Tom Burroughes
LondonGroup Editor
14 May 2012
Daily News Analysis
Three top executives involved with a failed hedging strategy that cost JP Morgan at least $2 billion and hurt its reputation are expected to leave the US bank this week, Reuters reported, citing unnamed sources.
The bank is expected to accept the resignation of Ina Drew, its New York-based chief investment officer in the next few days, the sources said. Two of Drew's subordinates who were involved with the trades, London-based Achilles Macris and Javier Martin-Artajo, are expected to be asked to leave, the report said.
JP Morgan declined to comment when contacted by this publication.
The departures come after the unit Drew runs, known as the chief investment office, mismanaged a large portfolio of derivatives tied to the creditworthiness of bonds, according to bank executives. The portfolio included layers of instruments used in hedging that became too complicated to work and too big to unwind quickly in the esoteric, thinly traded market, the report said.
Drew had repeatedly offered to resign in recent weeks, after the magnitude of the debacle became clear, a source told the news service. But the resignation was not immediately accepted because of Drew's past performance at the bank.
Until the loss was disclosed late on Thursday, Drew was considered one of the best managers of balance sheet risks. She earned more than $15 million in each of the last two years.
When he disclosed the losses last week, CEO Jamie Dimon said only that the bank was continuing to investigate and would take disciplinary action with those involved.
The loss has been a blow to JP Morgan’s reputation, which until this point had benefited from it having emerged from the 2008 crisis in seemingly stronger shape than many of its rivals. The loss is also a blow to Dimon, who has been an outspoken critic over some regulatory moves against banks.
