Jim Sinclair’s Commentary

Is this a Lehman white wash or just the darn Lyme tic disease?

Bank Regulators Under Scrutiny in JPMorgan Loss
By JESSICA SILVER-GREENBERG and BEN PROTESS
Published: May 25, 2012

Senior JPMorgan executives assured the bank’s watchdogs after the financial crisis that the chief investment office, with hundreds of billions in investments, was not taking risks that would be a cause for concern, people briefed on the matter said. Just weeks before the trading losses became public, bank officials also dismissed the worry of a senior New York Fed examiner about the mounting size of the bets, according to current Fed officials.

The lapses have raised questions about who, if anyone, was policing the chief investment office and whether regulators were sufficiently independent. Instead of putting the JPMorgan unit under regular watch, the comptroller’s office and the Fed chose to examine it periodically.

The bank pushback also suggests that JPMorgan had sway over its regulators, an influence that several said was enhanced by the bank’s charismatic chief executive, Jamie Dimon, long considered Washington’s favorite banker.

Now, as regulators scramble to determine whether the chief investment office took inappropriate risks, some former Fed officials are asking whether the investigation should be spearheaded by the New York Fed, where Mr. Dimon has a seat on the board. Some lawmakers and former regulators also have reservations about the comptroller’s office, which is investigating the trade and was the primary regulator for JPMorgan’s chief investment unit.