Chris Blackhurst: So what's $6bn between friends? Such a big loss and so little fuss

Midweek View: Has a government or business been ragingover the London Whale's exploits? No. Has a client made a civil claim? No

Normally, after the exposure of a great banking scandal, the turn of events is predictable. Regulators launch an urgent inquiry, politicians huff and puff, corporate and supervisory heads roll, charges are brought, arrests made, civil lawsuits launched.

This is why the case of $6.2bn (£4bn) worth of losses run up by JP Morgan in the "London Whale" trading disaster is so strange.

Everything about the affair is odd. From the very off, when Bruno Iksil, the investment bank's trader in London (he was nicknamed the "London Whale" after his location and the scale of the market bets he placed) panicked at what he'd done, nothing has felt right. The initial response of JP Morgan's extremely PR-savvy and image-conscious chief executive, Jamie Dimon, was to dismiss it as a "tempest in a teapot". Later, he apologised, but his first reaction is nevertheless telling: he did not appear to care that much.

Mr Iksil, at the bank's Chief Investment Office (CIO) in London, seems to have been able to operate with a degree of latitude that is extraordinary. Again, hardly anyone is bothered. Indeed, the authorities seem more concerned about attempts to cover up his exploits than the losses piling up and spiralling out of control. He is said to be co-operating with investigators, while charges are reportedly close to being brought in the US against Javier Martin-Artajo and Julien Grout, his former colleagues in London, for allegedly trying to conceal what had occurred. JP Morgan brought a civil suit against Mr Martin-Artajo in London last year but that was dropped.

When the US Senate took an interest, JP Morgan maintained that the CIO was intended to restrict the bank's exposure to risk rather than to make money. This reasoning was dismissed by the Senate committee.

At other banks, faced with huge trading losses, there have been wholesale clearouts. Not at JP Morgan. Some bonuses have been clawed back but that's about it; many of Mr Iksil's colleagues are still there.

Even the bank's shares have not suffered. While JP Morgan is a huge banking organisation, a deficit of $6bn should be enough to raise serious questions about management practice – questions that ought to affect the share price. Not a bit of it. The shares are up by a third from their pre-Whale level.

As for clients, they are similarly unaffected. This is curious, since as one newspaper reported at the weekend on the rapid expansion of the CIO after the financial crisis (with its assets growing from $75bn in 2007 to $375bn in 2012): "JP Morgan, America's biggest bank, was viewed as a safe haven after the financial crisis and saw a huge influx of deposits from businesses and foreign governments." Has there been a business or government jumping up and down about the Whale's exploits? No. Has a civil claim been brought by a client to recover its cash? No.

This may be because the CIO was a proprietary trading operation, playing with the bank's own money. But $375bn? And losses of $6bn, that the bank can swallow with ease? I know prop trading has grown enormously in recent years, but is JP Morgan so rich that $6bn does not hurt? That it does not cause the chief executive to go nuclear, rather than dismiss it so casually? The latter may be true, in which case it confirms the suspicion that banks increasingly function on a different plane, one divorced from ordinary people, where $6bn is a mere trifle.

It does not seem right. What if, though, the Whale's stake money was not the bank's at all, not a client's or clients', but someone else's – namely, the US taxpayer's?

In 2008, after the collapse of Bear Stearns, the US Federal Reserve was desperate to avoid other failures and bank runs. It was anxious to shore up liquidity and persuaded the US banks to take heavily discounted loans. Several, including JP Morgan, did not actually require saving but took the money from the federal "discount window" nonetheless. What if that cash ended up with the Whale?

If true, it would explain JP Morgan's relative insouciance. It would be the reason for the lack of the usual fallout, the absence of legal actions from clients and demands for management heads to roll.

That would not make it, however, any less of a scandal.

Suggested Topics
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
arts + entsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker