JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said some top executives at the largest U.S. bank “acted like children” in handling an errant derivatives bet that cost the company more than $6.2 billion last year.
“Instead of helping, they were running around with their head chopped off, ‘what does this mean for me personally, how’s my reputation?’” Dimon said yesterday at a conference in San Francisco hosted by the New York-based bank. Some people “felt they could take advantage of it personally, they were willing to hurt the company by maneuvering.”
The so-called London Whale, the nickname of the U.K.-based trader Bruno Iksil because his trading book was so large, made a wrong-way bet on credit derivatives that led to the company’s single biggest trading loss and at one point wiped out as much as $51 billion in market value. At least a dozen state, federal and international bodies are investigating the trades.
“We had 100 people who worked every day for 90 days to help the real problem -- the risk -- not the ongoing regulatory review, but the real problem, to get the risk down so we didn’t have ongoing exposure,” Dimon said. While some people “acted terribly,” the bank now has the “best management team I’ve ever had in my entire life,” he said.
“You learn the good and the bad about people and that’s invaluable to find out who those people are. Invaluable,” he said.
JPMorgan’s stock recovered, finishing up 32 percent for 2012. The shares closed at $44.34 on April 5 when Bloomberg News first reported that Iksil was having trouble unwinding a large and illiquid position in credit derivatives. The bank gained 0.9 percent today to $45.90 as of 10:16 a.m. in New York.
Dimon said he told employees, some of whom were crying in his office over the loss, that the public backlash would be “really, really bad” for months.
“They are going to attack me, they are going to attack the company. I’m off my high-holy horse,” Dimon, 56, said he told his public relations and investor relations staff. “It is what it is, don’t worry about it.”
Among senior managers who left last year was Chief Investment Officer Ina Drew, who retired four days after the loss was disclosed on May 10. Three traders involved in the loss, Iksil, his supervisor Javier Martin-Artajo and the former CIO head in Europe, Achilles Macris, were dismissed.
Other changes followed. Barry Zubrow, who had overseen JPMorgan’s risk-management function while Iksil expanded his book, retired at the end of last year. Former Chief Financial Officer Doug Braunstein is stepping down to become a vice chairman in the investment bank.
Jes Staley, former CEO of the investment bank who was stripped of day-to-day management duties in July, announced his departure yesterday. Staley, a one-time contender for Dimon’s job, is joining BlueMountain Capital Management LLC, the $12 billion hedge fund that profited from the bank’s trading loss.