May 13, 2012 6:21 PM
Top JPMorgan Chase exec to resign over loss
The bank will accept the resignation of Ina Drew, its chief investment officer, the person told The Associated Press, speaking on condition of anonymity because the person was not authorized to discuss the decision publicly.
Drew, 55, one of the highest-paid officials at JPMorgan Chase, had offered to resign several times since CEO Jamie Dimon disclosed the trading loss on Thursday, the person said. Pressure built on the bank over the weekend to accept.
At least two other executives at the bank will be held accountable for the mistake, the person said.
Earlier in the day, CEO Jamie Dimon called the trades "a terrible, egregious mistake." He also acknowledged the Security and Exchange Commission is investigating whether rules were broken.
"We know we were sloppy. We know we were stupid. We know there was bad judgment. We don't know if any of that is true yet. And of course regulators should look at something like this. That's their job so we are totally open to regulators and they will come to their own conclusions," Dimon said. "We took far too much risk, the strategy that we had was barely vetted, it was badly monitored. It should never have happened."
Michael Greenberger, a former Wall Street regulator and current law professor, said it should come as little surprise that smart, savvy bankers like Dimon made mistakes like this.
"These kinds of transactions are as complex as they are risky. And it's very difficult for anybody really to understand what's going on. I think (in) the end (it will be) shown the trader himself didn't understand what was going on," Greenberger said.
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"These traders are given enormous discretion without proper supervision or Understanding, and you end up with these enormous losses," Greeneberger said.
The sweeping financial reform bill that was passed in the wake of the last financial crisis - the Dodd-Frank bill - would have had safe guards in place to prevent these trades, had they been implemented, Greenberger said.
"This kind of trade would have been banned" under a fully-implemented Dodd-Frank, Greenberger said. "JP Morgan Chase has been arguing that these kinds of trades should go forward. But (some of the rules) on Dodd-Frank, the way they were written, these kinds of risky, complex trades would be banned."
What's scary about the situation is how likely it is to happen again.
"Of course it could happen at another bank next week," Greenberger said. "JP Morgan Chase and Jamie Dimon are the brightest guys in the room. If they have this problem, god knows how many other people have these problems. And this could lead us right back to where we were in 2008.
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