Dimon's 'Blood-on-the-Leaf Moment': How JPM Losses Have Helped Industry's Opponents

WASHINGTON — There's a seminal moment in the 1987 movie "Predator" when Arnold Schwarzenegger's character, facing a seemingly indestructible alien, finds its blood on a leaf and declares, "If it bleeds, we can kill it."

For Jamie Dimon, JPMorgan Chase & Co.'s announcement that it was taking a $2 billion loss on its trading activities was the blood-on-a-leaf moment for his multitude of regulatory and political opponents.

The loss didn't just deal a crippling blow to the bank's arguments to dial back the Volcker Rule, which is intended to stop similar kinds of trading activity, and add ammunitions to those, like the Federal Deposit Insurance Corp.'s Tom Hoenig, that want risky activities separated from commercial banks.

It also undercut the myth of Dimon himself, a man who has appeared largely invulnerable because he helped lead his bank through the financial crisis mostly unscathed.

"Of all the banks this could have happened to, this is the one that probably hurts us the most," said one industry representative who — like many in the banking sector on Friday — declined to speak on the record. "They are the gold standard."

Banking lobbyists saw the situation much the same way.

"We had one spokesman within our industry that had the credibility to push back on some of the worst or most excessive parts of Dodd-Frank regulatory actions," a lobbyist said. "And his standing — while I don't think it's ruined — it's obviously damaged."

One critic went even further, suggesting Dimon should be removed.

"In any other industry, when faced with large losses incurred in such a haphazard way and under his direct personal supervision, the CEO would resign," wrote Simon Johnson, a professor at the MIT Sloan School of Management, on his blog baselinescenario. "No doubt Jamie Dimon will remain in place."

Lawmakers wasted no time in pouncing.

"Jamie Dimon doesn't want derivatives regulated," said Sen. Carl Levin, the chairman of the Senate Permanent Subcommittee on Investigations, in a conference call with reporters, adding that Dimon also wants Dodd-Frank to be rolled back and to allow non-U.S. parts of U.S. banks to fall outside U.S. jurisdiction. "And all three of those positions of his have been proven to be wrong."

Senate Banking Committee Chairman Tim Johnson agreed.

"The fact that this can happen at a bank with a solid reputation like J.P. Morgan is evidence that our banking regulators must remain vigilant, and why opponents of Wall Street reform must not be allowed to gut important protections for the financial system and taxpayers," he said in a statement.

In a conference call on Thursday evening, Dimon acknowledged the bank had made an "egregious mistake," and predicted — rightly — that it would be fodder for his opponents.

"It is very unfortunate that it plays right into the hands of a bunch of pundits out there, but that's life," he said.

But by using the word "pundits," Dimon appeared to be vastly underestimating the threat.

Regulators immediately mobilized against the bank, with both the Securities and Exchange Commission and U.K. regulators probing the trades, according to media reports.

Fitch Ratings, meanwhile, downgraded the bank by one notch to A-plus from double-A-minus citing a "lack of liquidity" and questions about the bank's management, according to Dow Jones Newswires.