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Jamie Dimon has decided to shake things up in JPMorgan Chase’s municipal bond swaps business as regulators continue to bear down on the unit.
On Thursday, JPMorgan Chase (nyse:JPM - news - people ) said it was downsizing the division within its securities and underwriting arm that managed interest rate swaps for municipal borrowers, as a Federal probe into the segment’s practices continued. The number of offices that handle tax-exempt capital markets was cut to 10 from 19.
JPMorgan's shares fell 2.4%, or 97 cents, to $38.70 on Thursday morning in New York.
In a memo to employees, Matt Zames, who oversees JPMorgan’s tax-exempt capital markets, said earnings from the unit being investigated "no longer justify the level of resources we have allocated to it." A company spokesperson could not be reached for comment.
The move to pare down the business comes after the U.S. Justice Department and the Securities and Exchange Commission investigated JPMorgan over the sale of derivatives and investment contracts to municipal issuers. JPMorgan is also tightening the screws on all of its tax-exempt capital markets businesses, including curbing expenses on outside legal help and beefing up credit standards.
Wall Street had pitched unregulated derivatives as a way for cities and states to save money. It turns out that some trusting municipalities lost money instead.
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