Thursday, July 12, 2012

JPMorgan loss fallout may have just begun

(Reuters) - Jamie Dimon will do his best to put the "London Whale" trading flap behind him on Friday when JPMorgan Chase & Co (JPM.N) reports earnings, telling Wall Street that the bank has capped losses from the bad trades and found the key risk management flaw behind the positions.

But that doesn't mean the firm is off the hot seat.

Former employees and experts outside the bank say JPMorgan may be underplaying deeper management problems. Senior executives at the bank missed multiple red flags at the group responsible for the bad trades, including high turnover among risk managers, that raise questions about how far up the chain blame should be assigned.

"One would think issues would have been escalated internally," said Leslie Rahl, managing partner of Capital Market Risk Advisors and a former derivatives head at what is now Citigroup. "If there's not more disclosure about the governance on Friday, they still have questions that need to be answered."

JPMorgan declined to comment on any aspect of ongoing investigations or on responsibility for the losses. Read More