NEW YORK - JPMorgan Chase chief executive Jamie Dimon owned up to stock analysts and went on TV to accept blame for a $2 billion trading mistake. Next he faces shareholders, who are considerably less wealthy since the blunder was disclosed.
While Dimon may be greeted by colorful protesters and tough questions at the JPMorgan annual meeting in Tampa on Tuesday, shareholders are unlikely to call for his head.
For them, facing the crisis without Dimon might be a bigger nightmare than the loss itself.
“When a bank is dealing with this sort of a challenge, you want someone of his caliber to shepherd it through,’’ said longtime JPMorgan shareholder Michael Holland, chairman and founder of money manager Holland & Co.
That has not been a universal opinion since Thursday, when Dimon disclosed to analysts that the bank had lost $2 billion by making a bad bet with so-called credit derivatives.
Investors lopped almost 10 percent off JPMorgan’s stock price the next day, and 3 percent more on Monday. Since Dimon made the announcement, almost $20 billion in market value has evaporated.
On Monday, White House press secretary Jay Carney, without singling out Dimon, said that Washington can’t prevent “bad decisions being made on Wall Street.’’
He pointed out that it was the bank and its shareholders, not bailout-weary taxpayers, who were suffering this time.
Dimon will be talking to shareholders from a position of weakness for the first time. He has built a reputation as a cost-cutting zealot and an expert at keeping risk under control.
He led JPMorgan into a stronger position than almost any other bank after the 2008 financial crisis, which brought him more praise than at any other time in his career.
Dimon’s reputation has been severely damaged now. But shareholders still appear to believe he should be given the chance to prove himself again.
“He’s earned enough market respect to have the opportunity to correct this,’’ said Benjamin Wallace of investment firm Grimes & Co., a longtime shareholder that sold its JPMorgan shares six months ago.
Dimon has said the bank lost the money in a strategy to hedge against financial risk, as banks often do, not because it was trading for its own profit. Some have cast doubt on that portrayal.
Citing former employees, The New York Times reported Monday night that in the years leading up to the $2 billion trading loss, risk managers and some senior investment bankers raised concerns that JPMorgan was making increasingly large investments involving complex trades that were hard to understand. But even as the size of the bets climbed steadily, these former employees told the Times, their concerns about the dangers were ignored or dismissed.
An increased appetite for such trades had the approval of the upper echelons of the bank, including Dimon, the sources told the Times. Initially, this led to sharply higher investing profits, but they said it also contributed to the bank’s lowering its guard.
JPMorgan’s disclosure of the $2 billion loss has led lawmakers and critics of the banking industry to call for stricter regulation of Wall Street.
On Monday, President Obama said JPMorgan’s loss in high-risk trading shows the need for the Wall Street rules that Congress passed two years ago.
JPMorgan “is one of the best managed banks,’’ Obama said during an appearance on ABC’s “The View,’’ a daytime talk show. “You could have a bank that isn’t as strong, isn’t as profitable, making those same bets and we might have had to step in. Which is exactly why Wall Street reform is so important.’’
Many post-crisis rules governing risk-taking by banks are still being written.
Among them is the so-called Volcker rule, which would block banks from trading for their own profit, a practice known as proprietary trading. Dimon has said the trading in question would not violate the rule.
Four days after Dimon announced the trading blunder, the executive responsible for trading strategy at JPMorgan, one of the highest-ranking women on Wall Street, became the first casualty.
The bank said that Ina Drew, 55, the chief investment officer for the bank and a 30-year veteran of the company, would retire and be replaced by Matt Zames, an executive in JPMorgan’s investment bank.