Last month when JPMorgan first acknowledged that some of its chief investment office’s derivatives trades had gone haywire, it tried to soften the blow by pointing to a big chunk of freshly realized investment profits that reduced the unit’s overall loss.
The trading loss so far for the second quarter was about $2 billion, before taxes, the company said May 10. However, the same office had also realized a $1 billion pretax gain from sales of securities this quarter, which JPMorgan said it hadn’t factored into its previously issued earnings forecasts. The obvious impression JPMorgan left was that it had sold securities and booked gains as a way to mitigate the loss.
There’s nothing wrong with that under the accounting rules. The problem is with the rules themselves
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