There's not that much mystery about the actual trade. Leaving aside the sophistication of the transactions themselves, 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.

Dimon continues to explain this trade away as a "hedge." It may not have been anything of the kind. First of all, a hedge reduces risk: If one investment might lose a lot of money if markets move in one direction, you create a hedge that will make money under those circumstances so your losses are limited.

Yet JPMorgan already is massively long corporate debt as a result of its normal course of business, which is lending money to corporations. A "hedge" that replicates that same position isn't a hedge at all. There's evidence that the department where the Whale worked was, in fact, replicating Morgan's real-life business of lending to corporations, but using fancy derivatives to do so -- creating a "synthetic" bank, as traders would say, without actually lending to corporate customers as real banks do.

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