JPMorgan exec expected to resign, AP source says

PALLAVI GOGOI

AP Busi­ness Writer

NEW YORK — JPMor­gan Chase is expected to accept the res­ig­na­tion of one of the highest-ranking women on Wall Street after the bank lost $2 bil­lion in a trad­ing blun­der, a per­son famil­iar with the mat­ter said Sunday.

The bank will accept the res­ig­na­tion of Ina Drew, its chief invest­ment offi­cer, the per­son told The Asso­ci­ated Press, speak­ing on con­di­tion of anonymity because the per­son was not autho­rized to dis­cuss the deci­sion publicly.

Drew, 55, one of the highest-paid offi­cials at JPMor­gan Chase, had offered to resign sev­eral times since CEO Jamie Dimon dis­closed the trad­ing loss on Thurs­day, the per­son said. Pres­sure built on the bank over the week­end to accept.

At least two other exec­u­tives at the bank will be held account­able for the mis­take, the per­son said.

The casu­al­ties come as JPMor­gan, the largest bank in the United States, seeks to min­i­mize the dam­age caused by the $2 bil­lion loss. Investors shaved almost 10 per­cent off JPMorgan’s stock price on Friday.

Dimon has said the mis­take will com­pli­cate the efforts of banks to fight cer­tain reg­u­la­tory changes three years after the finan­cial crisis.

JPMorgan’s dis­clo­sure has led law­mak­ers and crit­ics of the bank­ing indus­try to call for stricter reg­u­la­tion of Wall Street. Many post-crisis rules gov­ern­ing risk-taking by banks are still being written.

Drew over­saw the divi­sion of the bank respon­si­ble for the loss. She was paid $15.5 mil­lion last year and almost $16 mil­lion in 2010, mak­ing her one of the highest-paid offi­cials at JPMor­gan, accord­ing to a reg­u­la­tory filing.

Drew declined com­ment through a bank spokes­woman. Kristin Lemkau, a spokes­woman for JPMor­gan Chase, also declined com­ment. The Wall Street Jour­nal reported ear­lier Sun­day that Drew and two other exec­u­tives were expected to resign soon.

The Jour­nal also reported that Bruno Iksil, the JPMor­gan trader iden­ti­fied as the “Lon­don whale” because of the giant bets he placed, was also likely to leave, but the paper reported that it was not clear when that would happen.

The sur­prise loss has been a black eye for the bank and for Dimon, who is known in the indus­try both as a mas­ter of risk man­age­ment and as an out­spo­ken oppo­nent of some pro­posed reg­u­la­tion since the crisis.

Dimon said in a TV inter­view aired Sun­day that he was “dead wrong” when he dis­missed con­cerns about the bank’s trad­ing last month.

“We made a ter­ri­ble, egre­gious mis­take,” Dimon said in an inter­view that was taped Fri­day and aired on NBC’s “Meet the Press.” ”There’s almost no excuse for it.”

Dimon said he did not know the extent of the prob­lem when he said in April that the con­cerns were a “tem­pest in a teapot.”

The loss came in the past six weeks. Dimon has said it came from trad­ing in so-called credit deriv­a­tives and was designed to hedge against finan­cial risk, not to make a profit for the bank.

A piece of finan­cial reg­u­la­tion known as the Vol­cker rule would pre­vent banks from cer­tain kinds of trad­ing for their own profit. Dimon has said the trad­ing involved in the $2 bil­lion loss would not have fallen under the rule.

Rep. Bar­ney Frank, D-Mass., told ABC’s “This Week” that he hopes the final ver­sion of the Vol­cker rule will pre­vent the type of trad­ing that led to the mas­sive loss at JPMorgan.

Dimon con­ceded to NBC that the bank “hurt our­selves and our cred­i­bil­ity” and expects to “pay the price for that.” Asked what the price should be, Sen. Carl Levin, D-Mich., said that banks will lose their fight to weaken the rule.

“This was not a risk-reducing activ­ity that they engaged in. This increased their risk,” Levin told NBC.

“So we’ve got to be very, very care­ful that the reg­u­la­tors here are not under­mined by this huge effort to weaken the rule by putting in a huge loop­hole” that includes the trad­ing involved in the JPMor­gan loss, he said.

Dimon said the bank is open to inquiries from reg­u­la­tors. He has also promised, in an email to the bank’s employ­ees and in a con­fer­ence call with stock ana­lysts, to get to the bot­tom of what hap­pened and learn from the mistake.

Dimon told NBC that he sup­ported giv­ing the gov­ern­ment the author­ity to dis­man­tle a fail­ing big bank and wipe out share­holder equity. But he stressed that JPMor­gan, the largest bank in the United States, is “very strong.”

Address­ing pub­lic anger toward Wall Street, Dimon said he wants a more equi­table soci­ety and does not mind pay­ing higher taxes. But he said attack­ing all of busi­ness is “very counterproductive.”

Posted by AP News on May 13 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.