Ex-JPMorgan official Ina Drew to testify before Congress on 'London Whale' loss
Ina Drew, JPMorgan Chase & Co.’s former chief investment officer, will make her first public appearance since leaving the bank when she testifies March 15 at a Senate Permanent Subcommittee on Investigations hearing into the bank’s “London Whale” loss.And from the New York Times Magazine:
Jamie Dimon, the bank’s chairman and chief executive officer, wasn’t among the witnesses listed by the Senate subcommittee in a statement released today....MORE
In February of 2011, Jamie Dimon, the chief executive officer of JPMorgan Chase, approached the podium of one of the ballrooms at the Ritz-Carlton Hotel in Key Biscayne, Fla., where 300 senior executives from around the world were attending the bank’s annual off-site conference. By that time, the cold fear of the financial crisis was cordoned off in the near-distant past, replaced by a dawning recognition that the ensuing changes in business — the comparatively trifling risk limits, the dwindling bonuses, the elevated stress levels — might actually be permanent. That day, Dimon took the opportunity, according to a bank employee in attendance, to try to inspire his team, to rouse them from the industrywide sense of malaise. Yes, there were challenges, Dimon said, but it was the job of leadership to be strong. They should be prudent, but step up — be bold. He looked out into the audience, where Ina Drew, the 54-year-old chief investment officer, was sitting at one of the tables. “Ina,” he said, singling her out, “is bold.”
Perhaps by now when bankers hear that kind of public praise, they simultaneously hear a distant clanging, a dim alarm that provokes an undercurrent of anxiety. It seems inevitable that an acknowledgment of such star power will eventually lead to a fall, a big one, and one year and three months later, Drew succumbed. Her team had been bold, so bold that along with Dimon, she had become the public face attached to a $6 billion mistake, a trading loss so startling in size that it dominated the business press, put Dimon on the defensive and cost Drew her job. Over and over again, online and on television, in stories about the loss, the same corporate headshot appeared: a woman wearing a hot pink bouclé jacket, showing a smile so faint it was almost frank in its discomfort.
James Lee, who eventually became one of the biggest dealmakers on Wall Street, started out at Chemical Bank in New York sitting next to Ina Drew. He remembers talking to a client on the phone one day, trying to answer some questions about a deal the bank was proposing. “So I told the client what I thought, and I’m answering and answering, and I say, ‘So what do you think?’ ” Lee says. But there was no response. Lee looked at the phone and then looked around. Drew, a foot away, was in the middle of a different phone conversation, but her eyes were on him, and she was shaking her head back and forth — no, that’s not right — and waving her hand to show she had something in it: the phone jack. “She heard part of what I was saying, which was obviously incorrect,” Lee says. “She literally pulled the plug on me.”
It was 1983, and Drew, just 26, had been in the business for only three years, but she proved herself quickly and was already running a small group of traders. A graduate of Johns Hopkins with a master’s degree in international relations from Columbia University, Drew had hoped for a job in corporate lending, the clubby, relationship-based business that was the track to the prestigious commercial-banking group. But corporate lending did not open its doors to a young woman from New Jersey with no M.B.A. After 23 interviews, Drew landed a decidedly less glamorous job, on the trading floor of the Bank of Tokyo Trust. Thrown in with no training, she cried every day, she used to tell junior people at JPMorgan Chase. But then one day, it clicked: Not only did she get it, she was good at it.
In 1981, she moved to Chemical Bank, then considered a step up — barely. “They used to call it comical bank,” Tom Block, who was in charge of government relations there, recalls. Nothing about the bank at the time would have suggested that over the next 30 years it would merge and acquire its way to become the megabank known as JPMorgan Chase.
By the mid-1980s, Drew was working directly under an economist named Petros K. Sabatacakis, the head of Chemical Bank’s global treasury department. Among the department’s tasks was managing interest-rate risk, ensuring that the bank did not find itself locked into paying out more in interest on the money it borrowed — bonds and deposits — than it was receiving in interest-rate payments from its loans. In the mid-1980s, to hedge against falling interest rates, the group poured money into $3 billion worth of government-backed mortgage securities that grew more valuable when their call on interest rates proved right. Still, the group was considered a sleepy backwater until Sabatacakis turned their attention a few years later to banking’s other major risk: credit default. The bank was most vulnerable to its lenders defaulting in a recession; in a recession, the Federal Reserve generally lowers interest rates to increase borrowing and spending. Sabatacakis determined they should continue to buy those securities whose value would rise in a recessionary environment.“It was a trader’s mentality,” says Glenn Havlicek, a trader who worked under Drew for 22 years. “It may seem elemental, but at the time, the idea of mixing a trading solution and a credit-crisis solution — it was in its awkward infancy.”
“What was crazy about it,” Sabatacakis says, “was that by the time we were finished, we were making more than 50 percent of the bank’s profits.” This kind of risk-balancing would continue to define Drew’s career — only the dollar amounts kept growing, and the instruments used to manage risk became more and more complex.
Drew was something of an unusual figure on Wall Street and not easily categorized. She was known for her small, girlish voice but could let loose with profanity when angered. She was the daughter of a Newark lawyer and had a reputation as a tough adversary but practically blushed whenever she spoke about her husband, a periodontist who was her high-school sweetheart and played on the Johns Hopkins basketball team. Tall, with expensive blond hair, she dressed impeccably for the office, favoring classic Chanel suits and Manolo Blahnik shoes, as well as a blinding emerald-cut diamond ring; but she and her husband never left the affluent but unremarkable suburban neighborhood in Short Hills, N.J., where they settled more than 20 years ago....MUCH, MUCH MORE
