JPMORGAN CHASE WHALE TRADES: A CASE HISTORY OF DERIVATIVES RISKS AND ABUSES

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automatic freeze or unwinding of positions. 882 The CIO used the same approach. If a risk limit
were breached, CIO traders were expected to express a view about the risk in the portfolio and
what should be done, but not to immediately reduce the portfolio’s holdings to end the breach. 883
Over the course of 2011 and 2012, the SCP breached every risk limit that the
Subcommittee examined, but none of those breaches led to an analysis of whether the portfolio
was engaged in overly risky trading activities. Instead, CIO personnel, including Javier Martin-
Artajo, head of the CIO’s equity and credit trading operation and the first line manager of the
Synthetic Credit Portfolio, repeatedly challenged and downplayed the significance, validity, and
relevance of the various metrics used to quantify the risk in the SCP. 884 Ms. Drew and Mr.
Macris held Mr. Martin-Artajo in high regard, and put a great deal of confidence in his
analysis. 885 The CIO’s risk personnel did not express a countervailing view. 886
With hindsight, the JPMorgan Chase Task Force provided this negative assessment of the
CIO’s risk management structure:
“For a significant period of time prior to the first quarter of 2012, CIO was
subjected to less rigorous scrutiny than client-facing lines of business. The lower
level of oversight engendered weak risk management and infrastructure within
CIO, which performed ineffectively at a time when robust, effective controls were
most needed. Granular limits were lacking, and risk managers did not feel
adequately empowered.” 887
C. CIO Risk Management Personnel
Although the CIO was not a client-facing business, it managed as much as $350 billion in
assets and oversaw a trading book that was among the largest in the industry. 888 Yet the CIO did
not have a Chief Risk Officer until 2012. The position of CIO Chief Risk Officer was vacant
through 2011. 889 During the key months of January through March 2012, Irvin Goldman was
new to the position, still learning the ropes, and did not respond in a vigorous way to CIO
breaches of various risk metrics. Peter Weiland, the CIO’s senior market risk officer, told the
Subcommittee that it was not his job to enforce the risk limits. 890
When he was informed of limit
882
Subcommittee interview of Jamie Dimon, JPMorgan Chase (9/19/2012).
883
Subcommittee interview of Ina Drew, CIO (12/11/2012).
884
See, e.g., 3/8/2012 email from Javier Martin-Artajo, CIO, to Ina Drew, CIO, and others, “CIO CRM Results,”
JPM-CIO-PSI 0008773-8775, and discussion below.
885
Subcommittee interview of Ina Drew, CIO (9/7/2012); JPMorgan Chase Task Force interview of Achilles Macris,
CIO (partial readout to Subcommittee on 8/28/2012).
886
See 2013 JPMorgan Chase Task Force Report, at 100, and discussion below.
887
2013 JPMorgan Chase Task Force Report, at 94.
888
Subcommittee interview of Michael Cavanagh, JPMorgan Chase (12/12/2012). See also testimony of Jamie
Dimon, Chairman & CEO, JPMorgan Chase & Co., “A Breakdown in Risk Management: What Went Wrong at
JPMorgan Chase?” before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, S.Hrg. 112-715
(June 13, 2012), http://www.cq.com/doc/congressionaltranscripts-4105471 (“Here -- here are the facts. We have
$350 billion of assets in CIO.”).
889
Subcommittee interview of Irvin Goldman, CIO (9/15/2012).
890
Subcommittee interview of Peter Weiland, CIO (8/29/2012).