* James 'Jes' Staley, chairman of investment bank, leaving
* Moving to BlueMountain, which bet against JPMorgan
* Staley at bank for 34 years
By David Henry
NEW YORK, Jan 8 James "Jes" Staley is leaving
his job as chairman of the investment banking unit of JPMorgan
Chase & Co to join a hedge fund that profited from the
bank's $6.2 billion "London Whale" loss.
The 56-year-old Staley, who was moved aside in July from his
position as chief executive for investment banking at JPMorgan,
is becoming a partner at BlueMountain Capital Management, the
hedge fund company said on Tuesday.
BlueMountain was among a group of hedge funds that profited
by betting against JPMorgan in credit derivatives transactions
known as the "London Whale" trades, which cost the bank billions
Later, BlueMountain worked for JPMorgan to help the bank
close the positions, according to a person familiar with the
The hedge fund manages more than $12 billion and was founded
by JPMorgan alums.
Staley, a 34-year veteran of JPMorgan, was sidelined in a
management reshuffle in July that foreshadowed his departure. He
had long been seen as a possible successor to JPMorgan Chief
Executive Jamie Dimon, but both men are the same age, and Dimon
seems to be focusing on promoting younger executives now.
At BlueMountain, Staley will focus on cultivating
relationships with clients and developing new strategies, the
firm said, echoing the kind of talk about financial innovation
that used to be routine at investment banks.
Many bankers complain that regulations are making it harder
to innovate. The new rules were put in place after a financial
crisis that was fueled in large part by abuses of innovations
such as securitization.
Staley will buy a stake in BlueMountain and the money will
be used on new technology and staff, the firm said. The amount
of his investment was not disclosed.
Staley spent nearly 22 of his 34 JPMorgan years at its
investment bank. He was a founding member of its equities
business in the early 1980s. He later worked as CEO of its asset
management unit, which includes its private bank.
As Dimon reorganized business units, he named two younger
executives to be co-CEOs of commercial and investment banking
and made Staley chairman of the unit and head of a committee to
consider the future of global banking.
Staley, appearing on CNBC on Tuesday, said of no longer
being in contention for Dimon's job, "There is a generational
issue. The bank has to get ready for that. The transition that
Jamie and I have been able to execute from JPMorgan to a firm
like BlueMountain, I feel very proud of."
Staley said he expects changes in the financial system will
shift more trading, particularly of credit instruments, from
banks to firms like BlueMountain.
Staley will become BlueMountain's ninth managing partner.
He declined twice on CNBC to discuss the trade other than to
make the point that JPMorgan had trusted BlueMountain enough to
use it to resolve the position.
The Whale trades were made through JPMorgan's chief
investment office in London, which was a separate business unit
from the investment bank. One of the key engineers of the trade
was Bruno Iksil, who took big enough positions to earn the
nickname "the London Whale."
At a conference in San Francisco on Tuesday, CEO Dimon
complained about the way some JPMorgan employees dealt with the
"We have some people who acted terribly and we had some
leaders who acted like children. It was unbelievable," Dimon
Andrew Feldstein, the CEO of BlueMountain, worked for
JPMorgan for more than a decade before starting the hedge fund
in 2003. His jobs at JPMorgan included heading structured credit
and the global credit portfolio.
Dimon, in a memo to senior managers after the announcement
of Staley's departure, said, "BlueMountain is an important
client of ours, and we look forward to working with Jes in the