JPMorgan loses $2 billion in fake credit securities

Company Slammed By Drop In Market Share, Credit Rating Agency Downgrades 

Major financial investment firm JPMorgan saw its stock price fall by more than 7 percent after its CEO Jamie Dimon announced Thursday that the company had lost $2 billion in what are being called synthetic credit securities.

While the U.S. markets were up at about noon today, the Dow Jones Industrial Average dropped more than 34 points – the steepest decline of 2012. Since the announcement of the $2 billion loss in fake credit securities, JPMorgan has shed another $10 billion in market share.

Credit rating agency Fitch announced it has downgraded the financial company from A+ to AA-. A report released by the rating agency includes the following: “Fitch views the size of loss as manageable. That said, the magnitude of the loss and ongoing nature of these positions implies a lack of liquidity. It also raises questions regarding JPM’s risk appetite, risk management framework, practices and oversight; all key credit factors. Fitch believes the potential reputational risk and risk governance issues raised at JPM are no longer consistent with an ‘AA-‘ rating.”

The massive trading losses at JPMorgan have raised concerns on Capitol Hill, where financial reform regulations are currently being vetted. Proponents of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 say that the argument against implementing the heavily debated Volker Rule, which restricts financial institutions from essentially gambling with federally insured deposits, may be softened by JPMorgan’s losses.

“This regrettable news from JPMorgan Chase obviously goes counter to the bank’s narrative blaming excessive regulations for the woes of financial institutions,” Barney Frank, former representative and an author of the Dodd-Frank financial reform act, said in a statement. “The argument that financial institutions do not need new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today.”

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