It is somewhat ironic that none other than CNBC is reporting [9]the news (which was suggested here months ago in "Will JPMorgan's "Enron" Be The End Of Blythe Masters?") [10]that as part of its divestment of its physical commodities unit announced previously, JPMorgan may also seek to cover up any trace of market manipulation in the division recently embroiled in the aluminum cartel scandal (which we reported on in June 2011 [11]and which story recently rose to prominence as a result of follow up reporting by the NYT [12]) by getting rid of none other than Blythe Masters.
To wit: "JPMorgan's initial round of conversations over the sale of its physical commodities unit has involved at least 50 potential suitors, according to someone familiar with the matter, as the bank attempts to ink a deal by the end of the year. In addition to energy supply contracts and metal-storage facilities, people close to the deal say the transaction could include a significant human asset: JPMorgan's longtime commodities head, Blythe Masters. In addition to the physical assets it is selling—including the Liverpool, England-based metal-storage business Henry Bath & Son, U.S. power plants, and crude-oil and power supply agreements—any deal to sell JPMorgan's commodities business could involve Masters, the division's current leader, as well. Masters, 44, has found her future at JPMorgan in question as regulators crack down on both its power-supply business over alleged manipulations and the whole notion of banks owning commodities assets more generally."
Ironic, because it was an extended CNBC interview-cum-PR campaign with Blythe Masters in April of 2012 [13], just before the London Whale scandal broke, and one of her very rare media appearances, in which she made the following quite amusing, and factually wrong, in retrospect, statements:
- "JPM's commodities business is not about betting on commodity prices but about assisting clients"... "it's about assisting clients in executing, managing, their risks and ensuring access to capital so they can make the kind of large long-term investments that are needed in the long run to expand the supply of commodities"...
- "There's been a tremendous amount of speculation particularly in the blogosphere on this topic. I think the challenge is it represents a misunderstanding as the nature of our business. As i mentioned earlier, our business is a client-driven business where we execute on behalf of clients to achieve their financial and risk management objectives. The challenge is that commentators don't see that. So to give you a specific example, we store significant amount of commodities, for example, silver, on behalf of customers we operate vaults in New York City, Singapore and in London. And often when customers have that metal stored in our facilities, they hedge it on a forward basis through JPMorgan who in turn hedges itself in the commodity markets. If you see only the hedges and our activity in the futures market, but you aren't aware of the underlying client position that we're hedging, that would suggest inaccurately that we're running a large directional position. In fact that's not the case at all.
- "We have offsetting positions. We have no stake in whether prices rise or decline. Rather we're running a flat or relatively flat matched book.
- What is commonly out there is that JPMorgan is manipulating the metals market. "It's not part of our business model. it would be wrong and we don't do it."
Well it was wrong. But Blythe did it anyway, as the current developments indicate and as the recent fine from FERC its escalation into a DOJ investigation confirms [14], despite your PR campaign to clear your reputation. And thank you CNBC for asking the hard-hitting questions at the time when you had a chance to actually do some investigative reporting instead of merely fawning over yet another naked emperor.