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

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been drafted with trading desks in mind, where both sides of a hedge are marked
to market. It is a poor fit with A[sset] L[iability] M[anagement].” 1608
Ms. Drew’s analysis, which describes the Volcker Rule’s language as “unclear” and a “poor fit”
for the SCP, is also contrary to the positive assessment provided by Mr. Braunstein during the
earnings call.
Ms. Drew’s suggested “answer” to a Volcker Rule question references the bank’s official
comment letter, which was signed by Barry Zubrow. Mr. Zubrow also sent an email to Mr.
Braunstein on the day before the earnings call, but suggested a more positive response to a
Volcker Rule question than did Ms. Drew. Mr. Zubrow wrote:
“If asked about London / CIO and Volcker[,] I suggest you add the
following thoughts:
1.) Activity was NOT short term trading
2.) Was part of LONG TERM hedging of the bank[’]s portfolio
3.) We do not believe that our activity in any way goes against the law as
passed by Congress, nor the spirit or proposed rule as written.” 1609
Mr. Zubrow did not disclose or explain in the email why his view differed from the bank’s
official comment letter, which he had signed and which stated that the proposed Volcker Rule
“could have [] deemed” the CIO’s credit derivatives trading as prohibited. He nevertheless
recommended a positive response, and Mr. Braunstein appears to have followed his advice.
Apart from Mr. Zubrow’s email, the Subcommittee was unable to uncover any other evidence to
support Mr. Braunstein’s statement.
A key, ongoing issue related to the SCP is whether it should be viewed as a risk-reducing
hedge or as a high-risk proprietary bet that the Volcker Rule is meant to stop. Investors would
likely consider, as one piece of information important in the overall mix, whether the CIO would
be permitted under the law to continue operating the SCP as before or whether the SCP would
have to be shut down, and a reasonable investor might have been reassured by Mr. Braunstein’s
confident statement on this issue. Mr. Braunstein should have known, however, that he could
not rely on Mr. Zubrow’s brief, three-point email which directly contradicted the bank’s 68-page
official comment letter that had been vetted by the bank’s counsel and other senior officials. Mr.
Zubrow’s email apparently had no other support in any bank legal analysis or regulatory
communication. Mr. Braunstein’s optimistic assessment during the April 13 earnings call may
have reassured investors, but that is no justification for misinforming the public about the bank’s
official position that the Volcker Rule might prohibit the SCP as an example of high-risk
proprietary trading.
1608 4/12/2012 email from Ina Drew, CIO, to Jamie Dimon, JPMorgan Chase, Douglas Braunstein, JPMorgan Chase,
and others, “Synthetic Credit Materials,” JPM-CIO-PSI 0001100, at 104 (emphasis in original).
1609 4/12/2012 email from Barry Zubrow, JPMorgan Chase, to Douglas Braunstein, JPMorgan Chase, Jamie Dimon,
JPMorgan Chase, and others, “If asked about London / CIO and Volcker,” JPM-CIO-PSI-H 0002418.