JP Morgans Jamie Dimon Ongoing Trading Losses Problem Keeps Growing

The blogger’s gift that keeps on giving appears to be Jamie Dimon’s whale of a problem. Bloomberg.com is taking direct aim at a key assertion the firm’s top execs made just two days ago, in a hard-hitting report today titled JPMorgan Blaming Marks on Traders Baffles Ex-Employees, which begins:

JPMorgan Chase & Co. (JPM)’s assertion that traders at its London chief investment office may have intentionally mismarked trades, masking losses that total at least $5.8 billion, makes little sense, according to former executives with direct knowledge of the unit’s operation.

The bank restated first-quarter results, paring profit by $459 million, in part because an internal review revealed that U.K. traders had priced their books “aggressively,” Mike Cavanagh, head of Treasury & Securities Services, said in a July 13 meeting with analysts. The mispricing made losses on a portfolio of credit derivatives look smaller than they were, and executives concluded that traders may have sought to hide the “full amount of losses,” JPMorgan said in a presentation.

JPMorgan requires traders to mark their positions daily  so the firm can track their profits, losses and risk. An internal control group double-checks the marks against market prices monthly and at the end of each quarter, said three former executives from the CIO and a senior executive in market risk. The firm uses the control group’s prices, not what individual traders submit, to calculate earnings, making it difficult for one trader or trading desk to rig prices, the people said.

The max loss appeared to be around $9 Billion as some estimated.  The last number was $4.4 Billion.  Now we’re around $5.8B?

The plot thickens…