'CIO Was a Mistake and We Are Sorry': JPMorgan's Dimon (Update 1)

Updated to reflect NY City Comptroller comment on clawbacks.

NEW YORK (TheStreet) -- After reporting mixed, but generally better than expected second quarter earnings, JPMorgan Chase(JPM) and its chief executive Jamie Dimon are trying to distance themselves from the reputational and trading disaster that was its Chief Investment Office, a unit created before the financial crisis to hedge the bank's risk and invest excess deposits.

"CIO was a mistake and we are sorry," Dimon told investors in a special two-hour call held to disclose what now stands as a $5.8 billion CIO unit trading loss.

On Friday, Dimon said that the unit will no longer invest in complicated credit derivatives, which precipitated the loss, and that the bank will clawback two years of pay for three London-based executives who are leaving the bank.

Dimon refuted the notion that he was instrumental in building the CIO unit. "I knew about it, but I had no role in creating it," Dimon said in a call with the media. JPMorgan said in multiple disclosures that the unit was created as a macroeconomic hedge to the firm's various credit risks.

Fielding a flurry of concerns on the trading loss, and even questions about whether JPMorgan would consider a separation of its investment banking unit from lending business, Dimon emphasized that the CIO unit failed in its execution, noting that its ability to trade in illiquid and risky credit products was a mistake from its start in 2007.

Just how big of a mistake remains to be seen, even after JPMorgan disclosed that losses at the unit have grown to $5.8 billion in total, clouding the bank's 2012 earnings.

The nation's largest bank by assets said on Friday that it would restate first quarter earnings by $459 million, according to a filing with the Securities and Exchange Commission, as a result of a what it characterized as an attempt to hide losses at its CIO unit. The decision to restate earnings was made on Thursday, said chief financial officer Douglas Braunstein, on a media call.

"The firm has recently discovered information that raises questions about the integrity of the trader marks and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter," JPMorgan said in its restatement filing on Friday.