The Senate subcommittee on investigations released a damning 300-page report on March 14 about JPMorgan's (NYSE:JPM) attempt to hide and obscure $6.2 billion in trading losses the bank blamed on the infamous London Whale. The Whale, a trader named Bruno Iksil, may get the last laugh as a gaggle of former JPMorgan executives testified in the Senate in yet another attempt to explain the bank's conduct surrounding this massive failure.
Remember, JPMorgan in January released its own report about the huge trading loss and the bank's CEO, Jamie Dimon, already testified before the Senate last year.
As Heidi Moore from the Guardian of the United Kingdom concluded in an article:
"The 300-page report alleges that JPMorgan hid losses, did not share information with its regulators, and misled the public. The report also blames the bank's regulator, the Office of the Comptroller of the Currency, and recommends reforming the way regulators oversee derivatives, the complicated financial instruments that played a role in the Whale trades and the financial crisis."
What's more, the report alleges that Dimon essentially lied to the investing public last year when he attempted to dismiss and downplay the massive losses at the bank and the huge risks the bank was taking. "The report also concludes that JPMorgan CEO Jamie Dimon, whose bonus was cut in half to $11.5m last year, knew about the sustained trading losses when he dismissed the incident as a 'tempest in a teapot' in April 2012," Moore wrote.
If that allegation is true, why would the board of America's largest bank keep Dimon as its CEO? Will this report finally turn Dimon into the scapegoat that JPMorgan has been seeking for more than a year now?
Remember, JPMorgan attempted to portray the Whale as the real reason for the losses. He was a rogue trader, the bank claimed, and he took on too much risk.
According to the report, that is simply not true.
The Whale "called (his bosses) instructions 'idiotic,' predicted more losses as early as January 2012, and commiserated with a junior trader about how they were forced to put the wrong value on some of their trades," Moore writes. The Whale "sent (his supervisor) Mr. Martin-Artajo an email advising that they should just 'take the pain fast' and 'let it go,'" the report said. "But according to Mr. Iksil, his supervisor Mr. Martin-Artajo disagreed and explicitly instructed him to stop losing money."
The story of the London Whale still matters and the Senate and the regulators must get to the truth, no matter how long it takes.
Despite Jamie Dimon's failure to sink the Whale story, it is a stark reminder of how a major global bank that is a central element to the financial system could still blow up and take Main Street down with it.
Incidentally, March 15 was the five-year anniversary of the collapse of Bear Stearns, the first "too big to fail" bank that JPMorgan bought with government bailout dollars.
After listening to the JPMorgan executives who will testify in the Senate, I came away with the impression that nothing has really changed since the 2008 financial crisis.
In fact, the Dodd-Frank rules that were supposed to limit the risk taking of global financial powerhouses have still not been put into effect. Banks are still largely free to do what they want.
It also appears that no individual executive will be held personally responsible for the destruction of a huge swath of shareholders' wealth. Indeed, U.S. Attorney General Holder recently told the same Senate Committee that some banks are so large that they are basically too big to jail.
Unless something significant changes in the regulation of major investment banks, the clock is ticking on the next financial crisis.
Disclosure: Zamansky & Associates (www.zamansky.com) are securities fraud lawyers representing investors in federal and state litigation and FINRA arbitration against financial institutions, including JPMorgan in connection with the London Whale trading losses.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.