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

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standpoint. We are very comfortable with our positions as they are held
today.” 1539
When Mr. Dimon was asked about the Synthetic Credit Portfolio on April 13, he said that
it “offset” other bank exposures:
“It's a complete tempest in a teapot. Every bank has a major portfolio. In those
portfolios, you make investments that you think are wise, that offset your exposures.
Obviously, it's a big portfolio. … But at the end of the day, that's our job, is to invest
that portfolio wisely and intelligently to – over a long period of time to earn income and
to offset other exposures we have.” 1540
A month later, during the May 10 business update call, Mr. Dimon three times described
the Synthetic Credit Portfolio as a hedge:
“[T]he synthetic credit portfolio was a strategy to hedge the Firm’s overall credit
exposure, which is our largest risk overall …. We’re reducing that hedge. …
The portfolio has proven to be riskier, more volatile and less effective [an]
economic hedge than we thought.” 1541
While their language varied, these communications all made the same point, which is that the
SCP was a counterbalance to potential losses in other parts of the bank. Given the briefing
materials executives had, however, it was inaccurate for the bank to describe the SCP as a hedge
because it did not reflect the true nature of the portfolio and its potential for losses at that time.
No Clear Offsets. As described in Chapter III, the purpose of the SCP was
undocumented, unclear, and changed over time. 1542 The assets that the SCP was purportedly
hedging were not identified or defined in writing, and calculating the size and nature of the
hedge was treated as a “guesstimate.” 1543 Days before the April 13 earnings call, Mr. Dimon
asked his colleagues, including Mr. Braunstein, for the correlation between the SCP and the
portfolio the SCP was meant to hedge. 1544 Mr. Dimon told the Subcommittee that he did not
recall if he received a response. 1545 Ms. Drew, who had told her colleagues she was “working on
Jamie’s request for correlation,” 1546 told the Subcommittee that so many events were unfolding
at the time, that she did not recall if the correlation analysis was sent to him. 1547
The
Subcommittee found no evidence that it was. Mr. Hogan also requested a correlation analysis to
1539
4/13/2012 “Edited Transcript JPM - Q1 JPMorgan Chase & Co. Earnings Conference Call,” at 7, JPM-CIO-PSI
0001151.
1540
Id. at 10.
1541
5/10/2012 “Business Update Call,” JPMorgan Chase transcript, at 2, http://i.mktw.net/_newsimages/pdf/jpmconference-call.pdf.
In addition, Mr. Dimon characterized the portfolio as a hedge five more times when responding
to questions on the May 10 call.
1542
See Chapter III, section entitled “Purpose of the Synthetic Credit Portfolio: Undocumented, Unclear, and Subject
to Change.”
1543
Subcommittee interview of Ina Drew, CIO (9/7/2012).
1544
See 4/11/2012 email from Ina Drew, CIO, to Jamie Dimon, JPMorgan Chase, and others, “updated,” JPM-CIO-
PSI 0001077 (“[w]e are working on Jamie’s request for [c]orrelation of the credit book against the portfolio”).
1545
Subcommittee interview of Jamie Dimon, JPMorgan Chase (9/19/2012).
1546
See 4/11/2012 email from Ina Drew, CIO, to Jamie Dimon, JPMorgan Chase, and others, “updated,” JPM-CIO-
PSI 0001077 (“[w]e are working on Jamie’s request for [c]orrelation of the credit book against the portfolio”).
1547
Subcommittee interview of Ina Drew, CIO (12/11/2012).