Senate committee launches probe of JPM's 'Whale' losses

NEW YORK, Sept 6 Thu Sep 6, 2012 3:16pm EDT

NEW YORK, Sept 6 (Reuters) - A Senate committee has launched a probe into JPMorgan Chase's "London Whale" trading losses, according to a source familiar with the investigation.

The Permanent Subcommittee on Investigations, chaired by Senator Carl Levin, is interviewing current and former employees of JPMorgan's Chief Investment Office in connection with the bank's $5.8 billion loss on trades in an obscure corner of the credit market, according to the source.

JPMorgan's losses stemmed from bets by London-based CIO trader Bruno Iksil on an index for credit default swaps. His outsized positions earned him the nickname "London Whale" from the hedge fund traders taking the other sides of his positions.

An internal investigation by the bank revealed the possibility that the trades may have been deliberately mismarked in JPMorgan's books to make the losses look smaller.

Federal investigators and the Securities and Exchange Commission are looking into whether anyone involved in the incident committed a crime.

So far, seven current and former JPM employees have hired lawyers to help them navigate the investigations. The bank's internal probe is ongoing.

Levin's investigation could focus on the risks the CIO's trading activities posed to taxpayers, regardless of whether any of the activity is determined to be criminal, the source said.

Levin's committee has examined other big banks' behavior in the past and issued reports that have become the foundation for new financial regulation.

The probe by Levin's committee was first reported by Bloomberg news.

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