Media Comment On JPMorgan’s Whale Report

By Sonja Ryst, Research Analyst

JPMorgan Chase (JPM) released a 132-page report on Jan. 16 that detailed the “London Whale” story surrounding a $2 billion investment fiasco. On the same day the New York financial services firm said its board approved compensating CEO Jamie Dimon $11.5 million for his work in 2012, or around half as much as in the prior year, taking into consideration both the continued strong performance of JPMorgan as well as its recent investment losses, including Mr. Dimon’s responsibility as CEO.

We noted on January 15 that several of the independent directors on JPMorgan’s board have supervised Mr. Dimon for many years. They also earned as much compensation in exchange for their services as some bank employees do. The following is a round-up of media commentary about the board’s recent decision:

“The pay cut was actually a message from the board to regulators and worried investors that it was a strong watchdog over the nation’s largest bank, according to several people with knowledge of the matter.” The New York Times.

“JPMorgan has gone soft on Jamie Dimon over the so-called whale trade. . . The more than $10 million docked from Dimon’s pay will sting, but the board could do more – like removing one of his hats.” Reuters Breakingviews.

JPMorgan said “employees were overwhelmed by the complexity of their bets, risk managers were ill-equipped and leaders including Chief Executive Officer Jamie Dimon weren’t aggressive enough in responding. . . (Michael) Cavanagh, who has worked with or for Dimon since 1993, led the management task force that produced the report. Dimon promoted him from chief financial officer to run the treasury and security services division in June 2010, and again last July to co-head the corporate and investment bank. . .Joe Evangelisti, a spokesman for the bank, said Cavanagh answered to the independent committee of the board, which also conducted its own review.” Bloomberg

“First and foremost, profits rose 53% to $5.7 billion. Revenue was in line with expectations. To no lesser degree: the self-examination stemming from the “London whale” trading debacle seems to be having the desired effect. . .That is: Chief Executive Jamie Dimon appears safe.” Marketwatch

“The problem isn’t that the report is incomplete, lacks analysis or fails to hold people responsible for the mess. . .Given how badly the trade went, it is amazing how right the response by the New York company has been, at least by Wall Street standards.” The Wall Street Journal

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