Top banker to leave after $2bn loss14/05/2012 - 07:18:05
America’s biggest bank is expected to accept the resignation of one of the highest-ranking women on Wall Street after it lost $2bn in a trading blunder, a person familiar with the matter said.
JPMorgan Chase will accept the resignation of Ina Drew, its chief investment officer, and at least two other executives will be held accountable for the mistake, the source said last night.
The casualties come as the bank seeks to minimise the damage caused by the trading loss, disclosed on Thursday by chief executive Jamie Dimon.
Investors shaved almost 10% off JPMorgan’s stock price on Friday, and Mr Dimon has said the mistake will complicate the efforts of banks to fight certain regulatory changes three years after the financial crisis.
Ms Drew, 55, is a top lieutenant to Mr Dimon. She was paid $15.5m last year and almost $16m in 2010, making her one of the highest-paid officials at JPMorgan, according to a regulatory filing.
She declined to comment early today, as did Kristin Lemkau, a spokeswoman for JPMorgan Chase.
The Wall Street Journal reported yesterday that Ms Drew and two other JPMorgan executives were expected to resign soon.
The Journal also said Bruno Iksil, the JPMorgan trader identified as the “London whale” because of the giant bets he placed, was also likely to leave, but it was not clear when that would happen.
The surprise loss has been a black eye for the bank and for Mr Dimon, who is known in the industry both as a master of risk management and as an outspoken opponent of some proposed regulation since the crisis.
JPMorgan’s disclosure has led politicians and critics of the banking industry to call for tougher regulation of Wall Street. Many post-crisis rules governing risk-taking by banks are still being written.
Mr Dimon told a TV interview shown yesterday that he was “dead wrong” when he dismissed concerns about the bank’s trading last month.
“We made a terrible, egregious mistake,” he said on NBC’s 'Meet The Press'. “There’s almost no excuse for it.”
Mr Dimon said he did not know the extent of the problem when he said in April that the concerns were a “tempest in a teapot”.
The loss came in the past six weeks. Mr Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.
A piece of the 2010 financial reform law known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Mr Dimon has said the trading involved in the two billion-dollar loss would not have fallen under the rule.
Democratic Rep Barney Frank, who was one of the namesakes of the 2010 financial overhaul law, known as Dodd-Frank, told ABC’s This Week that he hoped the final version of the Volcker rule would prevent the type of trading that led to the massive loss at JPMorgan.
Mr Dimon conceded to NBC that the bank “hurt ourselves and our credibility” and expected to “pay the price for that”. Asked what the price should be, Democratic senator Carl Levin said banks would lose their fight to weaken the rule.
“This was not a risk-reducing activity that they engaged in. This increased their risk,” he told NBC.
“So we’ve got to be very, very careful that the regulators here are not undermined by this huge effort to weaken the rule by putting in a huge loophole” that includes the trading involved in the JPMorgan loss,“
Mr Dimon said the bank was open to inquiries from regulators. He has also promised, in an email to the bank’s employees and in a conference call with stock analysts, to get to the bottom of what happened and learn from the mistake.
He told NBC that he supported giving the US government the authority to dismantle a failing big bank and wipe out shareholder equity. But he stressed that JPMorgan, the largest bank in the United States, was “very strong.”
Addressing public anger towards Wall Street, Mr Dimon said he wants a more equitable society and did not mind paying higher taxes. But he said attacking all of business was “very counterproductive”.
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