Photo by Michael Kappeler/AFP/Getty Images.
UPDATE: JPMorgan Chase's chief investment officer will lose her job in the wake of the company's $2 billion loss.
Bloomberg reports that Ina Drew, 55, will retire. The head of global fixed income at the company, Matt Zames, will take over the CIO position. According to the Associated Press, sources say that Drew had offered to resign "several" times since the disclosure on Thursday of the loss.
Drew made $15.5 last year and $16 million the year before, and was one of the company's highest-paid employees, as well as one of two women on its operating committee. The Wall Street Journal is reporting that two other executives are expected to resign over the loss as well, including Bruno Iksil, aka the "London Whale."
Sunday, May 13 Jamie Dimon, the CEO of JPMorgan Chase acknowledged Sunday he had been “dead wrong” to dismiss concerns about the bank’s trading loss as a “tempest in a teapot.” Dimon added: "We got very defensive. And people started justifying everything we did." Although the country’s largest bank lost at least $2 billion, the bank isn’t threatened, Dimon said in an interview that aired Sunday on NBC’s Meet the Press.
Still, Dimon emphasized that he understood the loss was no small matter. “We made a terrible, egregious mistake,” Dimon said, according to the Associated Press. “There's almost no excuse for it.”
Saturday, May 12: After reporting a surprise $2 billion trading loss, JPMorgan Chase lost $15 billion in market value and its credit rating was downgraded. Perhaps more significantly though, it reignited calls for stricter oversight of the banking industry, reports Reuters. The Washington Post says lawmakers have been suggesting that JPMorgan’s charismatic chief executive Jamie Dimon was facing a type of “poetic justice” after he led the fight against stricter regulation of the financial market. The loss was also a big personal hit for Dimon, whose reputation had turned him into the country’s most influential banker.
“The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today,” Rep. Barney Frank said.
The lobbying efforts by JPMorgan against regulation led to a “a big enough loophole that a Mack truck could drive right through it,” Sen. Carl Levin said, referring to the legislation known as the Volcker Rule that aimed to place limits on proprietary trading. The New York Times explains that the loophole is known as portfolio hedging, which “essentially allows banks to view an investment portfolio as a whole and take actions to offset the risks of the entire portfolio.” Levin calls it “a license to do pretty much anything.”
The loss may be huge but will only dent the quarterly profits at the nation’s largest bank but it could lead to greater scrutiny of risk management from the Federal Reserve, notes Bloomberg. In an interview with NBC, Dimon said it wasn’t clear whether the bank had broken any laws.
For now it seems clear that not only JPMorgna but other bankers will face a much harder time trying to get lawmakers to soften financial regulations. The Associated Press points out that criticism of JP Morgan didn’t just come from the “traditional chorus of detractors,” but also from lawmakers who have been good friends to the industry in the past.