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

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CIO management needed to “document investment policies and portfolio decisions.” 1235 The
Supervisory Letter also found that the “risk management framework for the investment portfolios
(Strategic Asset Allocation and Tactical Asset Allocation)” lacked “a documented
methodology,” “clear records of decisions,” and other features to ensure that the CIO was
making investments and controlling associated risks in line with the expectations of senior
management and the appropriate Board of Directors committee. 1236 The Supervisory Letter
made no explicit mention of the Synthetic Credit Portfolio, but because the SCP was part of the
TAA portfolio, which was mentioned in the MRA, the MRA also applied to the SCP. 1237
Prior to the OCC’s issuance of a Supervisory Letter, it is standard practice for the OCC to
hold a close-out meeting with the bank to discuss the examination findings, requirements, and
recommendations, and receive bank management’s response. The OCC’s head capital markets
examiner at JPMorgan Chase held that meeting with CIO head Ina Drew, whom he said did not
react well to the examination’s criticisms. According to a later email by his supervisor, the OCC
Examiner-In-Charge, Ms. Drew “‘sternly’ discussed [the OCC’s] conclusions with him for 45
1238
minutes.” The OCC told the Subcommittee that, among other objections, she complained
that the regulator was trying to “destroy” JPMorgan Chase’s business, and that its requirements
would take away necessary flexibility from the CIO. 1239 Moreover, according to the Examiner-
In-Charge’s email, Ms. Drew informed the OCC “that investment decisions are made with the
full understanding of executive management including Jamie Dimon. She said that everyone
knows that is going on and there is little need for more limits, controls, or reports.” 1240
The OCC’s head capital markets examiner told the Subcommittee that he was “surprised”
at the time by her reaction, because that level of “pushback” for an MRA regarding “basic
1241
banking” expectations was “extreme.” The OCC Examiner-In-Charge characterized Ms.
Drew’s response as an attempt to invoke Mr. Dimon’s authority and reputation in order to try to
avoid implementing formal documentation requirements. 1242 When asked about the meeting,
Ms. Drew told the Subcommittee that her recollection was, while she disagreed with the OCC’s
recommendations, it was a good “two way” discussion. 1243
The CIO’s formal response to the OCC’s 2010 Supervisory Letter, signed by Ms. Drew
in January 2011, committed to documenting investment and risk decisions for the SAA portfolio,
1244
but never mentioned the TAA portfolio in which the SCP was then located. Ms. Drew told
1235
12/8/2010 Supervisory Letter JPM-2010-80, OCC-SPI-00011201 [Sealed Exhibit].
1236
Id.
1237
Subcommittee interview of Scott Waterhouse, OCC (9/17/2012).
1238
5/11/2012 email from Scott Waterhouse, OCC, to Mike Brosnan and Sally Belshaw, OCC, “J.P. Morgan
Chase,” OCC-00001746. The OCC Capital Markets head examiner Fred Crumlish told the Subcommittee that the
Waterhouse email provided an accurate description of his telephone call with Ms. Drew. Subcommittee interview of
Fred Crumlish, OCC (8/28/2012).
1239
Subcommittee interview of Fred Crumlish, OCC (8/28/2012).
1240
5/11/2012 email from Scott Waterhouse, OCC, to Mike Brosnan and Sally Belshaw, OCC, “J.P. Morgan
Chase,” OCC-00001746; confirmed as an accurate description of the telephone call with Ms. Drew. See
Subcommittee interviews of Fred Crumlish, OCC (8/28/2012) and James Hohl, OCC (9/6/2012).
1241
Subcommittee interview of Fred Crumlish, OCC (8/28/2012).
1242
Subcommittee interview of Scott Waterhouse, OCC (9/17/2012).
1243
Subcommittee interview of Ina Drew, CIO (9/7/2012).
1244
1/7/2011 letter from Ina Drew, CIO, to Scott Waterhouse, OCC, OCC-SPI-00011198 at 11199.