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Q: Isn't the trading that led to the loss banned already? A: No. The rule doesn't take effect until July, and even then regulators are suggesting banks will have another two years to comply. In any case, it's not clear that the trade in question were subject to the rule. In the conference call Thursday, Dimon said the trades that backfired were hedges, not bets for profit, so they wouldn't have fallen under the rule. But some experts have doubts. Nancy Bush, a banking analyst at NAB Research, says it's not always clear what is hedging and what is gambling. The size of JPMorgan's loss makes her suspicious. "So they made money on hedges and then they hedged some more," she said. "At some point it goes from being a hedge to being a money maker. They crossed the line here somewhere and it's going to cost them." Sen. Carl Levin from Michigan, the chair of a subcommittee that investigated the crisis, put it more bluntly. "This is not a hedge," he said. He called the loss a "stark warning" about the danger of "risky bets" at banks. Q: How much will the trading loss hurt JPMorgan? A: Likely not much at all, putting aside the impact of tougher regulation. JPMorgan is a big money maker. The $2 billion loss, which is before accounting for taxes, compares with $19 billion in net income last year and $16 billion the year before that. What's more, Dimon said that $2 billion loss will be offset by $1 billion trading bets that have already paid off. Dimon said there are $7 billion more paper gains from trades that he can tap in case losses grow. Q: Are more losses possible? A: Dimon said he is trying to unwind the bad bets in a "responsible" manner to minimize losses, but prices can move against him. That would mean more losses. Dimon has said the $2 billion could become $3 billion depending on how markets react.
[Associated
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