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JPMorgan Chase Executive to Resign in Trading Debacle

Monday, 14 May 2012 09:15 By Jessica Silver-Greenberg and Nelson D Schwartz, The New York Times News Service | Report

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JP Morgan Chase logo with hole in itSince disclosing a $2 billion trading loss on Thursday, May 10, 2012, Jamie Dimon, the chief executive at JPMorgan Chase, has been getting flayed by the media and other critics for having been a vocal opponent of the regulatory reform while overseeing risky trades. (Photo: James Best Jr. / The New York Times) Stung by a huge trading loss, JPMorgan Chase will replace three top traders starting Monday, including one of the top women on Wall Street, in an effort to stem the ire that the bank faces from regulators and investors.

They are the first departures of leading officials since Jamie Dimon, the chief executive, disclosed the bank's stunning $2 billion loss on Thursday.

The huge scope of the complex credit bet caught senior bank officials off-guard when it began to sour last month and has set off renewed regulatory scrutiny of the industry. Mr. Dimon has largely sidestepped blame for the loss, although he has offered numerous apologies for the blunder, the biggest of his eight-year tenure at JPMorgan, the nation's largest bank.

Ina Drew, a 55-year-old banker who has worked at the company for three decades and is the chief investment officer, has offered to resign and will step aside Monday, said several bank executives who would not speak publicly because the resignations had not been completed.

Her exit would be a precipitous fall for a trusted lieutenant of Mr. Dimon. Last year, Ms. Drew earned roughly $14 million, making her the bank's fourth-highest-paid officer. From her desk in Manhattan, she oversaw the London office that assembled the trade, a growing unit that oversees a portfolio of nearly $400 billion. Two traders who worked for Ms. Drew are also likely to leave shortly. Ms. Drew was not available for comment.

Mr. Dimon, who will face shareholders at the company's annual meeting Tuesday, has been on a public campaign of contrition in recent days. Mr. Dimon, the famously confident, even cocky, executive, repeated his apologies in a broadcast Sunday of NBC's "Meet the Press."

"We made a terrible, egregious mistake and there's almost no excuse for it," Mr. Dimon said, adding that the bank was "sloppy" and "stupid." He also acknowledged that the timing of the loss was a gift for advocates of more stringent regulation.

Ms. Drew had tearfully offered to resign multiple times since the scale of the loss became apparent in late April, but Mr. Dimon had held off until now on accepting it, said people familiar with the situation.

A skilled trader who once said she relished a crisis, Ms. Drew — and the disastrous trade — had become a liability for the firm, whose announcement of the trading loss caused JPMorgan's shares to plunge 9.3 percent on Friday. It was unclear what type of severance package Ms. Drew will receive.

"It's not surprising that officials there are taking the fall, but this is one of the fastest movements I have seen," said Michael Mayo, an analyst with Credit Agricole Securities in New York. "Mr. Dimon gets an A for moving to stem the wrath of regulators, but an F for not finding the problem in the first place."

With the furor intensifying, former JPMorgan executives said, Ms. Drew was clearly feeling pressure to step down, especially with regulators and members of Congress pointing to the loss as an example of why tighter oversight of the nation's biggest financial institutions is needed.

"The bank has taken bigger losses in investment banking and elsewhere, but because of the timing, she is being piled upon as this huge failure," said a former senior executive, who spoke on the condition of anonymity because of the delicate nature of the situation.

Executives said that within the last several months, Ms. Drew told traders at the bank's chief investment office to execute trades meant to shield the bank from the turmoil in Europe. Ms. Drew thought those bets could protect the bank from losses and even earn a tidy profit, these employees said.

But when market tides abruptly shifted in April and early May, Ms. Drew's instructions to traders to trim what had become a gigantic bet came too late to avoid racking up losses that could eventually exceed the current $2 billion estimate. Within the bank, there is also ample frustration that instead of reducing the losses, Ms. Drew's traders may have worsened them.

Besides Ms. Drew, Achilles Macris, a top JPMorgan official in London, is expected to depart, as is a senior London trader, Javier Martin-Artajo. Under Mr. Dimon's leadership, the chief investment office has grown substantially in recent years, which until recently was little noticed by analysts and investors.

Some former colleagues said Ms. Drew pushed hard for the bank to take calculated risks. She was never a "schmoozer" and kept a very low profile, bank executives said, at both JPMorgan and Chemical Bank, one of JPMorgan's predecessor companies, which she joined in 1982. But Ms. Drew was not shy with her opinions. She routinely told senior executives in the firm's trading businesses if she did not agree with their positions, one of the former colleagues said.

Also under scrutiny is another of Ms. Drew's subordinates, Bruno Iksil, the trader in London who gained notoriety last month for his role in the losses. He was nicknamed the London whale, because the positions he took were so large that they distorted credit prices. Other departures in London are likely.

Former senior-level executives at JPMorgan said the loss was the first real misstep that Ms. Drew had experienced, having successfully navigated the financial crisis. They added that the recent trades were not meant to drum up bigger profits for the bank, but to offset risk.

"This is killing her," one of the former JPMorgan executives said, adding that "in banking, there are very large knives."

In February, Ms. Drew traveled to Washington with other JPMorgan executives, including Barry Zubrow, who oversees regulatory affairs, to explain why strategies like the one that later soured could offset risk within the bank. It was Ms. Drew's first such trip to Washington, and she was called upon as an expert to discuss how to manage the gap between assets and liabilities for big banks, specifically how to handle the capital risks posed by having more in deposits than in loans.

"She's a person of the highest integrity," said Walter Shipley, the former chief executive of Chase Manhattan and before that, Chemical Bank. "She was conservative on the risk side, she's not a speculator." Mr. Shipley retired from Chase in 2000, just before its merger with J.P. Morgan, but has kept in touch with Ms. Drew.

Mr. Shipley had lunch with her two months ago, he said, adding that Ms. Drew, her husband, and two children live in Short Hills, N.J., not far from his home in Summit.

Despite Ms. Drew's low profile beyond JPMorgan Chase — many top Wall Street figures said Sunday that they had never heard of her until the news of the trading loss — she was a passionate advocate for women within the firm. In the largely male word of the banking elite, trading is an especially testosterone-laden niche, but Ms. Drew encouraged women to go into trading, arguing that working predictable market hours was actually a benefit in terms of balancing career and family.

"I'm very upset for her," said William Harrison, who was chief executive of JPMorgan Chase before Mr. Dimon's tenure. "She looked out for the company first. I've always been a great fan."

Michael J. de la Merced and Ben Protess contributed reporting.

This article, "JPMorgan Chase Executive to Resign in Trading Debacle," originally appeared at The New York Times.

© 2014 The New York Times Company Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.

Jessica Silver-Greenberg

Jessica Silver-Greenberg is a reporter at The New York Times.

 


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JPMorgan Chase Executive to Resign in Trading Debacle

Monday, 14 May 2012 09:15 By Jessica Silver-Greenberg and Nelson D Schwartz, The New York Times News Service | Report

Support Truthout’s work by making a tax-deductible donation: click here to contribute.

JP Morgan Chase logo with hole in itSince disclosing a $2 billion trading loss on Thursday, May 10, 2012, Jamie Dimon, the chief executive at JPMorgan Chase, has been getting flayed by the media and other critics for having been a vocal opponent of the regulatory reform while overseeing risky trades. (Photo: James Best Jr. / The New York Times) Stung by a huge trading loss, JPMorgan Chase will replace three top traders starting Monday, including one of the top women on Wall Street, in an effort to stem the ire that the bank faces from regulators and investors.

They are the first departures of leading officials since Jamie Dimon, the chief executive, disclosed the bank's stunning $2 billion loss on Thursday.

The huge scope of the complex credit bet caught senior bank officials off-guard when it began to sour last month and has set off renewed regulatory scrutiny of the industry. Mr. Dimon has largely sidestepped blame for the loss, although he has offered numerous apologies for the blunder, the biggest of his eight-year tenure at JPMorgan, the nation's largest bank.

Ina Drew, a 55-year-old banker who has worked at the company for three decades and is the chief investment officer, has offered to resign and will step aside Monday, said several bank executives who would not speak publicly because the resignations had not been completed.

Her exit would be a precipitous fall for a trusted lieutenant of Mr. Dimon. Last year, Ms. Drew earned roughly $14 million, making her the bank's fourth-highest-paid officer. From her desk in Manhattan, she oversaw the London office that assembled the trade, a growing unit that oversees a portfolio of nearly $400 billion. Two traders who worked for Ms. Drew are also likely to leave shortly. Ms. Drew was not available for comment.

Mr. Dimon, who will face shareholders at the company's annual meeting Tuesday, has been on a public campaign of contrition in recent days. Mr. Dimon, the famously confident, even cocky, executive, repeated his apologies in a broadcast Sunday of NBC's "Meet the Press."

"We made a terrible, egregious mistake and there's almost no excuse for it," Mr. Dimon said, adding that the bank was "sloppy" and "stupid." He also acknowledged that the timing of the loss was a gift for advocates of more stringent regulation.

Ms. Drew had tearfully offered to resign multiple times since the scale of the loss became apparent in late April, but Mr. Dimon had held off until now on accepting it, said people familiar with the situation.

A skilled trader who once said she relished a crisis, Ms. Drew — and the disastrous trade — had become a liability for the firm, whose announcement of the trading loss caused JPMorgan's shares to plunge 9.3 percent on Friday. It was unclear what type of severance package Ms. Drew will receive.

"It's not surprising that officials there are taking the fall, but this is one of the fastest movements I have seen," said Michael Mayo, an analyst with Credit Agricole Securities in New York. "Mr. Dimon gets an A for moving to stem the wrath of regulators, but an F for not finding the problem in the first place."

With the furor intensifying, former JPMorgan executives said, Ms. Drew was clearly feeling pressure to step down, especially with regulators and members of Congress pointing to the loss as an example of why tighter oversight of the nation's biggest financial institutions is needed.

"The bank has taken bigger losses in investment banking and elsewhere, but because of the timing, she is being piled upon as this huge failure," said a former senior executive, who spoke on the condition of anonymity because of the delicate nature of the situation.

Executives said that within the last several months, Ms. Drew told traders at the bank's chief investment office to execute trades meant to shield the bank from the turmoil in Europe. Ms. Drew thought those bets could protect the bank from losses and even earn a tidy profit, these employees said.

But when market tides abruptly shifted in April and early May, Ms. Drew's instructions to traders to trim what had become a gigantic bet came too late to avoid racking up losses that could eventually exceed the current $2 billion estimate. Within the bank, there is also ample frustration that instead of reducing the losses, Ms. Drew's traders may have worsened them.

Besides Ms. Drew, Achilles Macris, a top JPMorgan official in London, is expected to depart, as is a senior London trader, Javier Martin-Artajo. Under Mr. Dimon's leadership, the chief investment office has grown substantially in recent years, which until recently was little noticed by analysts and investors.

Some former colleagues said Ms. Drew pushed hard for the bank to take calculated risks. She was never a "schmoozer" and kept a very low profile, bank executives said, at both JPMorgan and Chemical Bank, one of JPMorgan's predecessor companies, which she joined in 1982. But Ms. Drew was not shy with her opinions. She routinely told senior executives in the firm's trading businesses if she did not agree with their positions, one of the former colleagues said.

Also under scrutiny is another of Ms. Drew's subordinates, Bruno Iksil, the trader in London who gained notoriety last month for his role in the losses. He was nicknamed the London whale, because the positions he took were so large that they distorted credit prices. Other departures in London are likely.

Former senior-level executives at JPMorgan said the loss was the first real misstep that Ms. Drew had experienced, having successfully navigated the financial crisis. They added that the recent trades were not meant to drum up bigger profits for the bank, but to offset risk.

"This is killing her," one of the former JPMorgan executives said, adding that "in banking, there are very large knives."

In February, Ms. Drew traveled to Washington with other JPMorgan executives, including Barry Zubrow, who oversees regulatory affairs, to explain why strategies like the one that later soured could offset risk within the bank. It was Ms. Drew's first such trip to Washington, and she was called upon as an expert to discuss how to manage the gap between assets and liabilities for big banks, specifically how to handle the capital risks posed by having more in deposits than in loans.

"She's a person of the highest integrity," said Walter Shipley, the former chief executive of Chase Manhattan and before that, Chemical Bank. "She was conservative on the risk side, she's not a speculator." Mr. Shipley retired from Chase in 2000, just before its merger with J.P. Morgan, but has kept in touch with Ms. Drew.

Mr. Shipley had lunch with her two months ago, he said, adding that Ms. Drew, her husband, and two children live in Short Hills, N.J., not far from his home in Summit.

Despite Ms. Drew's low profile beyond JPMorgan Chase — many top Wall Street figures said Sunday that they had never heard of her until the news of the trading loss — she was a passionate advocate for women within the firm. In the largely male word of the banking elite, trading is an especially testosterone-laden niche, but Ms. Drew encouraged women to go into trading, arguing that working predictable market hours was actually a benefit in terms of balancing career and family.

"I'm very upset for her," said William Harrison, who was chief executive of JPMorgan Chase before Mr. Dimon's tenure. "She looked out for the company first. I've always been a great fan."

Michael J. de la Merced and Ben Protess contributed reporting.

This article, "JPMorgan Chase Executive to Resign in Trading Debacle," originally appeared at The New York Times.

© 2014 The New York Times Company Truthout has licensed this content. It may not be reproduced by any other source and is not covered by our Creative Commons license.

Jessica Silver-Greenberg

Jessica Silver-Greenberg is a reporter at The New York Times.

 


Hide Comments

blog comments powered by Disqus