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What on earth could possibly go wrong with one of the world's largest banks betting heavily on high-risk derivatives? Originally, that was supposed to be banned under Dodd Frank with the Volcker Rule. But lobbyists made sure it was just a hollow joke.

I don't know about you, but I don't want to pay for another round of bailouts for these jerks:

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon has transformed the bank’s chief investment office in the past five years, increasing the size and risk of its speculative bets, according to five former executives with direct knowledge of the changes.

Achilles Macris, hired in 2006 as the CIO’s top executive in London, led an expansion into corporate and mortgage-debt investments with a mandate to generate profits for the New York-0based bank, three of the former employees said. Dimon, 56, closely supervised the shift from the CIO’s previous focus on protecting JPMorgan from risks inherent in its banking business, such as interest-rate and currency movements, they said.

Some of Macris’s bets are now so large that JPMorgan probably can’t unwind them without losing money or roiling financial markets, the former executives said, based on knowledge gleaned from people inside the bank and dealers at other firms. Bruno Iksil, a London-based trader in Macris’s group, gained attention last week after moving markets with his trades, drawing a comparison to Federal Reserve Chairman Ben S. Bernanke’s power in the government-bond market.

“What Bernanke is to the Treasury market, Iksil is to the derivatives market,” Bonnie Baha, head of the global developed credit group at DoubleLine Capital LP in Los Angeles, where she helps oversee $32 billion, said in a telephone interview.

Macris’s team amassed a portfolio of as much as $200 billion, booking a profit of $5 billion in 2010 alone -- equal to more than a quarter of JPMorgan’s net income that year, one former senior executive said.

The shifting role of the CIO group at JPMorgan, which reported record firmwide profit for 2011, underscores how blurry the line can be between “proprietary trading” and hedging, and it highlights the challenge U.S. regulators face in curbing speculative bets by federally backed lenders under the so-called Volcker rule. JPMorgan, whose $2.27 trillion of assets at year- end made it the biggest U.S. bank, says the CIO manages the firm’s risks, with trades like Iksil’s forming a part of that effort.

“It’s a complete tempest in a teapot,” Dimon said on a conference call with investors today after the bank announced first-quarter earnings. “Every bank has a major portfolio and in those portfolios you make investments that you think are wise.”