I love nostalgia, but in my desire to go back in time, 2008 isn't one of the top settings on my wayback machine. Yet the unfolding of the JPMorgan Chase's $2 billion mishap put me right back into those fun days of the implosion of Lehman Brothers–and the resultant Great Recession.
It's a story that's still developing, but the gist is that some bad investment decisions involving derivatives gone wild could cost JPMorgan—one of the “good guys” of the '08 meltdown—as much as $5 billion, depending on who you talk to.
Michael Hiltzik of the Los Angeles Times breaks it down:
JPMorgan's trader, a London-based derivatives expert whose portfolio was so outsized he became known in the markets as the London Whale, essentially bet that corporate debt was becoming less risky as corporations were getting stronger—in trading parlance, he was long corporate debt. But he did so in a way that even a tiny hiccup in the index he was trading could be exploited by rival traders. And that's what happened.
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