July 13, 2012

In a revealing earnings call where more than a few bombshells were dropped the CEO of JP Morgan Chase still seems to be in denial. The investment bank confirmed media reports that their Bad Bet, made by a head trader in the UK known as The London Whale, has ballooned from $2 billion to $5.8 billion. Net income fell 9 percent to $4.96 billion in the second quarter, according to media reports.

Read Ivy Schmerken's analysis, What Went Wrong: J.P. Morgan to Disclose Details on Multibillion-Dollar Derivatives Loss.

A chastened Jamie Dimon was grilled by reporters in a stark contrast to the tongue bath he received from US lawmakers when he appeared before the Senate banking committee last month. One exchange of the earnings call stood out when a pair of reporters asked if JP Morgan was, in essence, too big to fail. On both occasions, Dimon brushed away the question.

Here are some (lightly edited) highlights of the Wall Street Journal's live blog:

During the Q&A portion Mike Mayo, an analyst with CLSA, asked Dimon about Too Big To Fail "I'm wondering if the firm as a whole has reached some sort of tipping point in terms of size or complexity that makes it more difficult to manage," Mayo asked.

Dimon replied, "No"

Mayo probed Dimon with "Have you lost a step?" The crowd on the conference call laughs and someone shouts out "Are you too old?"

Dimon will have none of it, saying "Mike, this company is the same company went from '06, '07, 2010, 2011, Bear Stearns, while Mike, we had a record last year."

Later, a reporter asks a question about splitting up J.P. Morgan's consumer bank. The WSJ reports that Mike Mayo made this same point passionately at investor day and was widely rebuffed by the entire J.P. Morgan management team. "What has to happen to you and the board to finally say we are a great institution and we own a lot of great businesses but are too big to manage?" asked the reporter.

Dimon: "I beg to differ ... There is huge strength in this company."

Questioner follows up and wonders if CIO would have been caught in a smaller company.

Dimon fires back: "Hundreds of smaller banks have gone bankrupt. Monolines went bankrupt. You can argue the other way there is a huge source of strength for how strong this company. The CIO was a mistake and we are sorry."

Clearly, JP Morgan Chase will not break up voluntarily.

ABOUT THE AUTHOR
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining ...