The following video is part of our "Motley Fool Conversations" series, in which senior analyst Anand Chokkavelu, CFA, discusses topics across the investing world.
JPMorgan announced an unexpected $2 billion in "hedge" losses on credit default swaps late last week. Understandably, the market hasn't been happy about the surprise from a bank with a reputation for avoiding calamity better than its peers. Anand digs into exactly how big a deal $2 billion (perhaps $3 billion after all is said and done) is to a bank the size of JPMorgan. Beyond reputational harm and increased regulatory scrutiny, the hit makes up about 1% to 1.5% of its equity, 10% to 15% of annual earnings, and 40% to 60% of quarterly earnings. Anand believes JPMorgan can easily survive this, but the magnitude of the loss is not trivial.
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