JP Morgan executives may have to return pay
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Thursday 14 June 2012
Executives responsible for JP Morgan Chase's $2bn (£1.3bn)-plus trading losses will have some of their pay clawed back, the bank's chief executive, Jamie Dimon, told the US Congress yesterday.
In a Senate Banking Committee hearing, Mr Dimon was grilled on the chain of events that led to JP Morgan's announcement last month that complex derivatives trades had gone badly awry — and why he had originally dismissed concerns from analysts as "a tempest in a teapot".
The chief executive blamed that comment on underlings in the bank's chief investment office (CIO), where traders made multibillion-dollar bets in the credit markets.
"I was on the road," Mr Dimon said. "I called Ina Drew who ran the CIO. I spoke to our risk officers. I was assured by them that this was an isolated, small issue."
Ms Drew, who resigned last month, and others, could have to give back some of their pay and bonuses if the board decides they exercised bad judgement, he said, the first time such a policy has been invoked.
The complex trades were designed to reduce JP Morgan's bet on a new credit crisis, which earlier this year appeared to be receding as a possibility.
Instead of just cutting existing positions, the CIO layered on what it believed was countervailing trades.
The portfolio "morphed into something I cannot defend," Mr Dimon said.
The Democratic Senator Robert Menendez shot back a rhetorical question: "What did it morph into? Russian roulette?"
Although the revelations of high-risk practices inside JP Morgan have invigorated supporters of Wall Street reform, Republican opponents also used the hearing to launch broadsides against the Dodd-Frank laws which were introduced to prevent a repeat of the credit crisis.
Demonstrators greeted Mr Dimon's arrival with complaints not about the trading losses but about foreclosures by JP Morgan's retail bank.
Mr Dimon appeared voluntarily, and said he was "embarrassed" by the trading debacle but that the losses would not dent the bank's "fortress balance sheet".
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