Daily News Brief

JP Morgan Chase & Co.--the largest U.S. bank by assets--revealed yesterday an unexpected trading loss of at least $2 billion, a result of risky positions taken by a trader in the bank's Chief Investment Office. JP Morgan CEO Jamie Dimon called the hedging strategy "poorly reviewed, poorly executed, and poorly monitored" (WSJ). The hefty loss pushed JP Morgan shares down about 6.5 percent in after-hours trading, with Citigroup down 3.6 percent and Bank of America down 2.6 percent. The incident comes as large commercial banks are combating U.S. and international efforts to regulate them by cracking down on high-risk trading. The Volcker rule--a provision of the 2010 Dodd-Frank Wall Street Reform Act that prohibits banks from engaging in proprietary trading--is set to come into effect on July 21.

"Even as Mr. Dimon put the blame squarely on his bank, his arguments on Thursday seemed intended to leave the impression that it was poor execution, not the risks inherent in accumulating big trading positions, that caused the huge loss. In fact, he went out of his way not to blame market shifts or trading reverses," writes Nelson D. Schwartz for the New York Times' DealBook.

"The danger of Volcker, as rendered by Washington and as suggested in the Fed's recent letter, is the danger that exists throughout Dodd-Frank. It is the taxpayer danger that results when regulators prone to capture by the industries they regulate are vested with huge authority and discretion to favor some activities while disadvantaging others, and to help some firms while harming others," says this Wall Street Journal editorial.

"There is plenty here for enemies of modern banking to grab hold of though. Corporate offices invest the deposits that government guarantees make the public feel confident enough to give to banks. In other words, this is subsidized capital the likes of JPMorgan then put at risk to earn large rewards. Of course, banks try to hedge these investments. But this time $2bn has been lost in a matter of weeks," say the Financial Times' Lex column.

China's industrial output growth slowed (WSJ) to its lowest level in nearly three years, rising 9.3 percent year-on-year in April, compared to a 11.9 percent increase in March. The data could prompt Beijing to loosen Chinese monetary policy in order to stimulate the economy.

PHILIPPINES: Hundreds of people demonstrated outside the Chinese embassy (al-Jazeera) in Manila today, calling on China to withdraw its ships from the Scarborough Shoal in the South China Sea. The shoal is the center of a month-long territorial dispute between the two countries.

Pakistan is not invited to a NATO summit in Chicago later this month, which will focus on the future of Afghanistan, NATO Secretary-General Anders Fogh Rasmussen confirmed today. Rasmussen also called on Pakistan to reopen NATO supply routes to Afghanistan (Dawn) that it closed last year.

AFGHANISTAN: A man wearing an Afghan army uniform shot dead a NATO soldier (BBC) at a U.S-Afghan military base in northeastern Kunar province today. At least eighteen coalition troops have been killed in similar incidents this past year.

Abdel Moneim Aboul Fotouh, a former leader of the Muslim Brotherhood, and Amr Moussa, a former diplomat under ousted president Hosni Mubarak, faced off Thursday evening in the country's first televised presidential debate (NYT).

YEMEN: Two air strikes--one thought to be a U.S. drone strike--hit southern Yemen on Thursday, killing seven al-Qaeda militants (AP), Yemeni security officials said.

Targeted killings are up in Yemen and military trials have resumed in Guantanamo. CFR's Matthew Waxman assesses the White House's evolving legal basis for its war on al-Qaeda in this CFR Interview.

The Economic Community of West African States today called for Guinea-Bissau's parliamentary speaker, Manuel Serifo Nhamadjo, to assume the role of interim president and lead the country's transition back to civilian rule (Reuters) following last month's military coup.

SOMALIA: Somali pirates hijacked a Greek-owned oil tanker (BBC) off the coast of Oman that is now heading toward Somalia, the ship's operators said today.

A surge in pirate attacks off the Somali coast in recent years has prompted the deployment of an international coalition of navies. But experts say that military force alone cannot address the underlying issue of failed Somali governance, explains this CFR Backgrounder.

ITALY: Italian Prime Minister Mario Monti is positioning himself as a mediator between Germany and weaker euzone member states (WSJ) as he tries to encourage Berlin to accept new growth measures--including investments in public works projects--as a corollary to Germany's strict austerity response to the ongoing sovereign debt crisis.

A Haitian male teenager, who was allegedly sexually assaulted by Uruguayan soldiers (al-Jazeera) serving as UN peacekeepers in Haiti last year, testified before a judge overseeing the investigation in Montevideo yesterday.

President Barack Obama's reelection campaign released three new economy-focused ads (HuffPost) in a $25 million ad buy targeting swing states that looks at the auto bailout, U.S. manufacturing, and job creation. Such a significant ad buy is considered unprecedented this early an election.

GOP presumptive nominee Mitt Romney's campaign team is "heavily salted" with advisers from President George W. Bush administration, especially on the foreign policy and economic sides, which could feed into Obama's campaign narrative of Romney being a potential return to the Bush era, says this Washington Times analysis.

With much of Washington discussing the end of Indiana Republican Senator Richard Lugar's political career, TIME's Michael Crowley says Lugar's departure marks the death of GOP foreign policy moderates and the beginning of an uncertain future.

Editor's Note: For more information on the presidential election and foreign policy check out CFR's campaign blog, The Candidates and the World.

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