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

62
Mr. Iksil later told the JPMorgan Chase Task Force investigation that then-CFO John
Wilmot told the traders in December 2011, that notwithstanding the $37 billion reduction in
RWA during the earlier part of 2011, he wanted an additional reduction in RWA of $25
billion. 387 Mr. Martin-Artajo told the internal investigation that Ms. Drew had told the traders
that they might need to reduce the SCP even “more” and “faster” to reach the desired RWA
outcome. 388 According to the traders, reducing the portfolio still more, and faster, would be
more expensive 389 because of execution costs. 390
In other words, if they had to sell assets
quickly, they would have to accept whatever prices were offered and would likely lose money.
Alternatively, allowing the traders more time to execute asset sales would allow them to trade at
better prices.
According to one trader, Bruno Iksil, when his supervisor, Javier Martin-Artajo, asked
him how much it would cost to reduce the SCP book to achieve the $25 billion RWA reduction,
391
Mr. Iksil estimated a cost of $400 million. Mr. Martin Artajo later told the JPMorgan Chase
Task Force investigation that the CIO had not been given any budget to cover that cost to reduce
the SCP. 392 When Ms. Drew requested an estimate of the costs to unwind the entire SCP, the
traders gave her a presentation estimating that the “cost to execute the unwinding” of about 35%
of the SCP would be $516 million. 393 Ms. Drew told the Subcommittee that she then asked the
traders to see if it was possible to reduce RWA without holding a “fire sale.” 394
In response, the traders undertook an analysis of how they could reduce the SCP and the
CIO’s RWA at a lower cost. When asked whether bank management had provided any
instruction to the CIO about how to proceed, Mr. Dimon told the Subcommittee that he did not
provide specific instructions or had a specific expectation as to how the RWA would be reduced
– that is, by unwinding the book or adopting another course of action – his only expectation had
395
been that the reduction be done “wisely.” Mr. Braunstein told the Subcommittee that Ms.
Drew was not told how to achieve the RWA reduction, but also explained it was “fair to say”
that it was his assumption that unwinding the SCP positions was the most direct way to reduce
the RWA. 396
Mr. Goldman told the Subcommittee that there was no discussion of reducing
“notionals,” meaning the size of the SCP, but rather the discussion centered on the expectation
387
JPMorgan Chase Task Force interview of Bruno Iksil, (partial readout to Subcommittee on 8/27/2012).
388
JPMorgan Chase Task Force interview of Javier Martin-Artajo, CIO (partial readout to Subcommittee on
9/6/2012).
389
Id.
390
Subcommittee interviews of Ina Drew, CIO (9/7/2012) and Michael Cavanagh, JPMorgan Chase (12/12/2012).
391
JPMorgan Chase Task Force interview of Bruno Iksil, CIO (partial readout to Subcommittee on 8/27/2012).
392
JPMorgan Chase Task Force interview of Javier Martin-Artajo, CIO (partial readout to Subcommittee on
9/6/2012).
393
12/28/2011 email from Javier Martin-Artajo, CIO, to Ina Drew, CIO, “10B RWA Target Reduction.ppt,” JPM-
CIO-PSI 0000039; JPMorgan Chase Task Force interview of Bruno Iksil, CIO (partial readout to Subcommittee on
8/27/2012). See also 2013 JPMorgan Chase Task Force Report, at 28 (“a 35% proportional unwind of the [SCP]
would result in a $10 billion RWA reduction, but could cost slightly more than $500 million”).
394
Subcommittee interview of Ina Drew, CIO (9/7/2012).
395
Subcommittee interview of Jamie Dimon, JPMorgan Chase (9/19/2012).
396
Subcommittee interview of Douglas Braunstein, JPMorgan Chase (9/12/2012).