September 27th 2017,

Connecting the dots….

This part will try to address the areas of ambiguity that remain around the « London Whale » scandal (April-July 2012) as of September 2017. It will deal with the attitude of the authorities and the one of the bank 5 years on. It will describe the massive gains that the bank realized through the scandal in mid 2012. And it will explain how top executives both at the bank and at many regulatory institutions were directly involved in these gains. In connecting the dots, the reader may quite often discern a criticism hinting at a broad based lack of professionalism and integrity… This is not the point.

It will be about the most recent events first that occurred in July and August 2017. They may have puzzled the observers. On the 12th June 2017 I had spoken up more distinctly on what I would call the “London Whale Marionette”. Many pages of comments would go public through this website. It would spark reactions. The 21st July 2017 the Department Of Justice in the US dropped its charges against my colleagues after a “review” of my “recent statements and writings”. The 3rd August 2017 the Wall Street Journal would launch an article where it would underline the stated ambiguity around my role alleging that I had “changed my story” over the last year. Where did the WSJ’s journalists get that tip from? I have not changed my “story”. I disagree in full with that allegation of the WSJ.

The 8th August 2017 Jamie Dimon stated that in his personal opinion I was not the one to blame. That one sentence was clear. Next I just did what I had been “asked” to do. Let’s be clear: I did what I had been ordered repeatedly to do. “Presumably”, I had wanted to “do something about it”. This other sentence was a vast understatement of his. Dimon would repeat that a “mistake” had been done by the firm though. These things happen. And by the 20th of August 2017 the SEC had dropped also all its charges against my colleagues. The SEC concluded the cooperation agreement without blaming me for anything with regards to my “recent statements and writings”, therefore in sharp contrast to what had just been put into question by the WSJ commenting on the DOJ’s latest disclosure…

But who really has enough spare time to monitor this? Nobody does as we all have much better to do in principle. This section of the website is here to carve in stone these events so that they are not lost in memory. After all this drumming, the “London whale” scandal ends up with No indictment. 5 years lost and more for some, one wonders why… This new puzzle should deserve more attention.

Another important puzzle has remained unsolved yet and will be described here. It will be about whether JpMorgan lost money in trading out of the “London Whale” positions, or else. A quite long document (JPM gains in 2012) will show in substance that the bank actually made about $25 billion through the scandal itself net of the $6.3 billion lost at CIO around mid 2012. It will also show that those huge gains and the CIO loss were integral parts of the same long planned “tangible gain in capital”. This predictable gain for the bank over time was totaling $50-60 billion net of “benign” collateral costs like the $6.3 billion CIO loss, like the $1 billion fine, like the additional $13 billion fine, like some other forced divestments etc…. The gain would have occurred anyway once the “exotic credit wind down” plan of Dimon would have been finalized. It most likely was inspired by the early investigations that regulators had run on the firm-wide 10-Q VaR in the course of 2009 at the latest. It was ready to go in September 2010. But its timing and its immediate impact could vary a lot. It all depended on the value of the “IG9 10yr skew” as it turned out…

The document will describe how this loss at CIO was under full control all along inside the bank. Clearly the bank’s “loss” itself was NOT what would go “out of control”. Yes “mistakes” were done but this was neither about the “CIO loss” as such, nor about the latest trades that would occur at CIO. The “mistakes” were neither due to alleged “deficiencies” at the control functions, nor due to inappropriate reporting and monitoring towards top bank executives or regulators themselves.

At last the document will show that mistakes would be done also “in hindsight” in the July-August 2012 statements and restatements altogether in alleging only a “trading loss” when it was quite a predictable massive gain happening right then. There was no “CIO trader” left then, just bank top executives and top regulators. See again “JPM gains in 2012”

One is left therefore with another puzzle in mind: “if the bank was sure to make certainly a fortune having a complete control of the losses at CIO all along, why next did JpMorgan hide the gains alleging instead to be a victim? Why did the regulators let JpMorgan do that?” The complete answer lies between Dimon and the top regulators who monitored all the events quite closely together since 2008. A document called “VaR history” provides my understanding of how things were done, how the genuine mistakes were done already by 2009 and how they would be blurred next by this “London Whale” scandal in 2012. The bank could have swiftly transferred the “tranche book” of CIO towards the IB at any time since late 2010. It was to start through an easy, preliminary, seamless internal transfer where prices would have been set on the record at a defined level of “skew risk” for the IG9 10yr for example. The ultimate “tangible gain” would have been the same 2-4 years on. Only the path followed through to the end of 2014 would have changed, depending upon this “IG9 10yr skew risk” level. The “collateral” costs would not have been the same at all than what they have been since 2012. See “VaR History”

For completeness of information here are the September 2010 slides of Jamie Dimon. See “September 2010 slides”. There was a plan that had a well known reason of being. In order to view how the “london whale” scandal was just one cathartic step inthe much longer process at play that started in 2002, please see the excel spreadsheet names “Summary of the gain of JPM.XLS”.

What is still missing is the clarity on my testimony. I would answer questions several times before the authorities between 2013 and 2016. Alongside with it lays the clarity on the role that regulators actually played “before-through-after” the scandal. What is also missing of course is the detailed market data that would establish the real market manipulation that occurred then. What a paradox here for what is famed to be a trading scandal and a suspected market manipulation that were never proved! I can only give an end to the ambiguity of the US authorities and of the UK authorities with regards to my role by having my testimonies be publicly accessible. The transcripts of my testimonies are available. The transcripts should be made public. There is no acceptable reason for them to be kept confidential today.

As one will see maybe one day, my testimony towards all the investigation teams remained consistent all the time. Only my understanding of the events playing in the backyard of my job at JpMorgan evolved a great deal. The cause of this evolution is simple: some of these events were deliberately concealed from my eyes then by my employer. I convey only one “story” to the public stage since late 2015.

The roles played by the regulators will get clearer once the “June 16 letter” is commented and completed by a short analysis of the publications that came out after July 2012. It will come at a later stage on this website. The short conclusion is that the watchdogs were very familiar with the issues at stake way before April 2012. Some were very, very familiar like the OCC, the CFTC, the FCA and the Federal Reserve. Others were more remotely concerned like the SEC. A lot of documents should be released on that matter. A lot of money was moved here in the markets, through the media reports, and through the bank reports. The actual manipulations that occurred then remain vastly unaddressed.