In the following video, Max Malcaluso interviews Fool banking analyst David Hanson regarding the "London Whale" incident at JPMorgan Chase (NYSE: JPM).
David explains that the job of the London Whale, a former JPMorgan trader based in London, was to safely invest excess capital and mitigate risk using strategies including asset hedging, if appropriate. He placed directional bets made to appear similar to a hedge, and the market started to move against him.
David discusses how senior management handled the situation when they were alerted to the magnitude of the trading loss, and he shares his view about the size of the trading loss as it relates to both JPMorgan's overall financial performance, and for investor confidence moving forward.
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or if finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, check out The Motley Fool's premium research report on the company. Click here now for instant access!