Jamie Dimon’s JPMorgan Chase sidestepped oversight and misled investors about the size of its complex derivative trade that ended up blowing a $6.2 billion hole in its books, Senate investigators said yesterday after a nine-month probe.
A scathing 301-page report found that top bank brass, including Dimon, purposely understated to federal examiners the size of the trading loss resulting from the so-called London Whale trade.
“We found a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public,” Sen. Carl Levin, head of the Permanent Subcommittee on Investigations, told reporters during a press briefing.
Several former top JPMorgan officials and regulators — including Ina Drew, the former chief investment officer, in her first public comments on the matter, are expected to be grilled about the report’s findings.
The London Whale trade fiasco has sullied Dimon’s reputation like no other single snafu in his 30-year Wall Street career. Dimon, who has already testified about his role in overseeing the trade — and apologized for his actions and inactions — will not be at the hearing.
The report — the most extensive since the trade was made public back in May 2012 — pulls from 90,000 documents, including e-mails, phone conversations and dozens of interviews with current and past JPMorgan staffers as well as regulators.
One such phone exchange had trader Bruno Iksil describing the perilous nature of the trade as “getting idiotic.”
Separately, Dimon and Goldman Sachs CEO Lloyd Blankfein got a yellow light from their biggest Washington regulator yesterday.
The Federal Reserve informed the banks that they must amend plans to return capital to investors in order to get its approval.
The action was a part of the Fed’s two-phase stress test of Wall Street’s biggest financial firms — which last week saw 17 of 18 banks pass an overall test of their ability to withstand some of the markets biggest shocks.
The results of a second phase of the so-called stress tests announced yesterday involved the Fed deciding on the banks’ ability to also take actions — like issue dividends or repurchase shares — and still remain healthy.
The Fed approved 14 of 18 banks outright.
Goldman and JPMorgan were granted only “conditional approval” for their capital plans.
Shares of Goldman and JPMorgan — which closed up in regular trading before the test results were released — each fell about 2 percent in after-hours trading.