For anyone who had doubts that the JPM CIO debacle was only just starting, the just broken news by Bloomberg that the firm has hired former SEC enforcement chief William McLucas "to help respond to regulatory probes of the firm’s $2 billion trading loss" should put all doubts to rest.
More Crimes & Misdemeanors of JP Morgan
Because the last thing JPM needs now is to be perceived as engaging in even more regulatory capture (its current general counsel was also previously a head of enforcement at the SEC) . Yet because it is doing precisely this, means that the offsetting cost, namely the fallout that will be associated with the CIO unwind if and when completed (and we will know for sure when the Q2 earnings are released at the latest), will be fast and furious.
From Bloomberg:
McLucas is not Dimon's first foray into reg capture:The lender’s May 10 announcement of the “self-inflicted” loss spurred reviews by the SEC, Commodity Futures Trading Commission, Office of the Comptroller of the Currency and Federal Bureau of Investigation. JPMorgan has said the losses may increase. Kristin Lemkau, a company spokeswoman, didn’t have an immediate comment on the hiring. The people requested anonymity because the appointment hasn’t been made public.
Investigators may focus on how JPMorgan disclosed the risk of losses, SEC Chairman Mary Schapiro said today in congressional testimony. The agency is studying the veracity of JPMorgan’s first-quarter reports, she said.
McLucas, a Washington-based partner at law firm Wilmer Cutler Pickering Hale & Dorr LLP, led the SEC’s enforcement division from 1989 to 1998. He represented board committees in the collapses of Enron Corp. and WorldCom Inc. McLucas, 61, didn’t reply to a phone call and e-mail seeking comment.
So... Time to revisit that stress test analysis Zero Hedge broke yesterday which caps the CIO loss at about $31.5 billion? Source: ZeroHedgeJPMorgan’s general counsel and most senior lawyer, Stephen Cutler, also previously served as the head of enforcement at the SEC. Cutler, 50, worked with McLucas at Wilmer from 2005 to 2007, before being hired by JPMorgan.