It was the “tempest in a teapot” that turned into a $6.2 billion trading loss and public relations storm. Now it may sink at least some of JPMorgan (JPM) CEO Jamie Dimon's 2012 compensation.
The infamous “London Whale” trade is making a splash again this week. The Wall Street Journal, citing people close to JPMorgan, reported that the bank's board is “expected to dock the 2012 bonuses of CEO Jamie Dimon and another top executive because of the ‘London Whale’ trading debacle."
In addition, Bloomberg reports JPMorgan’s board will review an internal report that faults Dimon for oversight of the Whale-trade division and will consider releasing it when the bank announces fourth-quarter earnings Wednesday.
This report is said to build on a preliminary analysis from July, when the bank disclosed that certain individuals involved in the trade may have been trying to avoid disclosing the full amount of the loss. The findings suggested people involved may have essentially engaged in a cover-up.
The Whale trading loss came from a complicated bet on credit derivatives made by JPM’s Chief Investment Office out of London, which reportedly manages the bank’s excess cash and risk. Shares of JP Morgan Chase tumbled last May when the bank first revealed the $2 billion trading loss. The news prompted calls from critics for more stringent bank regulation and, in some cases, for Dimon to lose his job.
Dimon could now stand to lose his position as the highest-paid big bank CEO, according to The Wall Street Journal. Dimon received a reported $23 million in compensation for 2011, with his cash bonus totaling $4.5 million. WSJ reports the next highest paid banker is Wells Fargo’s John Stumpf, with compensation of $19.8 million last year. According to the Telegraph, Dimon’s compensation in recent years is still less than half of the record $49.9 million he received in 2007.
The “London Whale” episode has raised questions about the types of risks federally-backed banks continue to take post-crisis. It’s also raised concerns over the types of hedges that may or may not be prohibited under the Volcker Rule, a part of Dodd-Frank that was supposed to stop banks from proprietary trading. While we continue to see traces of the London Whale, a final draft of the Volcker Rule has yet to rear its head after missing a Dec. 31, 2012 deadline.
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