Scores of federal regulators are stationed inside JPMorgan Chase’s Manhattan headquarters, but none of them were assigned to the powerful unit that recently disclosed a multibillion trading loss.
Roughly 40 examiners from the Federal Reserve Bank of New York and 70 staff members from the Office of the Comptroller of the Currency are embedded in the nation’s largest bank.
They are typically assigned to the departments undertaking the greatest risks, like the structured products trading desk.
Even as the chief investment office swelled in size and made increasingly large bets, regulators did not put any examiners in the unit’s offices in London or New York, according to current and former regulators who spoke only on condition of anonymity.
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