JPMorgan Chase published a feast of reading material on Wednesday morning about its trading losses in the “London Whale” debacle. The trading disaster last year not only cost JPMorgan some $6.2 billion, it transfixed Wall Street for months with questions of how a unit meant to reduce risk could have failed so spectacularly. Among the consequences: Chief Executive Officer Jamie Dimon, who compounded the bank’s problems in April by calling the incident a “tempest in a teapot,” saw his 2012 pay cut in half today, to $11.5 million.
The Whale disclosures arrived at the same time as the bank’s strong fourth-quarter results, which beat analysts’ predictions with earnings up 53 percent, owing to high mortgage revenue. JPMorgan’s bad-news/good-news maneuver left the bank’s stock trading roughly flat by 1 p.m.
Over 129 pages, the bank’s Whale report (PDF) retraces the complex bets that JPMorgan’s chief investment office made on credit derivatives, which by early 2012 began to accumulate enormous losses—$718 million at the end of the first quarter. The positions became so extreme that they distorted prices in the markets, and one trader’s nickname, the London Whale, helped launch the story into the mainstream press. Litigation, regulatory probes, and embarrassment ensued, denting both Dimon’s reputation as the most with-it bank CEO and the “fortress balance sheet” he claimed JPMorgan possessed. Today’s report lightly censures Dimon, saying he “could have better tested his reliance on what he was told” by senior managers. It is harsher on Ina Drew, the former chief investment officer who oversaw the trading and resigned in May.
In addition to Dimon’s pay cut, other executives saw their bonuses reduced or eliminated for 2012, the report says. Further “remedial measures” include new personnel in the CIO unit and tighter risk management. Separately, the bank trimmed its stock buyback request to the Federal Reserve to less than $3 billion per quarter. Last year’s $15 billion repurchase program was suspended after the Whale fiasco became public.