CNBC Breaking News: JPMorgan CIO Has Significant Mark-to Market Losses; Legal Losses of $4.2 Billion 'Reasonably Possible'

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JPMorgan Chase (JPM) fell 6.5% after-hours after saying it incurred “significant mark-to-market losses in its synthetic credit portfolio.”

CEO Jamie Dimon apologized on a conference call at 5 p.m. for “egregious mistakes” and an “unbelievably ineffective” trading strategy meant to hedge trading positions.

“The strategy was badly executed, badly monitored,” he said, without going into detail about the specific trading strategy. It was apparently in the global division.

The company’s 10-Q says:

“Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO’s synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO’s AFS securities portfolio.”

Analysts on the conference call were clearly perplexed by the sudden change. JP Morgan was considered to have among the cleanest balance sheets of the major banks. Dimon also noted that the loss could give fuel to critics who say that banks are still too lightly regulated.

Other major banks were also falling on the news.