JPMorgan: under siege - FT.com The bank that has boasted of a fortress balance sheet is under siege by litigation and regulation. With each day in the August doldrums, a new problem seemed to arise. It surfaced that JPMorgan is facing a criminal investigation over whether it manipulated US energy markets. There is a criminal inquiry into mortgage practices ahead of the crisis, too. And now a probe about hiring practices in China (children of government officials) questioning if the bank violated bribery laws. It also received a subpoena as part of an inquiry into metals warehousing. JPMorgan chief Jamie Dimon himself warned of heightened scrutiny after the "London Whale" debacle. Derivatives trading at the chief investment office backfired, producing not just $6bn in losses last year, but also allegations that the bank misled regulators and investors, setting off broader concerns. The actual legal costs are just one aspect. JPMorgan has set aside billions of reserves since the crisis. It has further estimated that the legal losses could exceed its reserves by up to $6.8bn. That is no small amount, but keep it in context: net profit in 2012 topped $20bn, even with the Whale losses. JPMorgan has now made studying and improving its controls the top priority, a major commitment of human and financial resources. Management is "re-prioritising" other projects. The costs of this focus on compliance - from Mr Dimon down - are hard to estimate but must be significant. In August, shares have fallen 6 per cent against a 1 per cent drop for the KBW Bank index. Yes, all of this is expensive and distracting. But the bank has to do whatever is required to stop the flow of bad news. Each new probe or lawsuit is worse than the one before it because it makes them all look less like anomalies and more like symptoms of an underlying problem, or like evidence that the bank is too big to manage. Even at JPMorgan the litany of legal problems will, unchecked, do lasting damage to the share price.