[ By Larry Goldfarb ] JPMorgan’s announcement on Thursday that it was reporting a $2 Billion trading loss has shaken Wall Street for at least three reasons.  First, unlike most large banks, JPMorgan Chase came out of the financial crisis with a stellar representation attributable, in part, to that fact that it had built a "fortress balance sheet" that purported to have made the bank insulated from financial messes that seem to be more and more commonplace.   Second, its CEO Jaime Dimon gave off the aura that he was a hands on manager, utilizing his significant acumen to safeguard all of the bank’s major bets.  And finally, the risks management apparatus at the bank was highly sophisticated, to the point where the reforms mandated by Dodd-Frank were not only unhelpful to its business, but could serve to negatively impact its risk management. So what was the trade that impacted JPMorgan Chase?  A bet that corporate profits would continue to rise.  The firm’s "chief investment office" London based trader purchased a large quantity of Credit Derivative Swaps (CDS).  These are the same securities that many firms could not properly hedge because they did not sufficiently understand.  Ironically, they are the one security tightly identified with the financial crisis.  Jaime Dimon, in his end of day announcement, used these terms to describe the trade, "flawed, poorly reviewed, complex, poorly monitored."  Dimon also noted that the trade was not fully understood by management.  It was reported that Dimon himself reviewed the trade a number of times.  While Dimon has been critical of himself and his unit, the question still remains, how could the world’s best managed bank fall prey to the same blight that buffeted the financial markets.  The answer is hubris. It seems clear from his remarks about the Volcker Rule that Dimon attributed the credit derivative swap losses by the large money center banks to management incompetency, a trait that he was confident did not exist at JP Morgan Chase.  Thus, he saw the Rule as "throwing the baby out with the bathwater."  Commenting in the Huffington Post, Mark Gongloff said, "Funny thing:  Some of the constraints of the very Dodd-Frank financial reform act Dimon hates could have prevented [JPM from making the 2 Billion losing bet]." In many ways, banks are public utilities.  They get access to very cheap funds though the Fed Window, and are responsible for operating and maintaining the confidence in the banking system.  The need to wager $2 billion in a CDS’ runs counter to the mission of the bank.  It is now clear that banks have to be protected from themselves; rules and regulations will be adopted to limit the type of trading activities which can be performed by a bank.  Compliance and risk management must be at the fore front to ensure that these types of activities are within bank policy.  But in the end, a bank has to be true to its dual mission: maintain the integrity of the banking system and make money for its shareholders.  In order to fulfill this mission, it requires integrity of management and integrity of purpose.  Given the gravity of the recent financial mess, one would have thought that banks did not have to re-learn that lesson.