Lesson for all traders. Define Risk. Limit Risk. Accept Risk.
JP Morgan, did not understand risk (i.e. define), they added to their risk (they increased their risk when they should have been hedging/limiting it). They accepted that risk and that was a huge mistake.
Not only did JP Morgan overleverage their position, they failed in their job of hedging their main exposure the bank had taken as a result of being a bank. The fact that the “trading” unit made 4 billion dollars in the past was because they were simply offsetting the exposure the bank had in their loan portfolio (i.e, that loan portfolio lost, they won because they hedged). When they went out and became a “trader” (and became greedy), they failed miserably.
The loss of 2B on that position (which I expect is not going to get better) also opens the risk to the loan portfolio. I am sure the loan portfolio has deteriorated in the process. Conclusion: the bank has the most amount of risk. Not a good thing.