How Big Losses Distorted JPMorgan's Sense of Reality

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., testifies at a House Financial Services Committee hearing in Washington, D.C. in 2012 Photograph by Andrew Harrer/Bloomberg

Time-tested wisdom on Wall Street is that when a trade you made is losing money, you should swallow hard and get out of the position before things get even worse. Cut your losses. But when JPMorgan Chase started losing big on its London Whale trade last year, traders and executives all the way up to the chief executive officer seemingly had trouble facing the painful reality.

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