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US watchdog calls London risky

by LLB Editor
20th Jun 12 12:15 pm

Hot on the heels of American bank JP Morgan Chase reporting a $2bn (£1.24bn) loss, a US watchdog has claimed the US might bear the brunt of risky financial activity in London.

Gary Gensler, chairman of the Commodity Futures Trading Commission, cited examples of uncertain financial activities in London such as the JP Morgan $2bn loss and US insurance giant American International Group’s (AIG) $3bn loss (in 2008) on its London-based unit caused by a dangerous credit default swap.

Gensler also referenced Citigroup’s $50m loss earlier this year after two London-based traders accused of trying to influence global lending rates left the bank.

The traders have not been publically named.

“So often it comes right back here, crashing to our shores … if the American taxpayer bails out JP Morgan, they’d be bailing out that London entity as well,” said Gensler at the House Financial Services Committee hearing into JPMorgan’s trading losses on Tuesday.

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