FBI probes trading losses at JPMorgan
Source: Agencies |
May 17, 2012, Thursday
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Print Edition
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THE FBI has opened an inquiry into the multibillion-dollar trading losses at JPMorgan Chase, stepping up pressure on the bank after key US agencies said they were looking into high-risk trades that first drew regulators' attention last month.
But shareholders backed embattled Chief Executive Jamie Dimon at the bank's annual shareholders meeting, with a vote rejecting a proposal to split the jobs of CEO and chairman.
Though investors mostly gave Dimon a pass, pressure mounted on the bank to reclaim some of the millions of dollars it paid to the executives who oversaw the trades. Dimon said JPMorgan would pursue more disciplinary action against those responsible.
"We will do the right thing. That may well include clawbacks," he said after the annual meeting.
The timing on any such move was not clear, though, and the various regulatory probes could add complications. A source familiar with the situation said on Tuesday that US and UK regulators first raised concerns with senior management in April.
A separate source familiar with the FBI probe, opened by the agency's New York office, described it as preliminary. The probe was seen in some quarters as a necessary public step, given the ongoing debate in Washington about bank regulation, and one expert said it raised the level of concern around what happened.
"The FBI looks for evidence of crimes and goes after people who it alleges are criminals. They want to send people to jail. The SEC pursues all sorts of wrongdoing, imposes fines and is half as scary as the FBI," said Erik Gordon, a professor in the law and business schools at the University of Michigan.
The bank's trading losses have also drawn the attention of the US Securities and Exchange Commission and the Federal Reserve, both of which have opened inquiries.
"It affects my opinion of the entire financial industry," said Dennis Hong, principal with Altimeter Capital, a hedge fund that manages US$250 million. "It's really shocking because JPMorgan has been known as the most conservative in terms of managing their business risk. They may be losing their way."
In Washington, US Treasury Secretary Timothy Geithner said JPMorgan's losses strengthened the case for reform.
"I think this failure of risk management is just a very powerful case for ... financial reform," Geithner told an event sponsored by the Peterson Foundation.
"The test of reform is not whether you can prevent banks from making mistakes ... the test of reform should be: 'Do those mistakes put at risk the broader economy, the financial system or the taxpayer?'"
But shareholders backed embattled Chief Executive Jamie Dimon at the bank's annual shareholders meeting, with a vote rejecting a proposal to split the jobs of CEO and chairman.
Though investors mostly gave Dimon a pass, pressure mounted on the bank to reclaim some of the millions of dollars it paid to the executives who oversaw the trades. Dimon said JPMorgan would pursue more disciplinary action against those responsible.
"We will do the right thing. That may well include clawbacks," he said after the annual meeting.
The timing on any such move was not clear, though, and the various regulatory probes could add complications. A source familiar with the situation said on Tuesday that US and UK regulators first raised concerns with senior management in April.
A separate source familiar with the FBI probe, opened by the agency's New York office, described it as preliminary. The probe was seen in some quarters as a necessary public step, given the ongoing debate in Washington about bank regulation, and one expert said it raised the level of concern around what happened.
"The FBI looks for evidence of crimes and goes after people who it alleges are criminals. They want to send people to jail. The SEC pursues all sorts of wrongdoing, imposes fines and is half as scary as the FBI," said Erik Gordon, a professor in the law and business schools at the University of Michigan.
The bank's trading losses have also drawn the attention of the US Securities and Exchange Commission and the Federal Reserve, both of which have opened inquiries.
"It affects my opinion of the entire financial industry," said Dennis Hong, principal with Altimeter Capital, a hedge fund that manages US$250 million. "It's really shocking because JPMorgan has been known as the most conservative in terms of managing their business risk. They may be losing their way."
In Washington, US Treasury Secretary Timothy Geithner said JPMorgan's losses strengthened the case for reform.
"I think this failure of risk management is just a very powerful case for ... financial reform," Geithner told an event sponsored by the Peterson Foundation.
"The test of reform is not whether you can prevent banks from making mistakes ... the test of reform should be: 'Do those mistakes put at risk the broader economy, the financial system or the taxpayer?'"
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