From Bloomberg: JPMorgan Chase, the biggest U.S. bank by assets, compensated
chief investment office traders in a way that encouraged risk-taking before the
unit amassed losses exceeding $6.2 billion, a Senate committee said.
Pay that rewarded “effective risk management” would have
suggested the synthetic credit portfolio functioned as a hedge, the Senate
Permanent Subcommittee on Investigations said yesterday in a report on the New
York-based bank’s so-called London Whale loss. Instead, compensation practices
suggest the bets “functioned more as a proprietary-trading operation.”
Executives including Ina Drew, 56, former head of the CIO,
are scheduled to testify today at a subcommittee hearing on the London Whale.
The bank endured 41 days of trading losses last year as it worked to stabilize
bets tied to credit derivatives. The board cut Chief Executive Officer Jamie
Dimon’s 2012 pay by 50 percent to $11.5 million, saying he “bears ultimate
responsibility for the failures that led to the losses.”
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