Roubini: JP Morgan, Dimon Guilty of 'Arrogant Violation' of Volker Rule

(May 21, 2012) — Economist and avid Tweeter Nouriel Roubini has commented on his Twitter page that JP Morgan and its CEO Jamie Dimon were not hedging, but were involved in “pure and sheer speculation in arrogant violation of the spirit of the Volcker rule”.

Dimon had long criticized regulation, particularly the Volker rule, which aims to limit banks’ ability to trade for their own profit. With the recent trading fiasco in the spotlight, however, industry sources say the CEO will be forced to rebuild the bank’s faltering reputation, regaining public trust in the bank’s ability to avoid losses and volatility. Now, while shareholders continue to question JPMorgan’s views on regulation in light of the trading loss, Dimon has said the bank is “not against new regulations,” but that “we all want better, smarter … regulation.”

Meanwhile, Dimon asserted that the firm does not foresee any scenario in which trading losses in its Chief Investment Office would amount to a disaster. “We’re looking at all the potential outcomes” from the unit’s trades,” Dimon said at an investor conference, according to Bloomberg. “There’s no outcome that will be a disaster for this company.”

“I am not sitting here worried about the ultimate loss on this thing,” Dimon added.

The banking giant has battled increasing scrutiny following a faulty trade that resulted in about $2 billion in losses as of May 10, which Dimon said stemmed from hedging improperly and could widen by $1 billion in losses this quarter. Shareholders and regulators are now focusing greater attention on the bank’s risk-management practices.

Since the announcement of the $2 billion loss, the company’s stock has fallen more than 21% and lost nearly $30 billion of market value.