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.”