Karen McVeigh in Tampa
and Dominic Rushe in New York
The US justice
department opened an investigation into how JP
Morgan lost more than $2bn in poorly managed trading at its London
The justice department inquiry is at a preliminary stage and as yet there
appears to be no evidence of criminal wrongdoing at the bank. The Securities
and Exchange Commission has already launched a separate investigation and as
political pressure for greater regulation of Wall Street banks begins to mount.
President Barack Obama appeared on the daytime talk show The View on
Tuesday to call for Wall Street reform. "JP Morgan is the best, or one of
the best managed, banks. You could have a bank that isn't as strong, isn't as
profitable making those same bets and we might have had to step in. That's
exactly why Wall Street reform's so important," he said.
He said Dimon, the chairman and chief executive officer of JP Morgan, was
"one of the smartest bankers we've got – and they still lost $2bn and
counting."
At the bank's annual meeting, held at a tightly secured facility seven
miles outside Tampa , Florida
Forty-one percent of shareholders voted for a proposal by the American
Federation of State, County and Municipal Employees (AFSCME) to appoint an
independent chairman. Dimon also received 94.8% approval from shareholders on
his $23m pay package from last year.
Lisa Lindsley, a AFSCME director, said the vote on splitting chairman and
CEO was "pretty high" in favour considering most of the votes were in
before the losses were announced last week. A similar proposal last year for an
independent lead director got only 11.9% of the vote.
"We're not saying he should be fired as CEO," said Lindsley. But
the "stakes were too high to continue business as usual," she told
shareholders. "An all-powerful CEO is his own boss," she said.
"Looking for an infallible CEO is a fool's errand."
After the meeting, Dimon told reporters that the bank was considering
whether to claw back bonuses from those responsible for the losses. "We
will do the right thing. And that may well include clawbacks," Dimon said.
"The buck always stops with me."
On Monday Ina Drew, JP Morgan's chief investment officer, quit. Drew
oversaw the London-based bankers at the heart of JP Morgan's losses.
Drew earned over $31m in the past two years, according to regulatory
filings. She is expected to be the first of several bankers to leave the bank
in the wake of the fiasco.
The scandal has put intense pressure on Dimon, who also sits on the
advisory board of the New York Federal Reserve. Shareholders at the meeting
questioned Dimon's role at the New York Fed, a position that has recently
attracted criticism from US politicians. Dimon said his role is on an
"advisory" board and that he isn't allowed to vote on anything.
But having emerged from the credit crisis as the most credible banker on
Wall Street, the London trading loss has dented Dimon's reputation, and his
role as Wall Street's chief cheerleader against new financial regulations – in
particular the Volcker rule that would limit trades like the ones that went
wrong in London.
In April, analysts asked Dimon about rumours of problems in London
"Mr Dimon, you showed your disappointment at the mistakes our company
has made over robo-signing and sloppy practices that have wreaked havoc on the
life of many homeowners. You assured us you would learn from those
mistakes," he said.
Finn said: "We heard you describe the latest problem as an 'oversight'
… you spoke of red flags. Do you still believe that the company should still
self-regulate any trading on their own accounts?
"Are your thoughts on the Volcker rule still evolving? We can't help
wondering if you are listening."
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