WASHINGTON (3/18/13)--A Senate Homeland Security and Governmental Affairs permanent subcommittee on investigations report has revealed troubling misconduct and high-risk activities at JPMorgan Chase, and broader, systemic problems related to the valuation, risk analysis, disclosure, and oversight of synthetic credit derivatives held by U.S. financial institutions.
The report was released at a Friday hearing entitled "JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses." The report and the hearing follow JPMorgan Chase's 2012 derivatives trading loss of more than $6.2 billion. The subcommittee developed the more than 300-page report by collecting nearly 90,000 documents and conducted more than 50 interviews and briefings, subcommittee Chairman Carl Levin (D-Mich.) said.
The congressional report alleges that JPMorgan Chase:
Engaged in high risk derivatives trading;
Mismarked the Synthetic Credit Portfolio book to hide hundreds of millions of dollars of losses;
Disregarded multiple internal indicators of increasing risk;
Dodged Office of the Comptroller of the Currency oversight; and
Misinformed investors, regulators, and the public about the nature of its risky derivatives trading.
Levin in prepared remarks said the investigation "brought home one overarching fact: the U.S. financial system may have significant vulnerabilities attributable to major bank involvement with high-risk derivatives trading. The four largest U.S. banks control 90% of U.S. derivatives markets, and their profitability is invested, in part, in their derivatives holdings, nowhere more so than at JPMorgan."
For more on the hearing, use the resource link.