JP Morgan Chase may be paying up to $800 million to settle a government suit stemming from the "London Whale" debacle. Is JP Morgan replacing Goldman Sachs as the government's new whipping boy?
The government went whale hunting and it looks like it’s about to come home with a fairly nice catch – a hefty chunk of cash.
According to published reports, JP Morgan Chase is about to settle with the US government for $800 million stemming from last year’s “London Whale” debacle.
In the early spring of 2012, a London-based JPMorgan trader named Bruno Iksil took on such large positions in credit default swaps (CDSs) that he was referred to as the “London Whale”. The bank ultimately took a $2 billion loss that quarter but losses ultimately mounted to $6.2 billion.
Yesterday, a grand jury indicted two JP Morgan employees – Iksil’s boss, Javier Martin Artajo, and Iksil’s assistant, Julien Grout – for their role in trying to hide Iksil’s losses. Iksil has not been charged.
The feds recent zeroing-in on JP Morgan echoes of another recent Wall Street scandal, that of Fabrice “Fabulous Fab” Tourre. The mid-level Goldman Sachs employee was found liable for fraud last month stemming from the $1 billion in investor losses. In that situation, Tourre sold packages of mortgage-based instruments without informing buyers that the mortgages were selected by John Paulson’s hedge fund, a major Goldman client. Paulson was heavily short the mortgages and would thus have an interest in seeing it fall substantially.
So, have government regulators now found a new whipping boy in JP Morgan? And, what does this all mean for the stock?
To answer these questions we turn to CNBC contributor Gina Sanchez, founder of Chantico Global. She looks at the fundamentals of JP Morgan. Talking Numbers contributor Richard Ross, Global Technical Strategist for Auerbach Grayson, will decide if the charts agree with her assessment.
To see Sanchez and Ross analyze what’s next for JP Morgan, watch the video above.
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