From the prepared remarks [5]of Ina Drew, former JPM CIO:
- ... In January the Company’s independent Model Review Group, part of the corporate Risk Management organization, approved a new, and purportedly better and more accurate, value-at-risk (VaR) model for the synthetic credit book... Although I, as well as the Company’s senior management, was well aware that a new VaR model was pending, I had no involvement in the process of developing, requesting or approving the new model and no basis to personally assess the merits of either the new or old model.
- ... It is also important to note that the Task Force Report itself lays out the critical factors – the flaws in the new VaR model and the deceptive conduct by members of the London team – that undermined my management and my oversight of the book.
- ... It appears that CIO Risk Management failed to properly understand and assess the risks in the book, and that CIO Finance failed to properly review the position valuations recorded by the traders.
- ... Though I did not (and do not) believe I bore personal responsibility for the losses in the synthetic credit book, in late April I began to consider whether, for the good of JPMorgan Chase, I should step down and make it easier for the Company to move beyond these issues. In the wake of the May 10 disclosures I approached Mr. Dimon and told him that I thought it would be best for the Company if I stepped down. He reluctantly agreed, and shortly thereafter I submitted my retirement letter. Similarly, although I did not (and do not) believe that I engaged in any misconduct, I offered to give up a significant amount of my recent JPMorgan Chase compensation, which I have done, in recognition of the size of the losses and my position as head of the business. Although asset-liability management, by its nature, involves regular ups and downs in both investment and hedging books, I had never before experienced a situation like this one.
- ... I have since come to learn – based on the Company’s public statements in July 2012 and Task Force Report in January of this year – that valuations for many of the book’s positions were inflated and not calculated or reported in good faith; that the original version of the second quarter scenario analyses reflected much higher projected losses and was specifically re-done before it was sent to me so as to reflect lower projected losses; and that some members of the London team participated in or condoned such conduct and hid from me important information regarding the true risks in the book. I have also since come to learn – based on the same public statements of the Company – that the new VaR model was flawed and significantly understated the true risks in the book. Needless to say, I had no knowledge of these things at the time.
And the piece de resistance:
- Since my departure I have learned of the deceptive conduct by members of the London team, and I was, and remain, deeply disappointed and saddened to learn of such conduct and the extent to which the London team let me, and the Company, down.
Maybe it is time to call back Jamie "This is why I am richer than you" Dimon?