WASHINGTON -- Ina Drew, the former JPMorgan Chase & Co., executive who oversaw the “London Whale” trades, admitted mistakes led to at least $6.2 billion in losses and told senators Friday she was “saddened” by the scandal last year that damaged the bank’s reputation and ended her 30-year career.
“Clearly mistakes were made,” Drew told a Senate hearing Friday in her first public comments on the episode. “The fact that these mistakes have happened on my watch has been the most disappointing and painful part of my professional career.”
Drew, the bank’s former chief investment officer, said she “accepted responsibility for the events that happened on my watch.” But said she was deceived by traders working for her about the size of the risk they were taking in the bank’s Synthetic Credit Portfolio and that a revised JPMorgan metric “significantly understated the real risks” of the portfolio.
“I don’t have all the answers but what I can tell you is that I always tried to do my best,” said Drew, who had been one of Wall Street’s highest ranking women executives. “This was my life’s work.”
Drew said the decision to retire in the wake of the scandal, delivered personally to JPMorgan Chief Executive Jamie Dimon in May, “was a devastating and very difficult decision for me.”
But there wasn’t much sympathy from senators on the Permanent Subcommittee on Investigations. The hearing was called after the committee released a bipartisan, 307-page report Thursday that ripped JPMorgan.
The report found that the trading losses were caused by high-risk bets on complex financial derivatives that the bank failed to catch and halt despite numerous warning signs. At the same time, bank executives, including Drew and Dimon, sought to hide the extent of the losses from regulators and the public.
Regulators at the Office of the Comptroller of the Currency also fell down on the job of overseeing JPMorgan, the nation’s biggest bank by assets and the world’s largest derivatives dealer.
“Let me be clear, JPMorgan completely disregarded risk limits and stonewalled federal regulators,” said Sen. John McCain (R-Ariz.), the panel’s top Republican. “This bank appears to have entertained, indeed embraced, the fact that it was too big to fail.”
Subcommittee chair Carl Levin (D-Mich.), said the losses showed that tougher regulations were needed on derivatives to prevent another financial crisis. Levin is a key backer of new rules, being drafted by regulators, limiting the ability of banks to engage in trading for their own profit.
“The Whale trades exposed problems that reach far beyond one London trading desk or one Wall Street office tower,” Levin said. “When Wall Street plays with fire, American families get burned. The task is to take away the matches.”
Levin and McCain pressed Drew about statements the bank made on Jan. 31, 2012, to the OCC that the London-based derivatives portfolio was shrinking when in fact it was increasing from $51 billion at the end of 2011 to $157 billion on March 31, 2012.
“You assured the OCC that you plan on reducing the portfolio and yet it tripled in size. How does that happen? Was the OCC misled?" McCain asked Drew.
Drew said she was not in the meeting with the OCC and that the company’s plan was to reduce the size of the portfolio over the course of 2012 after allowing it to get “slightly” higher in the first three months of the year.
“Things went terribly wrong as we all know and very large purchases that were made at the end of March were not brought to my attention,” she said.
Drew said she relied on two key employees in London, Achilles Macris, head of the chief investment office’s London operation, and Javier Martin-Artajo, who oversaw the portfolio. She said “some members” of her team hid important information from her about the true risks.
Drew did not name those team members. The report noted that Macris, Martin-Artajo and two other former London-based JPMorgan employees – traders Julien Grout and Bruno Iksil, who was dubbed the London Whale -- played key roles but refused to cooperate with the investigation.
Because they were abroad, the subcommittee could not subpoena them, Levin said.