NEW YORK ( TheStreet) -- It was like listening to Darth Vader apologize for embracing the dark side. JPMorgan Chase ( JPM) Chairman and CEO Jamie Dimon said during the company's April 13 first quarter conference call a series of news articles about massive risk-taking in its Chief Investment Office was a "tempest in a teapot."
JPMorgan Chase CEO Jamie Dimon
Oopsy. Less than a month later, that same unit just posted a $2 billion loss on existing trading positions as JPMorgan was forced to revise the trading unit's Value at Risk--a measure of risk-taking-- by nearly 100%, raising it from 67 to 129. Dimon has been the most vociferous, credible critic of proposed tough new rules aimed at reducing risk in the banking system... until Thursday. In one fell swoop, that credibility went out the window as he admitted a "hedging strategy" executed by the bank was "flawed, complex, poorly reviewed, poorly executed and poorly monitored. The portfolio has proven to be riskier more volatile and less effective as an economic hedge than we thought," he said. Needless to say the Volcker Rule -- a regulatory dagger aimed at the heart of this type of risk-taking and which Wall Street lobbyists have been striving to delay and water down -- is about to get a lot stronger. Anyone who had any doubt that giant global securities firms are highly risky and impossible to understand is going to have a difficult time arguing that point for some time to come. That lesson should have been clear enough during the 2008 crisis, when highly-respected and successful institutions such as Bear Stearns, Lehman Brothers and Merrill Lynch collapsed virtually overnight. But the "heroes" of the crisis--the JPMorgan and Goldman Sachs ( GS). They enabled defenders of the status quo to make the case that, despite a few--okay, lots--of bad apples, the core was more or less intact. If any single person could be said to embody that core, it was Jamie Dimon. But Dimon's credibility--and with it, an entire era of Wall Street risk taking and world domination--just proved more hollow than even its staunchest critics could have imagined. -- Written by Dan Freed in New York. Follow this writer on Twitter.