nach oben

Erschienen in:

2018 | OriginalPaper | Buchkapitel

12. Beaching the London Whale

verfasst von : Elise J. Bean

Erschienen in: Financial Exposure

Verlag: Springer International Publishing

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This chapter exposes how JPMorgan Chase engaged in high-stakes credit derivatives trading, lost billions of dollars, and then tried to blame the losses on a single trader dubbed the London Whale. It describes the Levin-led inquiry that opened a window onto the bank’s hidden world of high-risk derivatives trading and exposed a JPMorgan derivatives trading culture that piled on risk, misstated derivative values, disregarded risk limits, manipulated risk assessment models, and hid losses. The chapter also recounts the role of JPMorgan CEO Jamie Dimon in the facts and investigation, and explains how the London whale fiasco led to new regulatory safeguards and enforcement actions.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Vorheriges Kapitel Exposing Corporate Tax Dodgers

Nächstes Kapitel Targeting Commodity Speculation

See, for example, “The Senate’s Muckraker,” New York Times, Joe Nocera (3/19/2013), http://nyti.ms/2j4IXfL.

The information in this chapter is based on “JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses,” S. Hrg. 113-96 (3/15/2013), Volumes 1–2 (hereinafter “PSI London Whale Hearing”), https://www.gpo.gov/fdsys/pkg/CHRG-113shrg80222/pdf/CHRG-113shrg80222.pdf (Volume 1) and https://www.gpo.gov/fdsys/pkg/CHRG-113shrg85162/pdf/CHRG-113shrg85162.pdf (Volume 2).

“Report of JPMorgan Chase & Co. Management Task Force Regarding 2012 CIO Losses,” reprinted in PSI London Whale Hearing, Volume 1, Exhibit 98, at 963.

PSI London Whale Hearing, Volume 1, Exhibit 3, at 528.

Id., at 288–289, 293–297; see also United States v. Javier Martin-Artajo, Case No. 13-MAG-1975 (USDC SDNY) Sealed Complaint (8/9/2013), ¶¶ 34, 38–39.

See In re JPMorgan Chase & Co., “Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order,” (9/19/2013), at ¶¶ III-4, 5, 7, https://www.sec.gov/litigation/admin/2013/34-70458.pdf.

PSI London Whale Hearing, Volume 1, at 659, Exhibit 32c; see also hearing testimony, at 43–44.

The bank paid $200 million to the SEC, and the remaining $720 million to the Federal Reserve, OCC, and U.K. Financial Conduct Authority. “JPMorgan Chase Agrees to Pay $200 Million and Admits Wrongdoing to Settle SEC Charges; Firm Must Pay $920 Million in Total Penalties in Global Settlement,” SEC Press Release No. 2013-187 (9/19/2013), https://www.sec.gov/news/press-release/2013-187.

“JPMorgan Chase Reaches Settlements with SEC, FCA, OCC and Federal Reserve on CIO Trading Matter,” Statement by JPMorgan Chase & Co. (9/19/2013), http://bit.ly/2AbAxy7.

Jamie Dimon 2013 letter to JPMorgan Chase & Co. shareholders, at 6–10, http://bit.ly/2AbouRn.

“CFTC Files and Settles Charges Against JPMorgan Chase Bank, N.A., for Violating Prohibition on Manipulative Conduct in Connection with ‘London Whale’ Swaps Trades,” CFTC Press Release, No. PR6737-13 (10/16/2013), http://www.cftc.gov/PressRoom/PressReleases/pr6737-13.

See, for example, In re JPMorgan Chase & Co., “Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order,” (9/19/2013), https://www.sec.gov/litigation/admin/2013/34-70458.pdf; In re JPMorgan Chase Bank, N.A., CFTC Docket No. 14-1, Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the Commodity Exchange Act, Making Findings and Imposing Remedial Sanctions (10/16/2013), http://bit.ly/2AZHYpp.

See, for example, “Ex-JPMorgan Executive Fined $1.1 Million Over ‘London Whale’,” Bloomberg, Suzi Ring (2/9/2016), https://bloom.bg/1oo8dPa.

“Attorney General, Manhattan U.S. Attorney, and FBI Assistant Director-in-Charge Announce Charges Against Two Derivatives Traders in Connection with Multi-Billion Dollar Trading Loss at JPMorgan Chase & Company; Defendants Hid More than Half-a-Billion Dollars in Losses Resulting from Derivatives Trading in JPMorgan’s Chief Investment Office; a Third Trader, Bruno Iksil, Entered a Non-Prosecution Cooperation Agreement,” DOJ Press Release No. 13-272 (8/14/2013), https://www.justice.gov/usao-sdny/pr/attorney-general-manhattan-us-attorney-and-fbi-assistant-director-charge-announce. The SEC also filed parallel civil charges. See “Securities and Exchange Commission v. Javier Martin-Artajo and Julien G. Grout, Civil Action No. 13-CV-5677 (S.D.N.Y.),” SEC Press Release No. 22779 (8/14/2013), http://www.sec.gov/litigation/litreleases/2013/lr22779.htm.

“Acting U.S. Attorney Announces Filing of Motion to Dismiss Pending Charges in United States V. Javier Martin-Artajo and Julien Grout,” DOJ Press Release No. 17-228 (7/21/2017), https://www.justice.gov/usao-sdny/pr/acting-us-attorney-announces-filing-motion-dismiss-pending-charges-united-states-v.

Jamie Dimon 2013 letter to JPMorgan Chase & Co. shareholders, at 7–9, http://bit.ly/2AbouRn.

See, for example, PSI London Whale Hearing, at 35; “JPMorgan Halves Dimon’s Bonus to $10.5 Million after London Whale Fiasco,” Forbes, Steve Schaefer (1/16/2013), http://bit.ly/2zP8fbE.

Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 619, P.L. 111-203 (7/21/2010).

Proprietary trading was banned by Section 16 of the Glass-Steagall Act of 1933, P.L. 73-66, but that ban was dissolved by the Gramm-Leach-Bliley Act of 1999, also known as the Financial Services Modernization Act, P.L. 106-102, which repealed the Glass-Steagall Act.

“Fed’s Tarullo Says Volcker Rule Will Prevent More London Whales,” Bloomberg, Jeff Kearns and Jesse Hamilton (11/23/2013), https://bloom.bg/2hAXJui.

See also steps taken by the OCC with respect to the banks it regulates, PSI London Whale Hearing, OCC Responses to Questions for the Record, Exhibit 101, at 1126.

See, for example, id., at 1127.

See, for example, id., at 1116–1117.

See, for example, id., at 1121; see also “OCC Accounting Guidance to Banks That File Call Reports—On Derivatives Valuation,” (7/1/2013), http://www.fdic.gov/news/news/financial/2013/fil13029a.pdf (“[I]t would be inappropriate for an entity to alter its valuation methodology or policies to achieve a desired financial reporting outcome. An example of an inappropriate change in valuation methodology that would result in a fair value estimate that would not be representative of a derivative position’s exit price would be for an entity to migrate from a mid-market pricing convention to using a price within the bid-ask spread that is more advantageous to the entity to offset the impact of adverse changes in market prices or otherwise mask losses.”).

See, for example, PSI London Whale Hearing, OCC Responses to Questions for the Record, Exhibit 101, at 1119–1121.

See, for example, id., at 1123–1126.

See, for example, “Reducing Excessive Variability in Banks’ Regulatory Capital Ratios: A Report to the G20,” Basel Committee on Banking Supervision (11/2014), http://www.bis.org/bcbs/publ/d298.pdf; “The Manipulation of Basel Risk-Weights,” Mike Mariathasan, Ouarda Merrouche, Journal of Financial Intermediation, Volume 23, Issue 3 (2014), at 300–321, http://econpapers.repec.org/article/eeejfinin/v_3a23_3ay_3a2014_3ai_3a3_3ap_3a300-321.htm.

Titel: Beaching the London Whale
verfasst von: Elise J. Bean
Verlag: Springer International Publishing
Buch: Financial Exposure
Print ISBN: 978-3-319-94387-9

Electronic ISBN: 978-3-319-94388-6

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-94388-6_12