January 17, 2013 – “Whale” Swallows Half of Dimon’s Pay: Pictured above, J. P. Morgan Chase CEO Jamie Dimon. A report on J.P. Morgan’s London Whale debacle, which cost the firm billions in losses and resulted in the slashing of CEO Jamie Dimon’s salary, is out with some damning findings. Mr. Dimon’s Compensation was cut in half to $11.5 Million.
A trader working for the Chief Investment Office (CIO) of J.P. Morgan in London lost over $6 Billion in a series of Credit Default Swap derivative positions. J. P. Morgan settled out of court with the Managing Director of the CIO Division, Mr. Javier Martin-Artajo, for an undisclosed amount. The “whale” is said to be Bruno Iksil, although no photograph of Mr. Iksil has ever appeared in the media. The sordid details of another “Rogue Trader” are presented below.
J.P. Morgan hit Chief Executive James Dimon with a 50% pay cut for 2012 because of the “London Whale” trading debacle that cost the nation’s largest bank at least $6.2 billion in losses, and found Mr. Dimon bore “ultimate responsibility” for the failure.
The move came as the New York Company posted record 2012 net income of $21.3 billion, on the back of robust lending and deposit growth and strong results across segments of the bank. For the fourth quarter, the largest U.S. bank by assets reported net income of $5.69 billion, up from $3.73 billion a year ago.
Mr. Dimon’s reduced bonus is the latest fallout from an episode that has shaken the bank and its top executives over the last eight months. The trading losses in the Chief Investment Office (CIO), which invests the bank’s excess cash, tainted J.P. Morgan’s reputation as one of the industry’s best risk managers. Several traders and executives involved in the trades were replaced, and some incentive pay was clawed back.
The bank also released a pair of internal investigation reports faulting bank management for the handling of the trade, tied to synthetic corporate credit derivatives, and its aftermath last spring, two days after two federal regulators slapped the bank with enforcement orders citing lax risk management at the company.
A half-dozen other regulatory or law-enforcement agencies are conducting inquiries into the trades, internal accounting and risk controls at the bank and the adequacy of its public disclosures, according to securities filings and people with knowledge of the probes.
J.P. Morgan Chase settled out of court with a former supervisor of the trader known as the “London whale” for the supersize bets that backfired last year into more than $6 billion in trading losses for the largest U.S. bank, said a person close to the case.
The settlement, which stems from an October lawsuit the bank brought in London court against Javier Martin-Artajo, ends the New York Company’s first legal action against executives tied to the trading mess. The details of the settlement haven’t been released.
Mr. Martin-Artajo “utterly denies any wrongdoing,” said his lawyer, Greg Campbell, at the time the suit was filed. Mr. Martin-Artajo was the supervisor of the unit in which Mr. Bruno Iksil worked (see below).
It now seems likely that a mysterious creature known as the White Whale might have taken a rather large bite out of super bank JPMorgan Chase’s second quarter profits.
What — or who — is the White Whale, you ask?
The White Whale, according to the Wall Street Journal, is a JPMorgan (JPM, Fortune 500) trader based in London who made a series of very large bets on credit default swaps, which are complex derivatives sometimes used to hedge against risk.
His real name is said to be Bruno Iksil, and he works in the bank’s Chief Investment Office (CIO). According to U.K. regulatory records, Iksil has worked at JPMorgan since at least 2007.
The White Whale is just one of his nicknames. His detractors have also dubbed him the London Whale and, of all things, Voldemort, the Harry Potter villain so sinister his name is seldom spoken.
What exactly has the White Whale done to earn his unfortunate monikers?
According to the Journal, Iksil’s credit default positions were so large that they caused unusual market movements on occasion, prompting some hedge funds to make large opposing bets. J.P. Morgan chose to exit the position once it was disclosed, generating the $6.2B lose. Editor’s Note: It was impossible for me to obtain a verified photograph of Bruno Iksil. Some say that Jamie Dimon is Bruno Iksil? (Credits – Narrative Christian Berthelsen and Saabira Chaudhuri for The Wall Street Journal, Photo by Associated Press, Additional Narrative by W. G. Foster).
The Master of Disaster