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

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of the Volcker Rule, quoting legal counsel representing certain banks as stating, “I wouldn’t be
surprised if the pro-Volcker folks used this as a test case.” 1444
JPMorgan Chase’s press and investor relations offices fielded a number of questions after
the articles were published. Sarah Youngwood, head of investor relations, used Mr.
1445
Evangelisti’s narrative the following day in a conversation with Ben Hesse, a research analyst
at Fidelity, a JPMorgan Chase shareholder. 1446 According to her email at the time, she told him:
“Members of the CIO take long-term hedging positions in the context of our overall
asset/liability management,” “[h]edging is core to the bank’s activities,” the CIO is “not focused
on short-term profits,” and “CIO results are disclosed in our quarterly earnings reports and are
fully transparent to our regulators.” 1447
The Subcommittee is unaware of any action taken by any
personnel within the bank to correct this description of the SCP.
On Tuesday, April 10, the first trading day after the article was published, the Synthetic
Credit Portfolio reported internally a loss of $415 million, the biggest SCP loss to date in
1448
2012. JPMorgan Chase told the Subcommittee that it had expected a large loss due to the
press reports, which the bank viewed as exposing its trading positions and making the CIO more
vulnerable. 1449
On the same day as the loss, April 10, Messrs. Braunstein and Hogan were scheduled to
provide a “backgrounder” with the Wall Street Journal. 1450 Mr. Evangelisti informed them that
JPMorgan Chase had provided additional “background and on-the-record statements explaining
the hedging activities of our CIO and putting these activities in the context of our overall asset
and liability management. We also said that we now feel that our risks are effectively
balanced.” 1451 In addition, Sarah Youngwood, head of investor relations, reported that the bank
had “4 more conversations on CIO articles” with analysts; she noted that “[a]ll of them
understand our CIO activities. Joe [Evangelisti]’s statements [were] very helpful to the
conversations.” 1452
1444
“JPMorgan Trader Iksil Fuels Prop-Trading Debate With Bets,” Bloomberg, Shannon D. Harrington, Bradley
Keoun and Christine Harper (4/9/2012), http://www.bloomberg.com/news/2012-04-09/jpmorgan-trader-iksil-fuelsprop-trading-debate-with-bets.html.
1445
4/6/2012 email from Sarah Youngwood, JPMorgan Chase, to Jamie Dimon, JPMorgan Chase, and others, “CIO
articles – Calls (2),” JPM-CIO-PSI 0000554.
1446
Subcommittee interview of Douglas Braunstein, JPMorgan Chase (9/12/2012).
1447
4/6/2012 email from Sarah Youngwood, JPMorgan Chase, to Jamie Dimon and others, JPMorgan Chase, “CIO
articles – Calls (2),” JPM-CIO-PSI 0000554. On her last point, however, CIO results were not separately disclosed
in the bank’s quarterly earnings reports but rather were reported as part of “Corporate” earnings. See 4/5/2012 email
from Ina Drew, CIO, to Joseph Evangelisti, JPMorgan Chase, and Barry Zubrow, JPMorgan Chase, “Jamie’s fine
with this[,]” JPM-CIO-PSI 0000543 (“We do not disclose cio earnings – part of corporate”).
1448
See chart, prepared by the Subcommittee and printed in Chapter IV, tracking SCP’s daily reported profit and
loss (P&L) from January 3 to May 15, 2012, derived from an OCC spreadsheet, OCC-SPI-00000298-304, at 302.
Numbers do not reflect restated P&L figures after JPMorgan Chase’s restatement in July 2012.
1449
Subcommittee interview of Jamie Dimon, JPMorgan Chase (9/19/2012).
1450
4/10/2012 email from Joseph Evangelisti, JPMorgan Chase, to Douglas Braunstein, JPMorgan Chase, and
others, “WSJ call,” JPM-CIO-PSI 0017427.
1451
4/10/2012 email from Joseph Evangelisti, JPMorgan Chase, to Operating Committee, JPMorgan Chase, “WSJ
tomorrow,” JPM-CIO-PSI 0001066.
1452
4/10/2012 email from Sarah Youngwood, JPMorgan Chase, to Jamie Dimon, JPMorgan Chase, and others, “CIO
articles – Calls (7), JPM-CIO-PSI 0001024.