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

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the Subcommittee that the failure to mention the TAA portion of the MRA was not intentional;
the SAA was simply a bigger portfolio. 1245 The OCC told the Subcommittee that it should have
noticed at the time that the CIO’s response was limited to the SAA portfolio, 1246 but said it did
not, characterizing it failure to notice as an “oversight” by the OCC. 1247
According to the OCC, it usually performs a check one year after an MRA is issued to
evaluate whether the bank has taken the required corrective action. In this case, however, the
OCC told the Subcommittee that it did not provide a timeframe for completion of the corrective
action and did not check on the status of actions taken by the CIO to document its investment
1248
and risk decisions. The OCC told the Subcommittee that the MRA should have been
reviewed by December 2011, but because of competing priorities, it had delayed conducting that
review until the fall of 2012. The OCC also told the Subcommittee that it must officially “clear”
any given MRA on its internal tracking system, and does not do so unless examiners confirm that
the matter has been resolved. 1249 Ms. Drew, however, told Subcommittee staff that she believed
the MRA had been closed out, 1250 though, in fact, it had not and the OCC had not told the bank it
was closed. The OCC indicated that, while it had not cleared the CIO’s 2010 MRA and would
have examined the status of the MRA as part of a CIO examination in the fall of 2012, an
examination that was overcome by events, it still viewed its mishandling of the 2010 MRA as a
“fail from OCC.” 1251
When asked if the CIO’s aggressive reaction to the 2010 examination of the CIO was
unique, the OCC indicated that it was not. In fact, the OCC Examiner-In-Charge at JPMorgan
Chase told the Subcommittee that it was “very common” for the bank to push back on examiner
1252
findings and recommendations. He recalled one instance in which bank executives even
yelled at OCC examiners and called them “stupid.” 1253 In another example, in early 2012,
according to the OCC, the most junior capital markets OCC examiner arrived at a meeting at the
bank to discuss with his bank counterpart the results of a recent OCC stress examination. 1254 But
instead of meeting with a single risk manager, he was, in his words, “ambushed” by all the heads
of risk divisions from all the lines of business at the bank, including JPMorgan Chase’s Chief
Risk Officer, John Hogan. 1255
Given the senior rank of the bank officials, the junior OCC
examiner normally would not have led the meeting, but the bank officials pressed him to disclose
the OCC’s preliminary conclusions. According to the OCC examiner, on every issue, the bank’s
1245 Subcommittee interview of Ina Drew, CIO (9/7/2012). Other bank officials describing the difference between
the two portfolios characterized the SAA as a high credit quality, liquid portfolio for investing excess corporate
deposits, while the TAA was an “idea” book for “testing” new strategies. Subcommittee briefing by JPMorgan
Chase (8/15/2012) (Greg Baer, Chetan Bhargiri).
1246
Subcommittee interview of Michael Sullivan and Doug McLaughlin, OCC (8/30/2012).
1247
Subcommittee interview of Scott Waterhouse, OCC (9/17/2012).
1248
Subcommittee interview of Michael Sullivan and Doug McLaughlin, OCC (8/30/2012).
1249
Subcommittee interview of Scott Waterhouse, OCC (9/17/2012).
1250
Subcommittee interview of Ina Drew, CIO (9/7/2012).
1251
Subcommittee interview of Michael Sullivan and Doug McLaughlin, OCC (8/30/2012).
1252
Subcommittee interview of Scott Waterhouse, OCC (9/17/2012).
1253
Id.
1254
Subcommittee interview of Jaymin Berg, OCC (8/31/2012). The examination was regarding the Firm Wide
Stress Initiative, which concluded with an OCC Supervisory Letter. See 3/9/2012 OCC Supervisory Letter JPM-
2012-09 to JPMorgan Chase, “Examination of FSI Stress Testing Framework” [Sealed Exhibit].
1255
Subcommittee interview of Jaymin Berg, OCC (8/31/2012).