JPMorgan Chase's investment chief Ina Drew has resigned as the White House urged stronger industry regulation in the wake of the a $2-billion loss.
With more heads expected to roll, investors also punished JPMorgan’s shares, sending them down more than 2% after Friday’s 9.3% rout.
The White House said the loss was more evidence of the need to place tough controls on banks seen as systemically “too big to fail”. The banks, led by JPMorgan’s chief executive Jamie Dimon, have fought hard to block such curbs.
“This event only reinforces why it was so important to pass Wall Street reform, why it is so important to fully implement Wall Street reform,” said presidential spokesperson Jay Carney.
“Ever since it passed, there’s been millions and millions of dollars spent by Wall Street lobbyists to try to water down, delay and render ineffective those rules,” he said.
“It only reinforces why the president was right to take on this fight and why we need to make sure it’s implemented.”
Dimon announced on Monday that Drew, 55 and one of the highest-ranking women on Wall Street, would retire after more than 30 years at the bank.
$2-billion in losses
The departure came after the bank’s chief investment office (CIO), which Drew led, racked up at least $2-billion in losses in the past six weeks on trading its own assets in the complex derivatives market.
“Ina Drew has been a great partner over her many years with our firm,” Dimon said in a statement.
“Despite our recent losses in the CIO, Ina’s vast contributions to our company should not be overshadowed by these events,” he said.
Drew had previously tendered her resignation after the extent of the losses became apparent in late April but Dimon had refused to accept it until now, according to US media reports.
She will be replaced by Matt Zames, head of JPMorgan’s global fixed-income unit.
No mention was made in the statement of any of the other CIO officials reportedly involved in the loss.
The Wall Street Journalsaid two others would likely be pushed out this week: Achilles Macris, who heads the London-based desk that placed the trades, and trader Javier Martin-Artajo, a managing director on Macris’s team.
Focus shifts to ‘Voldemort’
Attention has also focused on the role of another London-based JPMorgan trader, French-born Bruno Michel Iksil, nicknamed “The London Whale” and “Voldemort”, after the villain in the Harry Potter books.
On Sunday, Dimon said that the loss was likely not bad enough to stop the company scoring a profit this quarter.
But he admitted that it had jeopardised JPMorgan’s credibility and the banking industry’s fight against tighter controls in the wake of the 2008 financial sector meltdown.
“This is a very unfortunate and inopportune time to have had this kind of mistake,” Dimon admitted on NBC television.
On Sunday, Senator Carl Levin said there was still pressure to water down the proposed Volcker Rule, which would ban so-called proprietary trading of the type that added to the financial sector collapse and appeared central in JPMorgan’s losses.
“We’ve got to be very, very careful that the regulators here are not undermined by this huge effort to weaken the [Volcker] Rule, by putting in a huge loophole,” the Michigan Democrat told NBC.
“The issue is whether we are going to stick with the law, as written, which will prevent us from bailing out banks again,” he said. - AFP