There are reports out there that Jamie Dimon may have his bonus "docked" because of the London Whale debacle. That sounds like a good start.
Given the money lost by the London Whale and the hornet's nest of legal and reputational problems dogging the bank lately, the CEO's bonus seems to be the absolute least he can give up.
Dimon, to his credit, is reportedly pushing for the quick release of an internal JPMorgan report looking into the bank's $6 billion (and counting) in credit-derivatives losses last year. That report, according to the Wall Street Journal and Bloomberg, will hold Dimon at least partially responsible for the loss, which happened after the bank's chief investment office built up huge, dangerous positions in credit default swaps.
That makes sense: A WSJ tick-tock of the Whale mess last year depicted Dimon "as a hyper-demanding micromanager who unaccountably developed a massive blind spot and a cavalier disregard for risk in the one area of the firm which he had explicitly encouraged to take on more risk," the blogger Epicurean Dealmaker wrote.
As CEO, Dimon ultimately has to bear responsibility for what happens on his watch, even if he wasn't directly involved in the losses. The commander of a Navy submarine that collided with an oil tanker last year was relieved of duty immediately. Dimon is not apparently at any immediate risk of losing his job over the London Whale -- just maybe part of a bonus that last year clocked in at $4.5 million. That's an expensive traffic ticket for Dimon, who owns at least $200 million worth of JPMorgan stock.
The board of directors is still preparing the report, which is due for presentation tomorrow. It will be interesting to see if the board itself takes any blame for the debacle. After all, JPMorgan's board has a whole Risk Policy Committee whose job is to keep an eye on the bank's "credit risk, market risk, interest rate risk, investment risk, liquidity risk and reputational risk."
(Note: If anybody gets a copy of this report and wants it exposed to the wider world, then please do feel free to email me a copy at email@example.com.)
But the board gets its information about those risks from management, including Dimon. Garbage in, garbage out.
And Dimon has a lot more to answer for than just the London Whale. That was the bank's biggest headache last year, but not its only one. JPMorgan was also caught up in the mortgage-foreclosure settlement, the Libor rate-fixing scandal, charges of energy-market manipulation and more.
The new year has brought new headaches. Those include a new lawsuit by the National Credit Union Administration over mortgage-backed securities sold by Washington Mutual, which JPMorgan bought during the crisis, and a demand by the government that the bank cough up documents about its involvement in the Bernie Madoff Ponzi scheme.
The bank will also cough up $2 billion as part of the latest settlement with the government over banks' poor handling of mortgage foreclosures.
Any day now, the bank could be sanctioned by the Federal Reserve and the Office of the Comptroller of the Currency over its money-laundering controls, Reuters reports.
And JPMorgan is in the middle of an exodus of top executives, including James "Jes" Staley, the former head of JPMorgan's investment bank and once considered a potential candidate to replace Dimon.
To add insult to injury, Staley is joining the hedge fund BlueMountain, which made millions taking the other side of JPMorgan's botched London Whale trades.
In Dimon's defense, the bank is expected to report record profit later this week. Dimon has at least done that part of his job well. But if boards like JPMorgan's don't impose stronger executive penalties for massive errors on their watch, then those executives will have little incentive to make sure such disasters don't happen again.