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

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Irvin Goldman, and Peter Weiland that the $3 billion increase in the CRM metric was due
primarily to the $33 billion increase in the size of the CIO portfolio over the same period:
“There are two related issues. The first is the $3b[illio]n increase in CRM RWA
between January and February, from $3.1bn to $6.3bn. The second is that your
group believes that the absolute level of CRM RWA we calculate was high to
begin with in Jan[uary]. The second question requires us to explain our models to
the satisfaction of your team. I am in London and spoke with Javier today and we
will make this an urgent matter.
Based on our models, though, we believe that the $3bn increase in RWA is
entirely explained by a $33bn notional increase in short protection (long risk) in
your portfolio between Jan[uary] and Feb[uary]. ...
Peter Weiland and your mid-office confirm this $33bn notional increase in long
index risk. Further we both agree that this position change results in a change of
about $150mm[million] (a decrease) in 10%CSW. Per our models, a roughly
10% capital charge ($3bn) on this $33bn increase in risk is reasonable.
Also, to be clear, there has been no model change on our end; the change in RWA
for tranches has hardly changed over the month.
I understand that we have to build your confidence in our models themselves but,
given our models, we believe the increase in RWA is well explained by the build
up in your risk positions.” 1084
Mr. Venkatakrishnan attributed the increase in CRM directly to the additional long
positions in the Synthetic Credit Portfolio, and denied any fault in the QR model. Ms. Drew
emailed his explanation to Mr. Macris and Mr. Martin-Artajo, copying Mr. Goldman and Mr.
Weiland, and added: “Not consistent with your take. Let's discuss thurs.” 1085 Expressing
concern at the discrepancy, Mr. Macris forwarded the email exchange to Mr. Martin-Artajo
appending the question: “what is going on here?” 1086
The next day, March 8, 2012, Mr. Martin-Artajo disputed Mr. Venkatakrishnan's
explanation of the CRM calculation in an email to Ms. Drew and Mr. Macris, copied to Mr.
Goldman and Mr. Weiland. He denied that the portfolio had increased by $33 billion and also
asserted that SCP’s increased long index positions did not involve the type of credit tranche
positions normally analyzed by the CRM:
1084
3/7/2012 email from C.S. Venkatakrishnan, JPMorgan Chase, to Ina Drew, CIO, and others, “CIO CRM
Results,” JPM-CIO-PSI 0001815.
1085
3/8/2012 email from Ina Drew, CIO, to Achilles Macris, CIO, and others, “CIO CRM Results,” JPM-CIO-PSI-
0001815.
1086
3/8/2012 email from Achilles Macris, CIO, to Javier Martin-Artajo, CIO, “CIO CRM Results,” JPM-CIO-PSI-
0001815.