12 SepA Whale of a Time with the Smoking Gun Spreadsheet (Revised, with link)
Jamie Dimon has been wishing the Whale problem would simply go away. He has put up a fair defence, rightly pointing out that no clients were harmed and the problem was the bank’s own stupid fault. As admirable as his stance is, three are two aspects of this case that are going to lead to a lot more scrutiny.
Now firstly, whilst clients were not affected, investors might well have been as results where effectively overstated. One for the courts. Of more interest to us infrastructure types is the revelation that there appears to be more to this than just the losses caused by unwinding some large and complex trades. A report on Bloomberg (Click Here) detailed how the London Whale, Bruno Iksil, purportedly the bad guy in all of this, might well have been the fall guy. He and his product controller seem to have been pressured by Iksil’s then boss, Javier Martin-Artajo, to mis-price the portfolio. The boss seems to have had plenty of motive, having previously pulled down double-digit million compensation. Now to make matters worse, the controller kept a spreadsheet of what he thought the correct mark should have been. A mere $500mm overstatement! Shades of the LIBOR problem.
Lessons Learned: Proper controls. The IPV, Independent Price Valuation, process failed here. Seems like a case of inadequate process. Size was a factor too, clearly the positions were very large both nominally and relevant to the market.
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