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TheStreet Open House

JPMorgan Shareholders Bear Entire Debacle Burden

NEW YORK (TheStreet) -- No borrowers, bondholders, regulators or taxpayers were hurt from the JPMorgan Chase (JPM - Get Report) trading debacle; only shareholders and bank employees got hurt, which is how it should be.

During the two trading sessions following JPMorgan CEO James Dimon's announcement late Thursday of a $2 billion second-quarter trading loss, the market lopped off 12% of the company's share price, and JPMorgan announced on Monday that Chief Investment Officer Ina Drew had resigned.

When acting Federal Deposit Insurance Corp. Chairman Martin Gruenberg last week discussed his agency's expanded powers to resolve large, failing financial holding companies -- under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 -- he said that one of the stated goals of the resolution authority was "accountability, ensuring that the investors in the failed firm bear the firm's losses."

While the profitable JPMorgan Chase is nowhere close to being a failure, there's no question that Congress and bank regulators are getting what they want, as "the market exacted pretty strong revenge," according to Michael Robinson, executive vice president of Levick Strategic Communications and chair of the firm's Corporate and Public Affairs Practice.

'Better Names to Own' Than JPMorgan: FBR >>

"The market did punish a bad actor, and it is likely at the annual meeting," which begins today at 10:30 EST, "that Mr. Dimon himself will get a lot of criticism," according to Robinson, who adds that the CEO "may voluntarily suggest that his pay package be reduced to a dollar a year."

"The smart money is saying that he'll get in front of it and say that he bears blame and take a personal hit for it," which "sends the right message and provides an opportunity to change the direction of all this," Robinson said.

Right after JPMorgan's trading loss announcement on Thursday, Senator Carl Levin (D-Mich.) said in a statement that "the enormous loss JP Morgan announced today is just the latest evidence that what banks call 'hedges' are often risky bets that so-called 'too big to fail' banks have no business making."

Lawrence Harris -- the Fred V. Keenan Chair in Finance at the University of Southern California's Marshall School of Business -- says that "there were some very serious mistakes made, which suggest that JPMorgan was doing things that they didn't think they were doing, which of course is problematic," but "in the grand scheme of things, for a bank of this size there is little systemic risk here. "

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