Source: The Wall Street Journal
J.P. Morgan Chase Chairman and CEO James Dimon had just committed the most expensive blunder of his 30-year career, failing to detect the risk of trades that had begun to generate huge losses at the bank.
On April 30, associates who were gathered in a conference room handed Dimon summaries and analyses of the losses. But there were no details about the trades themselves. "I want to see the positions!" he barked, throwing down the papers, according to attendees. "Now! I want to see everything!"
When Dimon saw the numbers, these people say, he could not breathe.
Those trading positions have produced losses that could total as much as $5 billion, tarnishing the record of an executive who had thrived through the global financial crisis and who has long been known for paying close attention to the bank's trading activity, its risk profile and the activities of its senior employees.
J.P. Morgan, the nation's largest financial firm by assets, is struggling to contain the damage, which already has shaved off more than $25 billion in shareholder value.
This behind-the-scenes account of the disaster -- based on interviews with numerous J.P. Morgan executives and with officials on Wall Street and in Washington -- provides new details about the drama inside the bank as executives sought to understand the scope of the losses and decide what to do about them.
Among other things, Dimon initially resisted ousting the executive at the center of the mess, confided in his wife that he had "missed something bad" and expressed regrets with his colleagues one night over vodka about how they had all let the firm down.
"The big lesson I learned: Don't get complacent despite a successful track record," Dimon said in an interview Wednesday. "No one or no unit can get a free pass."
The stakes are high. Dimon personally approved the concept behind the disastrous trades, according to people familiar with the matter. But he did not monitor how they were executed, triggering some resentment among other business chiefs who say the activities of their units are routinely and vigorously scrutinized.
J.P. Morgan executives -- including General Counsel Steve Cutler, the former Securities and Exchange Commission enforcement chief -- weighed whether or not to disclose the losses immediately.
Some argued that the losses were not material, that the firm did not have all the details and that there was a chance the trades could ultimately turn around.
On Thursday, the chairman of the Senate Banking Committee, Sen. Tim Johnson (D-S.D.), said he plans to ask Dimon to testify before the committee about the loss.