Usually, when TBTFs get caught doing something either illegal or just plain stupid, no actual humans are penalized.
What typically happens is there’s a yearslong investigation during which the handful of regulators and politicians whose palms weren’t thoroughly greased demand that the regulators and politicians whose pockets were properly lined do something to show the public that the government isn’t entirely beholden to the cabal of bankers that effectively run the world.
Later, the banks and the government negotiate a fine that is effectively just a tax Wall Street has to pay in order for government to acquiesce to a business model that far too often amounts to outright fraud and rampant financial chicanery.
But every so often, a head has to roll, and with the exception of Erin Callan at Lehman ca. 2008 and a few other examples it’s almost never a high profile executive.
Instead, it’s people like Tom Hayes, who is now sitting in HM Prison Wandsworth, which Bloomberg described last year as "a Victorian fortress south of the Thames known for its poor conditions and violent residents” for his alleged role as the “ringleader” of a LIBOR manipulation cartel.
Or people like Bruno Iksil, who will forever live in infamy as the trader who leaned so heavily on IG9 that he created market distortions large enough for hedge funds to identify and pick off and whose trades ultimately cost JPMorgan some $6 billion.
Iksil “earned” a number of amusing nicknames, the most famous of which was of course “The London Whale” (there was also “Voldemort”).
We have always said Iksil was merely a scapegoat for JPMorgan which was hardly willing to admit that what amounts to its UK-based hedge fund (CIO) somehow managed to turn a tail hedge into a multi-billion dollar debacle. Instead, the bank would claim that a “rogue” trader was responsible and that rogue trader would be Iksil.
Now, after the FCA dropped its case against him, Iksil has penned a three page letter explaining that he was in fact the fall guy for a flawed strategy that was “initiated, approved, mandated and monitored by senior management,” he writes.
“Publicity surrounding the losses sustained by the CIO of JPMorgan typically refers to ‘the London Whale’ in terms that imply that one person was responsible for the trades at issue,” he says. “In fact the losses suffered by the CIO were not the actions of one person acting in an unauthorized manner. My role was to execute a trading strategy that had been initiated, approved, mandated and monitored by the CIO’s senior management.”
“I kept raising alarms in the first half of March 2012 but was ordered to keep executing the strategy despite my repeated warnings,” he continues, noting that in 2011, he traveled to New York and “described the very difficult market conditions, the elevated execution costs and lack of proper relevant information on the RWA figures.”
"Iksil’s 3 1/2-page letter breaks his longstanding public silence following the episode, which culminated in government probes, more than $900 million in regulatory sanctions against the bank and a 50 percent pay cut for Chief Executive Officer Jamie Dimon for one year," Bloomberg notes. "In his letter, Iksil said the [US] government’s decision not to prosecute him helps show he’s not to blame."
And so, the Whale has "surfaced" so to speak, and confirmed what everyone already knew: at the very least, Ina Drew knowingly presided over a trading strategy she and others knew was likely to get the bank into trouble and it would certainly appear that Iksil might have told the top brass in New York as well. Of course we're a bit incredulous about Iksil's contention that he resented his nickname. After all, this is a guy whose Bloomberg profile once said he enjoyed "walking over water."
Amusingly, Iksil also says he sent a letter to the bank last month "to complain about the way it terminated me, the way the media conveyed so many erroneous descriptions about my role, about my conduct and the real context of this scandal."
We're sure an apology from Jamie Dimon is forthcoming.
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