Dimon called it "a tempest in a teapot." JPMorgan lost $6.2 billion.
On April 13, 2012, JPMorgan Chase chief executive Jamie Dimon dismissed press reports about trades on his bank's London desk as "a complete tempest in a teapot," according to the U.S. Senate record. On May 10, he disclosed about $2 billion in losses. A Senate subcommittee later counted at least $6.2 billion.
The bank's own task force found that a new risk model, cleared in January 2012, ran on spreadsheets filled in by hand. Reviewers called it error prone and ordered it automated by January 31. It never was. One formula divided by a sum instead of an average. The task force said this likely muted the calculated swings by a factor of two, though the exact effect was unclear. The trades caused the losses; the error made the risk look smaller.
In June 2012, Dimon told the Senate Banking Committee: "When I made that statement, I was dead wrong." In 2013, JPMorgan admitted the facts in its SEC settlement and agreed to about $920 million in penalties.
For CFOs and CIOs: the model went live with its automation still outstanding. That condition needed an owner and a deadline.
AI-generated illustration with narration by an AI voice.
Could your team list which live models still have open approval conditions?
What the captions say
- This is the story of how bank chief Jamie Dimon called a scare a tempest in a teapot. JPMorgan lost at least $6.2 billion.
- The trades sat on a desk in London, inside JPMorgan's Chief Investment Office, in 2012.
- That January, the bank broke its own risk limit, $125 million.
- On January 30, a new risk model was cleared. With it, the bank was back under the limit.
- But reviewers saw a weak spot. The model ran on spreadsheets filled in by hand. They ordered it automated by January 31.
- In April, reporters chased one trader on that desk, nicknamed the London Whale.
- Internal analyses called the losses manageable. On the April 13 call, Dimon dismissed the press concerns as "a complete tempest in a teapot."
- The losses kept growing, about $117 million the next week, then faster.
- A task force later found one formula that divided by a sum, not an average. It didn't cause the losses, but likely made the measured swings look half their size.
- On May 10, Dimon disclosed about $2 billion in losses. He called the strategy "flawed, complex, poorly reviewed, poorly executed, and poorly monitored."
- In June, Dimon faced the Senate. "When I made that statement," he said, "I was dead wrong."
- A Senate report counted at least $6.2 billion lost. JPMorgan admitted the facts and agreed to about $920 million in penalties.
- The facts JPMorgan admitted also included spreadsheet miscalculations. And the model meant to be automated by January 31 never was.
