The fallout from JPMorgan’s Thursday evening disclosure continued through the weekend. Mr. Dimon rushed to re-tape a weekend appearance on Meet the Press, and the SEC launched an investigation. Ina Drew, JPMorgan’s chief investment officer and one of the most powerful women on Wall Street, resigned on Monday, and rumors swirled that her entire London operation might be next. On Tuesday morning, President Barack Obama went on The View to resume his intermittent call for banking reform. At JPMorgan’s annual shareholder meeting the same day, Mr. Dimon said the firm may endeavor to claw back bonuses as it seeks to set things right with investors.
Though Wall Street maintained its habit of staying quiet publicly when a rival is down, banking analysts worried about reputational risk and suggested Mr. Dimon tone down his public profile. Nancy Bush, an independent bank analyst and founder of NAB Research, went so far as to suggest the previously unthinkable: that the world’s premier banking franchise should take a page from the playbook of its embattled neighbor to the south.
“The big banks should be doing what Bank of America is doing—go about the business of de-risking and stay out of the spotlight,” Ms. Bush told The Observer. “Say what you will about Brian Moynihan, but in the very best of circumstance he would not be out there trying to shape public opinion.”
From the moment the London Whale emerged in the public eye in April, the forensic technicians of the financial press have poured over the known details of the trade. Federal investigators are now lining up to answer several key questions: Was the firm merely hedging “downside risk,” as chief financial officer Doug Braunstein suggested in April, or had JPMorgan transformed its chief investment office into a profit center?
It would be just as interesting to learn how the firm’s blue-ribbon risk management team blundered in such a familiar manner: Like Long-Term Capital Management, Amaranth Advisors and countless others, JPMorgan’s chief investment office assumed a massive position, then watched helplessly as competitors attacked the firm’s holdings. “We see this time and again,” said Bert Ely, chief executive officer of bank consulting firm Ely & Co. “JPMorgan became the market, and then they were sunk.”
“There are very few people who are good with details and the big picture, and Jamie is one of them,” Mr. McDonald said. “That’s why this is so jarring: How did it get by him?”
And how did an executive who made his reputation managing details come to downplay the importance of the London Whale’s trade before he understood the consequences fully?
“It’s possible that he just shot from the hip,” Mr. Ely said, “and that he should have been more cautious. He may be more cautious now.”’