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

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of the SCP as it stood on that day, not at some historical date. As Mr. Braunstein said on the
call: “We … need to manage the stress loss associated with that portfolio .... We have put on
positions to manage for a significant stress event in credit .... the activities that have been
reported in the paper are basically part of managing that stress loss position[.]” 1588 He also
stated: “They're done to keep the company effectively balanced from a risk standpoint. We are
very comfortable with our positions as they are held today.” Use of the word, “today,” indicates
that Mr. Braunstein was not presenting a historical view. Moreover, if he had not been speaking
about the SCP’s current function as a hedge, it is unclear why he then said that the SCP trading
“is consistent with what we believe the ultimate outcome will be related to Volcker.” 1589
In addition, while Mr. Braunstein’s letter discussed only his own statements, other
statements made by Mr. Dimon and Joseph Evangelisti, the bank’s senior spokesperson, were
1590
also framed in the present tense. In fact, even one month later, on May 10, Mr. Dimon
continued to mischaracterize the SCP as a “hedge.” 1591
No “Fat Tail Hedge.” In addition to contending that he was discussing the SCP’s
function as a hedge in a historical sense, Mr. Braunstein’s letter to the Subcommittee also
explained that he had described the SCP as a hedge after “receiv[ing] information from a number
of sources regarding the CIO/London Whale issue” including “numerous conversations with Ina
Drew, J.P. Morgan’s Chief Investment Officer, and members of her London-based team,
including the CIO’s Chief Risk Officer and Chief Financial Officer, as well as John Hogan, J.P.
Morgan’s Chief Risk Officer.” He also “specifically recalled” the April 11 presentation,
1592
described above. These sources do not provide a reasonable basis, however, for Mr.
Braunstein’s characterization of the SCP as a hedge.
On April 5, Ina Drew emailed Mr. Braunstein and other executives, including Jamie
Dimon, to explain the CIO’s derivatives activity. She wrote: “Post December [2011] as the
macro scenario was upgraded and our investment activities turned pro risk, the book was moved
into a long position.” 1593
As detailed in Chapter III, holding a net “long position” is not
consistent with the SCP being a hedge.
Achilles Macris, the head of the “London-based team” from which Mr. Braunstein said
he gathered information, provided a more detailed update in the following email:
1588
4/13/2012 “Edited Transcript JPM - Q1 JPMorgan Chase & Co. Earnings Conference Call,” at 7, JPM-CIO-PSI
0001151.
1589
Id.
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See, e.g., “Making Waves Against ‘Whale,’” Wall Street Journal, Katy Burne (4/11/2012) (“The bank views its
recent selling in the context of a range of related positions and feels its risk is now effectively balanced, added Mr.
Evangelisti.”); 4/13/2012 “Edited Transcript JPM - Q1 JPMorgan Chase & Co. Earnings Conference Call,” at 10,
JPM-CIO-PSI 0001151 (Mr. Dimon: “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.”). Neither
statement referred to historical performance, but to the current status of the portfolio.
1591
5/10/2012 “Business Update Call,” JPMorgan Chase transcript, at 2, 10, 12, and 18,
http://i.mktw.net/_newsimages/pdf/jpm-conference-call.pdf.
1592
2/4/2013 letter from Douglas Braunstein, JPMorgan Chase, to the Subcommittee, PSI-JPMC-35-000001
(referring to 4/11/2012 email from John Wilmot, CIO, to Jamie Dimon, JPMorgan Chase, Douglas Braunstein,
JPMorgan Chase, and others, “synthetic credit information,” JPM-CIO-PSI 0001701, at 708).
1593
4/5/2012 email from Ina Drew, CIO, to Jamie Dimon and others, JPMorgan Chase, “CIO,” JPM-CIO-PSI
0000539.