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May 15, 2012

Communicating a $2 Billion Loss

JPMorgan made a mistake. A $2 billion mistake.

In April, CEO Jamie Dimon dismissed concerns about the bank’s trading, calling concerns raised by the media a “tempest in a teapot.” 

Less than a month later, the same trading group lost $2 billion over a six-week period through complex financial trades.

Then a funny thing happened.

Only a few weeks after Goldman Sachs showed the world what not to do in a crisis, Dimon and JPMorgan essentially did the opposite. 

Thursday night he held an analyst conference call to acknowledge the loss. He admitted there could be further losses, impacting the company’s second quarter results due out later this year.

Dimon also spoke to the media that night, reportedly telling them, “The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought. There were many errors, sloppiness and bad judgment.”

On Friday, he taped an interview with NBC’s national Sunday morning show, Meet the Press. He told host David Gregory, “we made a terrible egregious mistake” and called JPMorgan “sloppy” and “stupid.” Perhaps most interesting is that Dimon had already been interviewed for the episode of Meet the Press – the day before announcing the loss. He sat for another interview after the announcement, and apologized to Gregory.

Much is yet to be sorted out in with the story and the company and Dimon’s brand is certainly taking a hit. The company’s stock fell more than 9% on Friday, although long-term effects will play out in the days ahead. Reports indicate three executives at JPMorgan will step down. There have been calls for Dimon to resign from his position at the New York Federal Reserve. The loss will also likely affect the current debate over financial regulation legislation in Congress.

Yet, Jamie Dimon has made things easier on himself admitting the mistakes, being direct and candid, and taking action to clean up the mess…

What do you make of the response from JPMorgan?

-David Grossman

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