Chapter 11 JPMorgan Chase and the “London Whale”
In 2012, JPMorgan Chase Bank (JPM Bank) lost $6.2 billion from trading activities of its Synthetic Credit Portfolio (SCP), a relatively obscure and seemingly innocuous London-based operation.409 These oversized losses immediately focused the attention of JPM’s most senior managers on why they occurred and how to prevent them in the future. They also riveted the attention of financial regulators and shareholders, as well as many others—and for good reasons. After the dust settled, two especially disturbing facts (i.e., speculation and misrepresentation) emerged. First, the SCP was created to hedge JPM’s credit risks, but its activities were clearly speculative and partly funded with federally insured ...
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