[ by Melanie Gretchen ] JPMorgan Chase is not having a whale of time - since the London Whale made a splash in $2+ billion of losses, the bank has sold some $25 billion of profitable securities toward bolstering earnings and recovering from the aftershocks. To date, the sale of corporate bonds and other securities have earned $1 billion in gains to offset the trading losses, CEO Jamie Dimon said – softening the blow, ahead of reporting its second quarter earnings. Outside Analysis. Although these sales have provided damage control, going forward the sale of profitable securities from elsewhere in the bank's investment portfolio will increase its costs, by triggering taxes on the gains and by eliminating future earnings from the securities. Gains from the sales could provide about 16¢ a share of earnings, about one-fifth of the bank's second-quarter profit, analysts said.  Yet, the firm may have revealed another weakness in judgement: instead of creating new value for investors, the transactions just shift gains in securities from one part of the company's financial statements to another. "They really made two stupid decisions," said Lynn Turner, a consultant and former chief accountant of the SEC. The first was taking risks with derivatives that they did not understand, Turner said. "The second is selling assets with high income that they can't replace.  In a low interest-rate environment, the bank will struggle to generate as much income with the cash it received from selling the securities, he said. JPMorgan Math. Mr. Dimon disclosed the sales on May 10 when he announced the derivatives losses generated from the bank's London office and trader Bruno Iksil, since dubbed the London Whale.  In addition, the CEO noted that the bank has another $8 billion of profit it could gain by selling an array of debt securities. It is not known when the bank sold the securities, and the bank has not released the value of securities it sold, thus only the bank may know how many more sales are in the works, based on the drawbacks of the sales.  However, based on disclosures that the bank has historically realized less than a 4% gain from selling these kinds of securities, JPMorgan would have to sell $25 billion in securities to generate $1 billion in gains, according to Reuters. Taxes on the gains, if calculated at the 38% tax rate that JPMorgan uses to illustrate its business to analysts, would mean a $380 million cost to realize the gains – leaving a net gain to earnings of $620 million, or 16¢ a share. Strategy. Before the sale, the gains would have existed on the bank's books as so-called paper profits, and would have been included on its balance sheet.  However, when the bank sold and realized the gains, they moved to its income statement as profit. Paul Miller, an analyst at FBR Capital Markets, said the bank should skip the asset sales and "just take the pain" of reporting lower profits.  For his part, Mr. Dimon is also reluctant to cash in good investments, pointing to tax issues in selling these securities when he spoke to analysts May 10. "We can take some of those gains and we can take them to offset this loss.  But usually it's tax inefficient, so we're very careful about taking gains." For further details, go to [Reuters, 5/29/12].