Top JPMorgan Exec Out Over $2B Blunder as CEO Dimon Faces Heat

JPMorgan Chase moved swiftly on Monday to contain the growing fallout from a trading loss that could reach $3 billion or more, replacing the bank’s chief investment officer Ina Drew and moving to tamp down a growing furor over whether safeguards exist to prevent a similar debacle in the future. Drew, who had worked her way up the ranks at JPMorgan over three decades to become one of Wall Street’s most powerful women, was replaced by Matt Zames, currently co-head of the bank’s global fixed income group and head of capital markets in its mortgage division.

Last Thursday, JPMorgan’s CEO Jamie Dimon disclosed the $2 billion loss during a hastily convened conference call that stunned Wall Street. Dimon said the firm’s chief investment office, which Drew led, had engineered a “synthetic credit portfolio” as a “hedge” to balance out potential losses elsewhere on its books. As the markets turned against JPMorgan, the portfolio began to experience huge losses, spinning beyond the control of the bank’s risk managers. Dimon said the bank still faces $1 billion of further losses from the position. The Securites and Exchange Commission is investigating the loss, which caused JPMorgan shares to plunge 10% last Friday. The bank’s stock price had tumbled an additional 2.15% in early trading Monday.