JPMORGAN FAULTED OVER TRADING LOSS  | Congressional investigators on Thursday released a harsh portrait of the events surrounding JPMorgan Chase’s huge trading loss last year, saying the bank ignored internal risk controls while its chief executive, Jamie Dimon, briefly withheld some information from regulators. The 300-page report is sure to escalate the debate over policing Wall Street, and it may foreshadow a criminal case against employees at the center of the trading disaster, Jessica Silver-Greenberg and Ben Protess report in DealBook. Current and former JPMorgan executives, including Ina Drew, who led the office that oversaw the trades, are scheduled to testify at a hearing starting at 9:30 a.m., which DealBook will be live-blogging.
A spokeswoman for the bank said: “While we have repeatedly acknowledged significant mistakes, our senior management acted in good faith and never had any intent to mislead anyone.†Mr. Dimon, who once was heralded as an astute manager of risk, is severely criticized in the report. He approved changes to an internal alarm system that underestimated losses, seemingly in contrast to the chief executive’s earlier statements to lawmakers, the report says. Mr. Dimon is also accused of withholding from regulators details about the losses and then raising his voice at a deputy who later provided the information.
“While people close to the matter dispute whether the outburst actually happened, it illustrates a broader problem ! at JPMorgan,†DealBook writes. “After emerging from the financial crisis in far better shape than rivals, the bank saw itself as being above its regulators. The bank was so filled with hubris, Senate investigators said, that an executive once screamed at examiners and called them ‘stupid.’†The report cites some of the private documents now being examined by the Federal Bureau of Investigation.
As with past investigations, the Senate report includes a trove of internal communications at the bank. Among the details: In mid-March last year, a low-level trader started tracking on a spreadsheet the difference between the bank’s favorable valuations of derivatives and the midpoint prices, enabling the traders to hide losses, according to the report. Bruno Iksil, the trader known as the London Whale, told his manager via instant message that the difference “has increased to 300 now,†eaning $300 million, later adding that it could grow to “1000,†or $1 billion. One colleague responded “ouch,†to which Mr. Iksil said, “well that is the pace.â€
GOLDMAN AND JPMORGAN MUST REDO CAPITAL PLANS  | The Federal Reserve said on Thursday that Goldman Sachs and JPMorgan Chase were not strong enough to go ahead with plans to pay out billions of dollars to shareholders, telling the banks to resubmit their proposals. In contrast, Citigroup and Bank of America, two of the most troubled banks after the financial crisis, got a green light for their plans, DealBook’s Peter Eavis writes.
“The Fed’s rebuke to Goldman and JPMorgan highlights growing tension as regulators try to make sure banks are better prepared for the next market shock. With profits improving, financial ! instituti! ons want to enrich investors by increasing dividends and buying back shares. But regulators want banks to be cautious with their capital, in case of future losses.â€
Goldman and JPMorgan, which had been expected by analysts to gain approval for their plans, now have to address the shortcomings and resubmit their plans by the end of September.
AU REVOIR, LASRY Â |Â Rumors had buzzed around Wall Street for months that Marc Lasry, the billionaire chief executive of Avenue Capital, would be named ambassador to France after supporting President Obama in his re-election campaign. Now, it appears that Bill Clinton may have spilled the beans.
At a fund-raising event on Wednesday, the former president said that Mr. Lasry “got some good news†earlier that day, adding that he was informed he was the new ambassador to France, according to a report by Politico. Mr. Clinton “had asked the president to consider†the appointment, Politico says, citing an unidentified person. If Mr. Lasry indeed has the job, it’s unlikely that his hedge fund would be significantly affected, Absolute Return reported earlier.
ON THE AGENDA  | The consumer price index for February is out at 8:30 a.m., and data on industrial production that month is out at 9:15 a.m. Alan Greenspan is on CNBC at 7:30 a.m. H. Rodgin Cohen, senior chairman at Sullivan & Cromwell, is on Bloomberg TV at 7:30 a.m. An interview with Erin Callan, the former chief financial officer of Lehman Brothers, airs on NBC’s “Rock Center†at 10 p.m.
DealBook »
Deal-Making Seen in Time Inc.’s Future  | With an estimated enterprise value of about $3.9 billion, the magazine spinoff from Time Warner could look at a range of possible deals, analysts said, according to Bloomberg News.
BLOOMBERG NEWS
I.B.M. and EMC Said to Be Interested in So! ftLayer  | A deal for SoftLayer Technologies could be worth more than $2 billion, Reuters reports.
REUTERS
McKee Foods to Buy Drake’s From Hostess  |Â
REUTERS
Morgan Stanley Moves Closer to Buying Out Wealth Management Unit  |Â
REUTERS
Wells Fargo Chief Earns $19.3 Million  | John Stumpf of Wells Fargo saw his pay increase 8 percent in 2012.
REUTERS
The Pay Quandary for Banks  | As long as there is always one bank out there willing to bid high, existing pay structures will be hard to change, Dominic Elliott of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS
New Rules to Give a More Consistent Picture of Bank Size  | When first-quarter financial statements are out, it should be possible â€" for the firs! t time â€! " to compare the assets of American and European banks, Floyd Norris, a columnist for The New York Times, writes. “Their balance sheets will still be radically different, but for those who care, the comparison will be possible.â€
NEW YORK TIMES
Amid Rush for Corporate Bonds, a Word of Caution  | Investors seem to love junk bonds, but “nobody really knows just how vulnerable the sector is to a sudden capital flight,†Gillian Tett of The Financial Times writes. “In the meantime, we had all better hope that those corporate debt markets remain benign; and that investors do not entirely forget that 2007 lesson about maturity mismatches.â€
FINANCIAL TIMES
A New Trade Group for Structured Finance  |Â
BLOOMBERG NEWS
Executive at Schroders in Britain Resigns  |Â
FINANCIAL TIMES
While Raising Money, Valuing a Portfolio Generously  | A report about private equity firms from University of Oxford researchers f! ound that! “valuations of remaining portfolio companies, and therefore reported returns, are inflated during fund-raising,†according to Fortune.
FORTUNE
Bain’s Bet on Retail Looks Less Promising  | Bain Capital “doubled down on specialty retailers just as they were about to be pummeled by the likes of Amazon.com,†Bloomberg News reports.
BLOOMBERG NEWS
Carlyle Founders Earn a Combined $172 Million in Dividends  | But total compensation for the three men last year was reduced.
WALL STREET JOURNAL
More Hedge Funds Shut Their Doors  | The Financial Times reports: “The number of hedge funds going out of business rose for the third year in a row in 2012, according to HFR, a data provider. Last year, 873 funds failed or closed their doors out of the estimated 9,800 total, against 775 in 2011 and 743 in 2010.â€
FINANCIAL TIMES
Inv! estors Line Up for a Piece of Thai Infrastructure I.P.O. Â |Â Institutional investors signed on to receive allocations in the I.P.O. of a BTS Group Holdings fund, which is aiming to raise up to $2.1 billion, according to Reuters.
REUTERS
Demise of Google Reader Causes a Stir Online  | Some bloggers said Google was making a mistake in shutting down its Reader.
NEW YORK TIMES BITS
Dig Says It’s Building a Reader of Its Own  |Â
DIGG
A Bankruptcy Lawyer for Detroit  | Kevyn Orr, a partner at Jones Day, was named on Thursday the emergency manager overseeing operations in Detroit, tasked with bringing the city back from the edge of financial ruin.
NEW YORK TIMES
Longtime Critic of Japan’s Central Bank Takes the Helm  | Haruhiko Kuroda, who was approved on F! riday to ! become the next Bank of Japan governor, “will need more than Aristotelian logic to turn years of the central bank’s policies on their head,†The New York Times writes.
NEW YORK TIMES
Sexual Harassment Lawsuit Filed Against Prominent Plaintiffs’ Lawyer  | A former junior lawyer at the firm filed a lawsuit against Faruqi & Faruqi on Wednesday, accusing one of its most prominent partners of sexual harassment.
DealBook »
At This Conference, Gensler Is Strictly Ballroom  | Gar Gensler, a man more at home arguing the fine points of position limits or swaps reform, caught Tuesday Night Fever at the Futures Industry Association’s annual conference held in Boca Raton, Fla.
DealBook »
Consultant Gets One Year in Insider Trading Case  | Tai Nguyen, who admitted to passing illegal tips to a former SAC Capital Advisors fund manager and others, was sentenced to one year and one day in prison, Bloomberg News reports.
BLOOMBERG NEWS
Lenders Ask Greece for More Cuts  | On Thursday, “the Greek government tried! to figur! e out how to meet one of the troika’s toughest requirements: designating 25,000 of the country’s 650,000 or so civil servants for eventual dismissal,†The New York Times writes.
NEW YORK TIMES
