Tags: Ackman | JPMorgan | Loss | Bank

Bill Ackman: JPMorgan Loss ‘Not That Big’ in Bank’s Context

Friday, 18 May 2012 07:41 AM

JPMorgan's $2 billion trading loss is no big deal really, says Pershing Square hedge fund CEO Bill Ackman.

Hedge funds like Pershing lose money all the time and end up recovering it.

"I don’t see this JPMorgan loss as a big one. It’s unfortunate and it’s not good, but it’s not that big in the context of the bank. And it’s not going to break the economy," Ackman tells Forbes.

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"Here at Pershing Square, we have losses every day, mark to market. We make or lose lots of money every day. It’s the nature of this business."

The JPMorgan trading loss, which could still climb higher once the dust settles, is generating lots of press in that JPMorgan is a bank, meaning its money is insured by taxpayers, yet Ackman says the bank's CEO Jamie Dimon will navigate the bank through the storm.

"People are paying a lot of attention to this JPMorgan thing because it’s a bank and the banks are under a lot of scrutiny. I have enormous confidence in Jamie Dimon and his team, and even the best people occasionally make mistakes. The key is they’ve recognized the mistake, owned up to it and they’re working hard to rectify it. That’s confidence-inspiring to shareholders."

Reports are emerging that as the botched trade at JPMorgan unwinds, losses could climb to $3 billion, and some point out that banks should never have been involved in such hedging operations since their money is backed by the government and also because banks have access to cheap capital at the Federal Reserve.

"JPMorgan Chase has a big hedge fund inside a commercial bank," says Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner, the New York Times reports.

"They should be taking in deposits and making loans, not taking large speculative bets."

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Friday, 18 May 2012 07:41 AM
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