How JPMorgan’s Added Risk Led to $2 Billion Loss: Timeline

A recent history of JPMorgan's risk.

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., is scheduled to testify tomorrow before Congress about the bank’s $2 billion loss on derivatives trading at its chief investment office. Here’s a chronology of events leading to the disclosure and the aftermath.

Some dates are approximate and are subject to revision as more information becomes available.


Nov. 13: JPMorgan completes takeover of Bank One Corp., run by Jamie Dimon. He becomes CEO of JPMorgan the following year. Global treasury unit, led by Ina Drew, is broken out of JPMorgan’s investment bank and expands to manage combined firm’s more diverse balance sheet. Drew begins reporting to Dimon at year-end.


February: Ina Drew’s title changes to chief investment officer.

Date unknown: Bruno Iksil, whose trades play a central role in adding risk to CIO, joins JPMorgan.


Jan. 18: Dimon says value-at-risk, or VaR, is “a very bad number if you think it actually represents risk.” The number probably will climb, according to Dimon, who says, “We are going to build our businesses, and therefore, over time, we’ll be taking more aggregate risk.”

Date unknown: Achilles Macris joins JPMorgan, becomes leader of strategy that builds credit risk in CIO.


Date unknown: CIO bets against an index of subprime mortgage bonds and earns about $1 billion.

Nov. 26: Barry Zubrow becomes chief risk officer. Also late in the year, Irvin Goldman, brother-in-law of Zubrow, loses job at Cantor Fitzgerald LP after money-losing bets.

Dec. 31: Securities held in JPMorgan’s CIO and treasury reported at $76 billion. Corporate division, which includes CIO and treasury results, has net loss of $150 million for the year.


Mar. 16: Assets managed by CIO expand as JPMorgan agrees to buy Bear Stearns Cos.

Sept. 25: Assets managed by CIO increase again as JPMorgan buys Washington Mutual.

November: Macris’s group begins placing bigger bets, becoming the biggest buyer in some markets. A CIO trader buys about $1.1 billion of AAA-rated portions of collateralized loan obligations in November-December.

Dec. 31: Corporate division finishes year with $1.5 billion profit.


Date unknown: In the months after the financial crisis, top executives raise concerns with Dimon that the CIO’s risk management wasn’t adequate, according to the two executives familiar with the conversations. William Winters and Steve Black, co-heads of the investment bank, seek more information on the unit’s changing risk profile. Dimon responds that the situation is under control. (The bank says executives never complained about a specific risk in the CIO’s office. For a complete account, click here.)

April 16: An analyst queries the rise in JPMorgan’s risk gauge during quarterly earnings call. “I don’t pay that much attention to VaR,” Dimon says. “A lot of that is just hedge positions.”

Sept. 29: Winters ousted as co-CEO of investment bank in shakeup. Jes Staley named CEO of investment bank, Black named executive chairman.

Dec. 31: Corporate division ends year with $3.7 billion profit.


Jan. 15: “I wouldn’t focus too much on trading VaR,” Dimon tells analysts on an earnings conference call. “It’s really not an accurate measure of risk.”

April 14: Dimon says on quarterly call that VaR is “an inadequate measure of most things.”

Dec. 31: Macris’s team books $5 billion annual profit, more than a quarter of bank’s net income. CIO finishes year with average value at risk of $57 million, down from $61 million in 2010.


April 4: Office of the Comptroller of the Currency warns banks to scrutinize computer models for VaR for possible flaws, citing the risk of financial loss and damage to reputation.

Nov. 29: One of Iksil’s concentrated bets on an insurance-like product produces a large gain less than a month before expiration as the parent of American Airlines goes bankrupt.

Dec. 31: Iksil records profit of more than $100 million for the year. He’s given more leeway than other traders because of outsized gains in prior years.


January: JPMorgan changes VaR model for chief investment office. By the end of the quarter, the new measure shows risk averaging about half the level that the old model would have indicated.

Jan. 12: John Hogan becomes chief risk officer, replacing Barry Zubrow, who moves to head of regulatory policy.

Feb. 13: Hogan names new team, with Irvin Goldman as new chief risk officer for CIO. The following month, Evan Kalimtgis, co-head of risk management for the CIO securities book, quits after learning Goldman is his new boss.

March 31: Average value at risk falls by $2 million to $67 million during the first quarter, according to the new, flawed formula.

April 5: Bloomberg News is first to report Iksil had roiled markets with CIO positions so large that they were distorting prices. The Wall Street Journal follows with a report that hedge funds are taking positions to bet against JPMorgan. The bank says the CIO hedges structural risks to bring assets and liabilities “into better alignment.”

April 8: JPMorgan, responding to speculation that it’s engaging in proprietary trading, says the CIO “is not focused on short-term profits.”

April 10: The Wall Street Journal reports that Iksil has stopped making trades. A spokesman says the bank believes its risk is now effectively balanced.

April 13: Bloomberg reports that the CIO’s trading positions are so big that they probably can’t be unwound without losing money or disrupting markets, and that Dimon supervised a shift in the CIO’s office in the pasts five years toward making a profit rather than protecting the bank from risk. In a quarterly earnings call, Dimon calls the matter “a complete tempest in a teapot.” JPMorgan posts earnings and distributes VaR data, which is later withdrawn.

May 10: Dimon announces “egregious” CIO loss of about $2 billion and says it may increase by $1 billion in the months ahead. Bank reverts to old VaR formula, which shows average daily trading risk at $129 million, almost double what had been reported. The bank’s filing shows VaR at $186 million on last day of March. Dimon says the trading blunder may blunt efforts to soften pending U.S. regulations that would restrict trading.

May 11: JPMorgan stock falls 9.3 percent, the most in nine months. Federal Reserve, Securities and Exchange Commission, Commodity Futures Trading Commission start reviews of trading.

May 14: Ina Drew retires as head of CIO. Matt Zames, her replacement, shakes up the unit’s leadership. Macris will leave the firm, Bloomberg reports. Office of the Comptroller of the Currency says it’s examining losses and risk management.

May 15: Treasury Secretary Timothy F. Geithner calls CIO trading loss a “pretty significant risk-management failure.” Department of Justice and Federal Bureau of Investigation open inquiries.

May 16: The New York Times, citing unidentified people with knowledge of the matter, reports that the bank’s trading loss could rise by 50 percent to as much as $3 billion.

May 17: The Wall Street Journal describes how Dimon learned of the trading losses and reports that JPMorgan’s losses may total $5 billion.

May 19: Drew began to lose control of the CIO after contracting Lyme disease in 2010, which resulted in her taking a leave, the New York Times reports. In her absence, internal divisions and “clashing egos” contributed to losing trades, the Times says.

May 21: JPMorgan halts stock buybacks. Stock price stands 20 percent below levels that prevailed before CIO loss was announced. Dimon says there’s no outcome that would be a “disaster” for the bank. “It’s ugly, but it’s going to be boxed and eventually it’ll be gone,” the CEO says.

May 22: SEC Chairman Mary Schapiro says bank’s changes in VaR are being scrutinized.

May 25: Bloomberg reports board risk committee lacks members with financial risk experience. Wall Street Journal later reports risk panel may add members. Senate Banking Committee asks Dimon to testify at June hearing.

May 30: Zames tells CIO staff he’ll unwind the Special Investment Group and sell holdings in owner of Ebony magazine, bankrupt Lightsquared Inc., and Technicolor SA.

May 31: Bloomberg reports CIO valued some of its trades at prices that differed from those at its investment bank.

June 5: CIO may lose $4.2 billion, according to estimate by International Strategy & Investment Group Inc. Federal Reserve is providing oversight to JPMorgan’s “efforts to manage and de-risk the portfolio,” Fed Governor Daniel Tarullo says.

June 6: Comptroller of the Currency Thomas J. Curry tells Senate the losses reflect “inadequate risk management” in the CIO and the agency is checking for similar gaps elsewhere in the bank.

June 13: Dimon scheduled to testify before Senate Banking Committee.

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