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How JPMorgan Lost $2 Billion Without Really Trying

The bank won’t say, but clues are surfacing
Demonstrators outside JPMorgan's annual meeting in Tampa put egg on Dimon's face
Demonstrators outside JPMorgan's annual meeting in Tampa put egg on Dimon's facePhotograph by Jim Stem/Bloomberg

The $2 billion trading loss that JPMorgan Chase announced in a hastily scheduled conference call on May 10 has its roots in credit-default swaps, the same derivatives that helped trigger the financial crisis—only this time there were no mortgages involved.

The bank has launched an internal investigation, regulators are swarming, and the Department of Justice has said it is pursuing a criminal probe. The bank has not yet released details of the money-losing trades. But based on publicly available information plus interviews with traders, former JPMorgan employees, and fund managers, it’s possible to draw the basic outlines of what may have gone wrong.