[ by Larry Goldfarb ] The JP Morgan $2 billion loss was characterized by bank management making mea culpas.  Think of a great scandal in US History: Watergate, Iran-Contra, Iraq's WMD.  The pervasive attitude is "nothing happened" or "it’s a political hatchet job."  But not the current loss at JPMorgan.  People involved in the scandal were fired, others quit or retired.  And don’t forget the apologies. The participants said we missed it or the review process was not adequate or sufficient.  One even cited Ina Drew's contraction of lime disease.  The head of the Chief Investment Office, who's responsible for the trades, was unable to come into the office because of her condition. But Let's Take a Different Tack for the Moment. While the scenario, replete with  apologies, appears quite plausible, we nonetheless believe that they're highly unlikely.  Consider this: a trader putting on gargantuan positions on the wrong side of the market.  Management missing what he was doing until insurmountable losses piled up. The more likely or plausible scenario would play out like this: Management tells the London Whale, Bruno Iksil, that it's his job to dominate a market segment and destroy all in his path.  In the case of the trades in question, Mr. Iksil’s strategy was to sell the market down very low, lowering his basis at every sale and gaining mark-to-market profits.  Then when it became low enough, he was to buy it back for cents on the dollar and make a windfall.  Mr. Iksil was cornering the market on this particular type of derivative trade.  He tempted competitors to come in because, after all, he was on the wrong side of the market.  But JP Morgan’s market power would cause their sensible trades to go so low that they would have to ditch the trade.  JPM would win by both gaining  profits and by eliminating competitors. However, the strategy ultimately failed because one the hedge fund managers on the other side of the trades with JPMorgan - namely, Boaz Weinstein - recruited fellow fund managers to buy the trade and not to ditch it as their P&L want down.  He imbued them with the confidence of buying into the twilight side of the trade and with the news that the other side was JPM.  Thus, Mr. Iksil started to pile up mark-to-market losses as the positions kept rising from the coordinated buying of the hedge fund managers.  Finally Mr. Iksil, with pressure from CEO Jamie Dimon, Ms. Drew, and others, bailed. WOW!!! That last explanation is so far beyond anything we've heard from JPMorgan management - starting at the top with Mr. Dimon, on down - as well as from media pundits and regulators. So what do we make of this scenario: We take the unconventional scenario and reinforce it with the presumption that JPMorgan got caught executing a strategy it has likely carried out many times before - while usually racking up significant trading profits.  It's a strategy that any regulator would come down hard on - that is, if a regulator such as the Fed, the SEC or FINRA knew about or was aware of.  Civil charges would mount up and fines and sanctions would light up the scoreboard.  And it would not come as a surprise to see the U.S. Attorneys Office join in for a concurrent criminal investigation. So, as we read each day's plausible news accounts offered by various media sites, keep in mind that you can't necessarily believe everything you see.  And as much as you're tempted to give credit for apologies, remember that they might actually be smoke screens, and the only honest comment should have been, "darn, we got caught."