it will impact the discourse surrounding the rule.
Back with more later . . .