JPMorgan Said to Shut Proprietary Desk, Shed Traders (Update2) By Elizabeth Hester Nov. 4 -- JPMorgan Chase & Co., the largest U.S. bank by market value, will shut down a global proprietary trading desk and shed some of the unit's employees as the firm braces for a recession, a person familiar with the matter said. Other members in a group of about 75 people, led by William Johnson in New York, will move to desks within the equities, fixed income, foreign exchange, commodities and emerging markets businesses that trade for clients and the bank's own account, said the person, who declined to be identified because the plan is confidential. JPMorgan spokeswoman Kristin Lemkau declined to comment. ``It's been a very difficult trading environment,'' said Jeffery Harte, a financial analyst at Sandler O'Neill & Partners in Chicago. ``In the wake of that, everyone on the street is probably reevaluating capital commitments in regards to trading operations.'' Credit Suisse Group AG, Switzerland's second-biggest bank, lost 609 million francs ($523 million) from proprietary trading, the firm said Oct. 23. The money-losing trading books will be reduced ``significantly,'' the firm said. Deutsche Bank AG, Germany's largest lender, said Oct. 30 it lost 386 million euros betting on equities for the firm's account. Jamie Dimon, JPMorgan's chief executive officer, told employees in Hong Kong yesterday that the company faces ``highly challenging conditions'' in 2009. JPMorgan is among nine U.S. banks that received $125 billion from the U.S. Treasury last month as part of a plan to rescue the financial services industry from a credit crisis that has saddled banks and brokerages worldwide with more than $690 billion of writedowns and losses. Slowing Growth The U.S. economy contracted 0.3 percent in the July- September period, and growth is expected to slow to 1.15 percent in 2009 from 1.6 percent this year, economists' estimates compiled by Bloomberg show. As earnings prospects dim, banks are searching for ways to cut costs and reduce their leverage, or reliance on borrowed money. Still, the pullback in proprietary trading is likely to be temporary, because firms can make ``decent returns'' in the business when markets stabilize, Harte said. The breakup of the JPMorgan trading desk was announced internally yesterday in a memo from Steven Black and William Winters, the co-chief executives of the New York-based firm's investment bank. Financial News reported the plan earlier today. Traders won't be allowed to take any new positions until the reorganization is complete, expected by the end of the month, the person said. The same people won't be allowed to handle clients' money and the firm's money to avoid conflicts. `Eliminate Duplication' ``We can take advantage of our global platform and scale rather than run a small, separate operation within our business,'' the memo from Black and Winters said. ``We eliminate duplication that exists within the businesses today and create efficiencies.'' Johnson, who took over the proprietary unit in April, will work with the heads of JPMorgan's markets groups during the transition, according to the person with knowledge of the plan. Johnson's subsequent role hasn't been determined, the person said. The majority of the firm's proprietary trading revenue is reported in equities and fixed income markets, which pulled in a combined $2.47 billion in the third quarter. That compares with $3.43 billion in the previous quarter and $1.22 billion a year ago. The total includes client trading and other elements of the businesses. JPMorgan rose $1.44, or 3.5 percent, to $42.17 at 4:01 p.m. in New York Stock Exchange composite trading. Last Updated: November 4, 2008 16:11 EST