Receiving Wide Coverage ...
Your JPMorgan Minute: Irvin Goldman, recently “relieved of his duties” (the Journal’s words) as chief risk officer at JPMorgan’s chief investment office after the $2 billion-and-counting blowup, has prior experience with trading losses. In 2008, he blew at least $10 million during a prior job at the bank as a trader, the Journal reports today. And before he joined JPMorgan, he was fired (the Journal uses the “f” word in this instance) from Cantor Fitzgerald in 2007 after the MBS unit he ran lost $30 million. And JPMorgan put him on leave eight months after he joined, while the NYSE’s electronic trading arm investigated his trading while at Cantor. He had been day trading certain securities for his own personal account that he was also trading with the firm’s money. (Cantor settled the probe for $250,000.) Of course, one learns by making mistakes, so perhaps JPMorgan could argue that these expensive blunders might have given Mr. Goldman an appropriately jaundiced eye for risks (both the market and regulatory kind), and thus justified giving him the CRO role, despite his reportedly scant experience with risk management. The fact that he is the brother-in-law of JPM’s head of corporate regulatory affairs might undermine such an argument, though. … A Times story reports that Ina Drew, JPM’s recently relieved chief investment officer, “began to lose her grip” on the unit a couple years ago after a medical issue necessitated her frequent absences from the workplace. With Drew less involved in the day-to-day, her underlings in New York clashed with their London counterparts over the latter camp’s increasingly risky trades. The Londoners prevailed, apparently through sheer will. Achilles Macris, the direct supervisor of the “London Whale” trader Bruno Iksil, comes off in this story as, well, a heel. … The Journal’s “Heard on the Street” column asks some disquieting questions about JPMorgan’s fiddling with its value-at-risk model during the first quarter: “Had the trade gone bad and someone didn't want the Var model to start alerting others to rising risk?” … The Times’ “DealBook” says the CFTC has joined the SEC and FBI in opening a preliminary investigation into the JPMorgan trading loss. … Politico’s Ben White reports that CFTC chief Gary Gensler will cite the JPM mess in a speech today on cross-border application of reforms to the swaps market. … In case you missed Paul Krugman’s Times column last week, in which he said the JPM loss shows the need for tougher regulation, his column this week says the JPM loss shows the need for tougher regulation. … Finally, though it’s not directly related to the beaching of the Whale, JPMorgan has returned $178 million to the bankruptcy trustee for MF Global. This cash was posted as collateral to JPM, which was MF Global’s lead bank, during the commodities brokerage’s waning days. The FT says the $178 million is not a part of that missing $1 billion-plus, which is evidently still missing.
Wall Street Journal
The Journal analyzes the compensation and performance of CEOs in a range of industries and finds that generally the captains of industry are properly compensated, but some deliver far more to shareholders than they take home, and some do the opposite. Citigroup’s Vikram Pandit is highlighted as one of the “highly paid” CEOs (in contrast to the “bargains”).
The SEC is opening up the market for covered bonds to a wider range of U.S. investors. The agency gave Royal Bank of Canada the all-clear to sell these mortgage-backed securities in what would be the first registered offering in this country. Rep. Scott Garrett of New Jersey and others see covered bonds as a way to bring back private capital in the housing market.
An article takes a broad look at efforts by regulators on both sides of the Atlantic to write resolution plans for large banks.