Receiving Wide Coverage ...
Another JPMorgasbord: And we’re still breaking it down into digestible portions for you.
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The breaking news. JPMorgan’s trading losses have swelled by 50% in recent days to $3 billion, the Times’ “DealBook” reports. Somewhat less shocking is the “DealBook” story saying that Bruno Iksil, the “London Whale” trader who reportedly placed the disastrous bets, is “expected to leave the bank.” (JPMorgan told Bloomberg yesterday afternoon that Iksil was still working there.)
The story behind the story. The FT and the Journal offer “tick, tock” narratives that recount the behind-the-scenes events leading up to the $2 billion trading loss with dramatic details (before he was known as the Whale, Iksil was nicknamed “the Caveman” for making aggressive trades; the earliest hints of the trader’s impact on the credit derivative market were aired at an investor conference in February — convened at JPMorgan’s offices.)
Fallout in Washington. The Journal says that White House is now pushing for a tough final version of the Volcker rule, even though it’s a matter of widespread debate and speculation whether the Whale’s trades were, er, speculative (verboten under Volcker) or true hedges (which would be kosher). Meanwhile, likely GOP presidential candidate Mitt Romney and the Republican House Financial Services chairman Spencer Bachus warned against overreacting to JPM’s stumble. “The $2 billion J.P. Morgan lost someone else gained,” Romney said.
Pundits pontificate. Now that we can all see Jamie Dimon is a mere mortal, JPMorgan ought to split the chairman and CEO roles as any well-governed public company would, writes John Gapper in the FT. Dimon, who holds both titles, “has been behaving imperiously,” Gapper says. (The piece is illustrated with a caricature of Dimon and Facebook’s Mark Zuckerberg as Roman emperors — we think the boy King Tutankhamun might make a more fitting avatar for Zuck.) Writing in the Times, Jesse Eisinger (the ProPublica journalist, not the actor who played Zuckerberg in “The Social Network”) says all this talk about JPM’s problems underscoring the need for stronger reforms is just a big old sissy cop-out. “The first question on everyone’s mind should be whether any existing laws were broken,” Eisinger writes, calling for “a serious investigation” into whether the bank misled investors about the trades. Another Times contributor, Simon Johnson, similarly calls for an investigation by an independent counsel — the reported FBI and SEC probes, he says, could be compromised by “the strong political connections between JPMorgan Chase and the Obama administration.”
It’s all about money. A Journal article says the executives and traders responsible for the loss at JPMorgan will be an important test case for compensation clawback policies. They’ve been around for a decade, since the Sarbanes-Oxley Act was passed in the wake of the Enron fraud, but clawback powers have until now seldom been used. Another Journal piece calls out a number of major investors, including George Soros, who purchased or increased stakes in JPMorgan in the first quarter, before the trading loss led to a big selloff that shaved 12% off the stock’s value. And the Post reports that a “class action lawsuit” has been filed on shareholder’s behalf against the bank. We put that phrase in quotes because we’re wondering if the case should properly be referred to as “a lawsuit seeking class action status.” Clunkier wording, perhaps, but you wouldn’t refer to an applicant to a law school as “a student” there.
