Dimon’s ‘Harpooned’ Whale Resurfaces With Senate Findings
The U.S. Senate Permanent Subcommittee on Investigations, led by retiring Senator Carl Levin, will release the panel’s findings after probing JPMorgan’s record trading loss last year. The flawed bet on credit derivatives cost the company more than $6.2 billion and stained Dimon’s 31-year Wall Street career.
The bank’s stock recovered after disclosure of the trading loss at JPMorgan’s chief investment office erased as much as $51 billion in market value. The shares have gained 14 percent this year, closing yesterday at $50.16.
“It’s sad that investors are so complacent,” said Paul Miller, a bank analyst with FBR Capital Markets in Arlington, Virginia. “But political issues never die. It’s a chance to bring these guys up to Congress and make them shiver a little bit.”
Former Chief Investment Officer Ina Drew, 56, among Wall Street’s most powerful women until she resigned four days after the bank disclosed the initial trading losses, will testify tomorrow in her first public appearance since her May 14 exit. Dimon, 57, said he was “dead wrong” to dismiss as a “tempest in a teapot” news reports in early April that a trader had amassed a large and illiquid position in credit derivatives.
The trader, who was dubbed the London Whale because his positions were large enough to move markets and later was identified as Bruno Iksil, isn’t on the Senate panel’s witness list. Dimon, who testified twice about the loss last year before Senate and House banking panels, also won’t return to Capitol Hill for the hearing. Iksil’s managers, former boss Javier Martin-Artajo and Achilles Macris, who ran the CIO in Europe, the Middle East and Africa, weren’t asked to appear.
Douglas Braunstein, who stepped down in January as chief financial officer and is still at the bank, will join Drew before the panel along with Pete Weiland, who oversaw market risk for the CIO and has since left the firm. Ashley Bacon, JPMorgan’s acting chief risk officer, and Michael Cavanagh, who led the internal review of the losses and is now co-CEO for the corporate and investment bank, also are scheduled to testify.
Dimon, who said some executives “acted like children” in dealing with the fallout, removed, pushed out or replaced executives involved in the trade or managing its risk. He also said that the bank had put the matter behind it.
“The London Whale drama has been harpooned, beached, eviscerated, cremated, and killed,” Dimon has told clients and employees, according to a November report in Vanity Fair. “So help me God! It’s fish food.”
The Federal Reserve forced JPMorgan to suspend a $15 billion share repurchase program as a result of the losses and censured the firm in a cease-and-desist order that requires the lender to improve risk controls. The bank’s board of directors cut Dimon’s pay for last year by 50 percent after an internal review held him partly responsible for the botched trades.
The Securities and Exchange Commission, Federal Bureau of Investigation and the U.K.’s Financial Services Authority are among agencies still investigating the Whale trades.
The losses could complicate Dimon’s quest to keep both of his roles as chairman and CEO. The Fed required the board to review the matter and to explain why it doesn’t want to split Dimon’s duties.
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