JPMorgan Pay Fueled Risk Amid London Whale Loss: Report

JPMorgan Chase & Co., the biggest U.S. bank by assets, compensated chief investment office traders in a way that encouraged risk-taking before the unit amassed losses exceeding $6.2 billion, a Senate committee said.

Pay that rewarded “effective risk management” would have suggested the synthetic credit portfolio functioned as a hedge, the Senate Permanent Subcommittee on Investigations said yesterday in a report on the New York-based bank’s so-called London Whale loss. Instead, compensation practices suggest the bets “functioned more as a proprietary-trading operation.”