Heads will roll. Bloomberg reports this morning that the entire London staff of JPMorgan’s chief investment office (CIO), numbering ‘several dozen’ are at risk of dismissal. Bonuses in London will fall, maybe by 50%. Seal Team 6 risk managers have been summoned to sort out the mess. Things at JPMorgan Europe are going to be different when the dust settles.
The alleged perpetrators
Further information has emerged on the alleged perpetrators of the $2.3bn loss at JPMorgan. Although the entirety of the London CIO business are apparently at risk of redundancy, some are being fingered more heavily than others. In the process, a new name has emerged: Javier Martin-Artajo.
The Wall Street Journal reports today that Ina Drew set the investment strategy and that Bruno Iskil and Martin-Artajo implemented it. Achilles Macris, head of the CIO for Europe, also seems implicated.
We already know about Drew and Iskil, but who is Martin-Artajo?
He joined JPMorgan in May 2007 from Dresdner, where he was head of credit derivatives trading. Before that, he was head of emerging markets trading for Lehman in Europe. He has an electrical engineering degree from ICAI in Madrid and an MBA from Columbia University (which we assume was his ticket into banking). Within the CIO, Martin Artajo was responsible for investments in rates, credit, FX and equities for Europe.
However, it is Ina Drew who appears to be emerging in a particularly bad light. It is Drew who set the strategy, and who – according to the New York Times initially, “campaigned vigorously,” to keep the trade on.
Bloomberg says Ina Drew, Bruno Iksil, Achilles Macris and Javier Martin-Artajo will definitely go. The Guardian says Iksil has already retreated to Paris and is declining to speak, although he may conceivably have been there for the weekend.
Fifteen days in late April and early May
The Wall Street Journal says the $2.3bn loss accumulated over 15 days in late April and early May, at an average rate of $153m per day.
However, the potential for disaster appears to have been flagged long before. The Telegraph reports that queries were raised about the quality of risk management in the CIO as early as 2007. It claims Bill Winters personally raised concerns about what was going on there.
The risk management saviours
One thing is clear: JPMorgan’s investment banking risk managers are seen as the superheroes who must rectify the problem. Risk management within the CIO was inadequate, but risk management within the investment bank is now seen as having restorative powers.
Hence, the New York Times reports that once the problem was identified, a team of risk managers suddenly assigned the name of ‘Navy Seals,’ began meeting twice a day at 8am and 4pm and that Jamie Dimon was often in attendance.
Elsewhere, the New York Times says the team of super-powered risk managers was referred to as the A-Team. ‘Immediately, Mr. Dimon assembled an eight-person team under John Hogan, the company’s chief risk officer’, the NYT says. Dimon apparently uttered the words: ‘Let’s go get the A-Team.’ It’s not clear whether he also played the music.
Once the problem was identified and the A Team activated, the Wall Street Journal reports that Jes Staley and John Hogan flew to London to attend the twice daily meetings. Daniel Pinto, head of the investment bank in Europe – and (until recently) a potential successor of Jamie Dimon, was summoned too.
The real hope for rectification, however, appears to lie with one man: Ashley Bacon, JPMorgan’s head of market risk. Bacon has been at JPMorgan for nearly 20 years and was previously co-head of European rates. It is up to Ashley to prevent the $2.3bn turning into $3bn, or $5bn, or more.
The Independent reported at the weekend that London-based staff at JPMorgan are now understandably fearful for their bonuses. One “senior figure,” worried they’ll probably be halved. Another, “senior rainmaker” said 2012 bonuses will obviously be impacted.
Finally, research firm Tricumen, tries to put the CIO losses in a little context. The office generated $6.8bn in revenues for JPMorgan over the past two years, it points out, adding that, “while Jamie Dimon would doubtless like to wish away this incident, we suspect he would not want to wish away the unit.”