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

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deposits. 49 By 2012, the CIO was managing a portfolio of approximately $350 billion, a historic
high. 50 According to the OCC, the enormous size of this $350 billion portfolio would make the
CIO alone the seventh largest bank in the country. 51
The CIO was formerly part of the bank’s internal treasury function, but was split off into
52
a stand-alone office in 2005. According to JPMorgan Chase, its Treasury office and the CIO
perform similar tasks in terms of managing the bank’s assets, but the Treasury office focuses
more on shorter-term asset liability management. 53 In 2012, JPMorgan Chase’s proxy statement
described the CIO and its Treasury office as follows: “The Chief Investment Office and
Corporate Treasury are responsible for managing the Firm’s liquidity, interest rate and foreign
exchange risk, and other structural risks.” 54 A March 2012 internal JPMorgan Chase
presentation on “CIO 2012 Opportunities and Challenges,” prepared by the CIO, stated that the
CIO’s “key mandate” was to: “[o]ptimize and protect the firm’s balance sheet from potential
losses, and create and preserve economic value over the longer-term.” 55
CIO Investment Portfolios. In its March 2012 presentation, the CIO described
managing nine investment portfolios spanning an investment horizon that extended from the
56
shorter term to the longer term. At the short end of the horizon, the CIO indicated that it
maintained “North America” and “International” portfolios, whose assets were “mainly in mark
to market accounts.” 57 In the medium-term, the CIO presentation indicated that the CIO had a
“Strategic Asset Allocation” portfolio, which was a portfolio used to “manage the Firm’s
structural risk exposures” using assets that were “[m]ainly available-for-sale.” 58 Also included
in the medium-term horizon were portfolios of assets used to hedge the bank’s activities relating
to foreign exchange and mortgage servicing rights. 59 On the longer-term investment horizon, the
CIO presentation indicated that the CIO maintained a portfolio to fund the bank’s retirement
plans; a portfolio to maximize “tax advantaged investments of life insurance premiums”; and a
private equity portfolio that, by 2012, was characterized as “in run-off mode.” 60
A final
component of the CIO’s longer term horizon was a portfolio of “Special Investments,” which
49
Subcommittee interview of Ina Drew, CIO (9/7/2012).
50
Subcommittee interview of Scott Waterhouse, OCC (9/17/2012).
51
Id.
52
Subcommittee briefing by JPMorgan Chase (8/15/2012) (Harry Weiss).
53 Id.
54 5/15/2012 JPMorgan Chase 2012 Proxy Statement, “Board’s Role in Risk Oversight,” at 11,
http://files.shareholder.com/downloads/ONE/2265496134x0x556146/e8b56256-365c-45aa-bbdb-
3aa82f0d07ea/JPMC_2012_proxy_statement.pdf.
55 Mar. 2012 “Directors Risk Policy Committee – CIO 2012 Opportunities and Challenges,” prepared by Ina Drew
and Irvin Goldman, CIO, JPM-CIO-PSI 0015015.
56 Id.
57 Id.
58 Id.
59 Id.
60 Id; Subcommittee interview of Fred Crumlish, OCC (8/28/2012). According to Ina Drew, the private equity
portfolio was added to the CIO in 2010, at the request of Mr. Dimon. Subcommittee interview of Ina Drew, CIO
(9/7/2012).