Just as the Dow was zooming and booming to record highs Tuesday afternoon, sending Wall Street into fits of joy, JPMorgan CEO Jamie Dimon and the rest of the bank's executive committee were being doused with sobering news. The New York Times reported last week that a Senate subcommittee will soon issue a report on the trader known as the "London Whale," and the news is not likely to be good for a host of executives at JPMorgan.
Until now, JPMorgan has pointed to the Whale, a trader named Bruno Iksil, a gang of lower-level traders and other executives already booted out of the bank as the main culprits for the staggering $6-billion trading loss. But the executives in the crosshairs of the subcommittee's investigation reportedly include Douglas Braunstein, who is currently the vice chairman of the board and was the bank's chief financial officer last year at the time of the disastrous losses.
"Congressional investigators have discovered that the problems involved more senior levels of the nation's largest bank," wrote Ben Protess and Jessica Silver Greenberg. "The report's findings are expected to fault the executives for allowing JPMorgan to build the bets without fully warning regulators and investors," according to people briefed on the inquiry. Braunstein and others could be asked to testify at a Senate hearing later this month.
Readers of this blog will recall that JPMorgan in January issued its own 129-page report in the matter that detailed its failures and missteps in managing the Whale in the run up to his trades. As expected, JPMorgan's report appears to fall short of the Senate Permanent Subcommittee on Investigations' effort to unearth the root cause of the trading problems at JPMorgan.
"The Congressional inquiry is expected to open a window into how (JPMorgan) executives ignored warning signs and failed to alert investors about changes to its method for detecting risk," according to the Times report.
And Braunstein and Dimon, the proverbial last men standing, could be in for it.
"Because a large majority of the executives involved in the trade have since departed the bank, the heading could increase the scrutiny of Mr. Braunstein and Mr. Dimon, the remaining senior executives," the Times reported. "Within JPMorgan, people close to the bank say, executives have expressed dismay about the lingering questions."
It gets worse. "The subcommittee's report is expected to detail how senior executives failed to heed warnings from London. Scrutiny around Mr. Braunstein partly focused on other people's assurances about the safety of the (Whale's) trades," the Times concluded. And remember, the FBI already has its own investigation going.
The saga of the JPMorgan Whale illustrates, yet again, how accountability and responsibility are qualities and characteristics in devastatingly short supply on Wall Street.
Will a top executive at the bank stand up, take full responsibility and admit his mistakes to the public?
Of course not. This is Wall Street, after all. And no one admits responsibility for anything down there.
Disclosure: Zamansky & Associates (www.zamansky.com) are securities attorneys representing investors in federal and state litigation and arbitration against financial institutions, including an ERISA case on behalf of JPMorgan employees concerning the London Whale trading losses.