JPMorgan Chase & Co. chief executive Jamie Dimon sought to hide escalating trading losses that surpassed $6.2 billion, misled investors and dodged regulators as the bank's position deteriorated last year, a Senate probe said.
The largest U.S. bank "mischaracterized high-risk trading as hedging" and withheld key information from its primary regulator, sometimes at Dimon's behest, according to a report Thursday by the Senate Permanent Subcommittee on Investigations. The 301-page document also said managers manipulated internal risk models and pressured traders to overvalue their positions in an effort to hide growing losses in a "monstrous" credit derivatives portfolio in London.
"We found a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public," chairman Carl Levin, a Michigan Democrat, told reporters Thursday after his investigators spent nine months combing through 90,000 documents and interviewing current and former executives.
Former chief investment officer Ina Drew, 56, among Wall Street's most powerful women until she resigned in May four days after the bank disclosed the initial trading losses, will testify Friday at a subcommittee hearing in her first public appearance since leaving the Manhattan-based bank. Lawmakers have pushed banks to halt so-called proprietary trading.
"Mr. Dimon has not acknowledged that what the SCP morphed into was a high-risk proprietary trading operation," according to the report, referring to the synthetic credit portfolio.
JPMorgan has "repeatedly acknowledged mistakes" in handling the loss, Mark Kornblau, a spokesman for the bank, said in an email.
"Our senior management acted in good faith and never had any intent to mislead anyone," Kornblau said. The bank cooperated with the investigation, he said. "We have taken significant steps to remediate these issues and to learn from them."
JPMorgan, regarded on Wall Street as one of the best- managed banks in the world, lost more than $6.2 billion last year in a bet using derivatives, investments that derive their value from underlying securities. The portfolio became "huge" and "monstrous," according to excerpts of emails and recorded conversations from trader Bruno Iksil, nicknamed the "London Whale" because his portfolio was so large it moved markets.