More JPMorgan Shakeups in Wake of London Whale Trading Debacle

The post-"London Whale" housecleaning at JPMorgan Chase (JPM) isn't over yet.

On Thursday, the country's biggest bank by assets announced sweeping changes in both its top-level management and its organization. The changes, the bank said in a statement, will help it "better serve consumer customers" as well as "benefit corporate and investor clients around the world."

On the management side, Matt Zames will remain head of the bank's chief investment office, but will also become co-chief operating officer of the entire firm.

Zames is best known for -- as the bank put it – parachuting into the chief investment office after the London Whale revelations surfaced. In its most recent quarterly earnings report, JPMorgan revealed that the trading blunder cost the bank $5.5 billion.

Zames was tasked with unwinding the bank's massive credit default swap positions. (He replaced long-serving Dimon-lieutenant Ina Drew, who resigned in the wake of the scandal.) At the height of the crisis, Dimon referred to Zames as "the kind of person you want to be in a foxhole with." Zames has been mentioned in the press as a possible successor to Dimon.

Streamlining for Clarity, Cost, and Efficiency

On the organizational side, JPMorgan says it's continuing to try and streamline operations and draw a clear line between the corporate and investment side of the bank and the consumer and community banking side.

In that vein, on the consumer and community banking side JPMorgan will continue its successful "One Chase" interdepartmental merging efforts.

On the other side, JPMorgan's investment bank, treasury and securities services, and global corporate bank will be combined into a single corporate and investment bank. This should help the bank reduce costly customer and client overlap.

The Depression-era Banking Act That Refuses to Die

The overlap in the U.S. banking system between consumer and investment banking has been controversial since the financial crash.

In 1999, Congress overturned the 1932 Glass-Steagall Act, which inscribed a clear border between pure investment banking and federally insured consumer banking. Some economists, politicians and media folks blame the financial crash on the repeal of Glass-Steagall. And on Wednesday, Sandy Weill, ex-CEO of Citigroup (C) and one of the main chief architects of Glass-Steagall's destruction, made headlines by coming out in favor of reinstating the act.

JPMorgan Chase, the kind of superbank that couldn't have existed before Glass-Steagall's repeal, has been held up repeatedly of late as an example of U.S. banks that are too big to manage and too big to fail.


John Grgurich is a regular contributor to The Motley Fool, and owns no shares in any of the companies mentioned in this column. The Motley Fool owns shares of JPMorgan Chase and Citigroup.

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35 Comments

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ccurt78

And the GOP is STILL calling for LESS regulations, at the behest of their of their contributors ( the top 10 % ) who were the engineers of the fraud to begin with. Yes I know the democrats have been responsible also, so save your disingenuous rhetoric for someone who has not done the research.

July 30 2012 at 8:21 AM Report abuse +2 rate up rate down Reply
fredslil98

'n'
Well, Getting Rid of the Prig's Bout time. Now Knock on My Door (Alfredo's Tamales)...Let's start to Get the Economy Back to Where it Should Be 'n' the Way to do it is to Contact me...

July 29 2012 at 10:06 PM Report abuse rate up rate down Reply
aptp356

The only thing that will bring us out of this depression is repealing Phil Gramm's " Futures Tradeing Reform"2000-,Phil and his rollypolly little wife should both be in jail for what they did to the worlds economies,scum-lowlife.Give control back to the CFTC,who only set the price of oil based on supply and demand,unlike Wall Street who base the price on what might happen next week or month.

July 29 2012 at 5:23 PM Report abuse +1 rate up rate down Reply
lightningstrike

HOW THE HELL DOES JAMIE DIMON STILL HAVE A JOB AFTER THAT DEBOCLE????
HAS SOME BIG FRIENDS AT THE TOP,OBVIOUSLY!!!!

July 29 2012 at 12:10 PM Report abuse +1 rate up rate down Reply
FRANK

THEY SHOULD HAVE HAD A STANDBY LETTER OF CREDIT.

July 29 2012 at 10:56 AM Report abuse +1 rate up rate down Reply
rpthe1

Banks need to be broken up. What ever happened to monopoly laws? Finally Sandy Weill see's the destruction he cause and is trying to repent. It only took 10 short years to take us back to 1929 by repealing Glass-Steagall. It was created because the banks cause the gr8 depression and now have done it again.

July 29 2012 at 9:27 AM Report abuse +1 rate up rate down Reply
michael.griggs

they never tell ya who found the money. someone looses it, the money doesn't evaporate. someone profited that much. the media always makes it sound like no one found the 'lost' billions.

July 29 2012 at 1:00 AM Report abuse +1 rate up rate down Reply
SyFy_Geek58

Linda Almonte tried to warn Chase Morgan about the problem but she was fired for it:

http://www.huffingtonpost.com/2012/05/07/linda-almonte-jpmorgan-chase-whistleblower_n_1478268.html

July 28 2012 at 9:44 PM Report abuse +1 rate up rate down Reply
boxigg

COULD NOT HAPPEN TO A NICER BUNCH OF THIEVES

July 28 2012 at 6:36 PM Report abuse +1 rate up rate down Reply
1 reply to boxigg's comment
rpthe1

I had a small account with Chase when they started a $10 monthly savings acc fee. I took out all but $20 figuring it would be closed when it got to zero balance. Guess what! They continue to change a fee even tho it is negative!

July 29 2012 at 9:38 AM Report abuse rate up rate down Reply
1 reply to rpthe1's comment
USUCK2MUCHO

That was stupid. You have to close it out yourself. Then when you don't and they charge you fee's you blame them for your own laziness.

July 29 2012 at 9:40 PM Report abuse +2 rate up rate down
boxigg

THAT'S OK ,THEY WILL JUST STEAL IT BACK TRADING ---

July 28 2012 at 6:35 PM Report abuse rate up rate down Reply