Jamie Dimon London Whale a Tale of a Moby Dick

Will the London Whale Devour Jamie Dimon?

JP Morgan last week released a scathing 129 page report which details its widespread “failures” and missteps which led to a massive $6 billion loss at the mouth of the now infamous trader known as the “London Whale”.
In the bible, the whale swallows Jonah, only to spit him out three days later. In this instance, the London Whale has already swallowed a good chunk of CEO Jamie Dimon’s pay.
What’s next? If charges of fraud against traders and managers surface at JP Morgan, will the whale swallow Dimon?
Remember, Dimon early in the crisis dubbed the matter nothing but a “tempest in a teapot.” The CEO’s disdain has backfired.
Now, he must be singing a different tune. Last week, the board of JP Morgan decided to cut his pay in half to a mere $11.5 million.
Other than a dent in JP Morgan’s earnings and in Dimon’s pay, what does the London Whale incident really mean?
Any really good Wall Street or Washington scandal always needs a few scapegoats, and JP Morgan found them right away. The Whale was forced to step aside and the CFO and Chief Risk Officer were thrown overboard as well.
If you read the report, you might wonder if the FBI and Congressional Committees investigating the case will charge JP Morgan executives with criminal securities fraud for blatantly trying to hide the massive losses from investors.
You also might question whether the board of directors or audit committee had any comprehension of the extraordinary risks being taken by the bank’s traders who are incentivized to bet the farm to boost annual bonus pools.
Indeed, the report is worth reading as a sea tale rivaling the ancient story of Jonah.
“The report describes traders making overly optimistic estimates of their losses, but stops short of claiming outright fraud,” according to an article last Thursday in The New York Times by Ben Protess and Peter Eavis. “But the FBI, suspecting that some employees intentionally hid the losses last year, is using taped phone conversations to build criminal cases against London-based traders involved in the debacle, according to the officials briefed on the matter.”
Can one conclude from this investigation that a bank the size of JP Morgan is simply “too big to manage”? Let’s ask Jamie Dimon in 12 months. He’ll either still be stuck in the Whale’s belly, or well out of it.
Disclosure: Zamansky & Associates are securities attorneys representing investors in federal and state litigation and arbitration against financial institutions, including in litigation concerning the JPMorgan “London Whale” episode.