Ina Drew, the former J.P. Morgan Chase executive who resigned after that bank made a billion dollar trading error, faced a Senate hearing Friday, where she testified she had been a diligent manager but had been lied to by subordinates. Ray Suarez talks with Bloomberg News' Dawn Kopecki who attended the hearing.
JUDY WOODRUFF: Finally tonight: The U.S. Senate turned its attention to huge trading losses at J.P. Morgan Chase, the country's largest bank.
Ray Suarez has the story.
INA DREW, Former J.P. Morgan Chase Executive: The fact that these mistakes happened on my watch has been the most disappointing and painful part of my professional career.
RAY SUAREZ: Former J.P. Morgan Chase executive Ina Drew testified at a Senate hearing today, speaking publicly for the first time since she resigned 10 months ago. Drew was the bank's chief investment officer. She oversaw the British unit that ran the so-called London Whales trades, involving risky derivatives, which lost $6 billion.
Today, she said her oversight was reasonable and diligent, but she insisted she was lied to by subordinates.
INA DREW: Some members of the London team failed to value positions properly and in good faith. They minimized reported and projected losses and hid from me important information regarding the true risks of the book.
RAY SUAREZ: CEO Jamie Dimon initially dismissed reports of major losses. Later, the bank said the figure was $2 billion dollars, a sum that ultimately tripled. The Senate launched an investigation last July, and yesterday released a report of more than 300 pages. It blamed Drew and others for high-risk activities and troubling misconduct.
Michigan Senator Carl Levin fleshed that out at the hearing.
SEN. CARL LEVIN, D-Mich.: It exposes a derivatives trading culture at J.P. Morgan that piled on risk, that hid losses, that disregarded risk limits, that manipulated risk models, that dodged oversight and that misinformed the public.
RAY SUAREZ: In a statement, J.P. Morgan Chase said it has acknowledged mistakes, but denies hiding any losses.
For more on all this, I am joined by Dawn Kopecki of Bloomberg News. She's been covering this story for months and was at the hearing today.
So, for someone who is as read in as you are, Dawn, did the Senate report and the testimony fill in some of the blanks of the J.P. Morgan saga?
DAWN KOPECKI, Bloomberg News: Yes, absolutely.
J.P. Morgan came out with their own report a couple months ago and that was like 60 pages, weren't a whole lot of details. Today's report shows some pretty damaging evidence about the fact that top executives knew that these -- that this portfolio was breaching risk limits, that they tried to game the risk limits by changing the models used to determine what the limits would be.
It shows that Dimon had knowledge and was actually trying to withhold information from regulators. It shows a very combative tone with J.P. Morgan and its primary regulator. There was quite a bit in the Levin report and in the hearing today that lawyers are going to be looking and sifting through for months and months and maybe even years.
RAY SUAREZ: And, of course, someone that's been wanted to be heard from for a long time in the person is Ina Drew.
DAWN KOPECKI: Yes.
RAY SUAREZ: Did she bring out anything new in her testimony?
DAWN KOPECKI: She deflected all blame from herself. It's really interesting, because these executives make a lot of money because they are -- you know, they are paid to know what is going on in these institutions. And she said that she wasn't aware of the deceptive contest of her subordinates until after she left the company.
I find that a little bit hard to believe, considering that she was in the meetings with them working on trying to redo these risk measures, trying to make sure that they weren't triggering certain breaches that would -- that would, you know, justify some sort of internal review.
She was there with them. She knew what some of the losses were early on. That came out in the Levin report. But she said at the hearing today that she had no knowledge of how bad it was until after she left.
RAY SUAREZ: She was sitting at a witness table with many of the senior officers, past and present, in the J.P. Morgan empire.
DAWN KOPECKI: Yes.
RAY SUAREZ: Were they in essence blaming each other, sitting at the table blaming each other for what had happened?
DAWN KOPECKI: There was a lot of blame going around.
They were also mostly blaming the people who have left. They just absolutely threw the three traders and managers in London completely under the bus, the three who couldn't or didn't or wouldn't speak today. Extradition doesn't apply to the Senate committee today, so they weren't able to subpoena them and bring them over to the U.S. to testify.
But it was Bruno Iksil, who is nicknamed the London Whale, his manager, Javier Martin-Artajo, and Achilles Macris. And there was a lot of blame going on, a lot of blame throwing them under the bus.
RAY SUAREZ: More than just inadvisable strategies, more than just mistakes, does this expose something more serious, criminality, laws that may have been broken in both countries?
DAWN KOPECKI: There's a lot of analysis going on about that.
There are some suggestions that there could some criminal transgressions going on here. The traders were mismarking their books. The -- Doug Braunstein and Mike Cavanagh, who are still executives at the company, were trying to parse those -- parse that issue, because they really want to deflect any kind of criminal charges or wrongdoing from the company themselves.
But other attorneys we have spoken to said that they might.
RAY SUAREZ: And could the material in the Senate report and in fact some of the testimony taken today be used against these people in some downstream legal action?
DAWN KOPECKI: Absolutely.
And that was the key goal of defense attorneys today, was to keep that from happening. But it was very tough hearing. Doug Braunstein came out. The problem was, he came out in April after he knew that a lot of these risk measures were breached, after he knew that the losses were in the billions of dollars, and told everyone that they were comfortable with the book, that everything was OK.
This was after Achilles Macris told them that they were in crisis mode in London. You know that your London unit is in crisis mode, and yet you tell investors that everything is OK. Jamie Dimon told investors it was a tempest in a teapot. That is what's going to be troublesome, this April 13th analyst conference call and a call with reporters where they assured everyone that it wasn't a big deal and everything was fine, when they knew for months that the losses were growing, when they knew they had violated the breaches of risk limits.
RAY SUAREZ: Dawn Kopecki from Bloomberg News, thanks a lot.
DAWN KOPECKI: Thank you.