The buck stops with Jamie Dimon.
That’s the view of Boaz Weinstein, the hedge-fund manager who first speared JPMorgan’s infamous “London Whale” trade. He now thinks that requiring bank CEOs to sign off on such trades is the only way to prevent debacles.
As the “ultimate boss” of JPMorgan, Dimon should have had to approve the complicated trade that ended up blowing a $6.2 billion hole in the bank’s earnings last year.
“If you had a rule that anytime, anyone wants to make an investment in any one thing greater than $10 billion or $20 billion, the boss has to sign off on it — the ultimate boss,” then those types of disasters wouldn’t happen, Boaz said today at the Absolute Return Symposium, a hedge fund conference.
Taking the other side of the trade was a lay-up for hedge-fund traders like Weinstein. JPMorgan trader Bruno Iksil was selling protection via credit default swaps on an index of investment grade companies.
“It was a fairly easy and obvious trade to do,” Boaz said, adding that the index was mispriced because “it didn’t make sense to me that you could buy a dollar for 77 cents.”
What’s historically significant, Weinstein added, is that only one firm was “the entire other side of the trade. There was no one else that had that position.”