When making an investment, we all know they carry some risk of loss. The general rule is: The more you are set to gain, the more you are set to lose, and generally the more risky the transaction may be. People and companies make trades on a near 24 hour scale now, but what is one to do when the transaction results in a $2 billion loss?
JPMorgan, a long standing financial giant took a risk and it ultimately failed and cost them $2 billion. It has been just days since the loss and people are calling for action as a response. Investing in a company though does carry risks, which includes the risks that come from their own investments, so should any further action be taken?
JPMorgan personnel associated with the deal have already took responsibility for the large investment loss. Chief Executive Jamie Dimon is ready to accept resignations of Ina Drew and at least 2 other traders that worked for her. Ina Drew has been with the company for decades and previous resignation attempts had been declined, but as the government begins investigations and seek to add more harmful regulations to an already damaged industry that has been hurt through previous regulations, people are trying to limit the damage any further by resigning explaining what happened.
It was an investment risk that had it succeeded, Dimon and Drew would be hailed as market geniuses and being praised instead of criticized by officials who have overseen one of the largest self-inflicted economic crises in the nation’s history. Dimon though, went on record calling the bank “sloppy” and “stupid” over its transaction that saw a loss over a bet on credit derivatives that went opposite of how they thought it would.
The original transactions were actually meant to protect the bank and the public investors from any harm from the government caused European Economic crises. Drew attempted to protect JPMorgan from losses and even potentially earn some large profits, but with such an unpredictable situation in Europe and the EU continuing to interfere in the healing process, the damage was already done. Despite efforts to scale back and cut smaller losses, it was too late and as we know, an estimated $2 billion was lost.
Misses Drew has a history in JPMorgan as being successful and had a long career with them, so is it proper to release her and send criticism her way on transactions that went sour? Many government officials are already trying to butt in and further harmful regulations to play off of the public backlash that is wrongly misdirected. But what further punishments and information is needed? Stocks fell 9% already on Friday alone, resignations are being handed in and the company learned a lesson on risky investments. The public is now also aware that the company may at given times take risks that can impact the value of the company, allowing them to decide on their own whether to stay partial owners in JPMorgan or not.
Investments carry risks, but larger losses in investment banking has occurred before. Shareholders have the option of choosing other investment strategies and to opt for more risk managed portfolios. It is only to appease regulators that the pressure to resign is being felt.