March 24, 2023

DealBook: Senior JPMorgan Executive Takes Temporary Leave Amid Reshuffling

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JPMorgan Chase’s chief risk officer is taking a temporary sabbatical, marking the latest move in an extensive reshuffling of JPMorgan’s executive suite following a botched credit bet that has cost the bank more than $6 billion.

The executive, John Hogan, said in a memo to employees Friday that he would leave the nation’s largest bank for four months. Ashley Bacon, who is currently the bank’s deputy chief risk officer will take over until Mr. Hogan returns, which is expected during the summer, according to several people familiar with the matter.

As chief risk officer, Mr. Hogan has presided over a tumultuous period at JPMorgan. He took over from Barry Zubrow just months before JPMorgan announced in May that a soured bet had caused roughly $2 billion in losses. The losses on the trade made by the bank’s chief investment office have since swelled, undercutting the reputation of the bank and its chief executive, Jamie Dimon, who was long known for his deft handling of risk.

In less than a year, JPMorgan has vastly upended its executive suite, elevated a team of younger executives and clawed back millions of dollars in compensation from executives tainted by the bungled trades. Ina R. Drew, who headed the chief investment office, resigned shortly after the trading losses were announced.

Mr. Hogan had been planning for the past couple of months to take a temporary leave after the death of his father in November, according to several people close to Mr. Hogan.

“Later this month I plan to begin a sabbatical for a few months – returning to the firm in early summer in my current role as chief risk officer,” Mr. Hogan said in a memo provided by JPMorgan.

Mr. Hogan, 46, was spared from criticism in an internal investigation of the losses led by Michael J. Cavanagh, the co-head of the corporate and investment bank. While the report, which was critical of Mr. Dimon for relying too heavily on assurances of others at the bank, leveled its most vicious attacks on the executives directly responsible for reining in the outsize bets of London traders in the chief investment office, a once little known unit. The 129-page report, which the bank released last week during its quarterly earnings call, laid much of the blame on Mr. Zubrow and Douglas Braunstein, who was the bank’s chief financial officer.

In another blow to the bank’s once vaunted risk reputation, federal banking regulators hit JPMorgan this month with two enforcement actions for gulfs in risk management that caused the multi-billion trading loss.

The two cease-and-desist orders from the Office of the Comptroller of the Currency and the Federal Reserve spotted several weaknesses throughout the bank, including problems related to how JPMorgan quantified potential losses from a series of complex trades. In addition, the orders faulted bank executives for not better informing the board as the wagers in the chief investment office grew increasingly risky.

To reassure skittish investors and regulators that JPMorgan has revamped its risk oversight, JPMorgan’s board dealt a stunning blow to Mr. Dimon. Last week, the board voted uninanimously to slash Mr. Dimon’s pay to $11.5 million, down from $23.1 million a year earlier.

Still, some federal regulators are concerned that the board lacks the financial acumen to control the bank’s risky activities, according to several regulators.

The cut to Mr. Dimon’s pay were announced last week when the bank reported that its earnings surged to a record of $21.3 billion.

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DealBook: JPMorgan Names New Head of Chief Investment Office

Craig Delany is the new head of JPMorgan Chase's chief investment office.JPMorgan ChaseCraig Delany is the new head of JPMorgan Chase’s chief investment office.

Continuing its management shuffle in the wake of a multibillion-dollar trading loss, JPMorgan Chase announced on Thursday that Craig Delany would take the helm of the chief investment office, the unit at the center of the soured trade.

Mr. Delany, 41, was most recently the chief operating office of JPMorgan’s mortgage banking unit.

The latest management shift follows a broader reorganization of the bank’s upper ranks, which was intended to strengthen JPMorgan’s focus on its clients, especially as profit in other areas is threatened by regulatory changes and the gloom in Europe.

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In July, JPMorgan promoted a number of younger executives, including Matthew E. Zames and Michael J. Cavanagh.

Mr. Delany, who will report to Mr. Zames, whose rise has generated speculation about who may succeed the bank’s chief executive, Jamie Dimon. Still, people close to the bank say that Mr. Dimon, who is 56, does not have plans to hand over the reins for at least five years.

“Craig has been in the center of some of the company’s toughest challenges, including the 2008 financial crisis, the acquisition of Bear Stearns, and helping to lead the turnaround of our Mortgage division following the housing collapse,” JPMorgan said on Thursday in an e-mail announcing the management moves.

JPMorgan has been working to contain the damage from the trading loss — a rare black eye for Mr. Dimon, once considered among the most deft risk managers on Wall Street.

In May, Mr. Zames, 41, took over the bank’s chief investment office, succeeding Ina Drew, who was one of the more notable casualties of the trade, which has grown to $5.8 billion in losses.

Like Mr. Zames, Mr. Delany has gained a reputation as a kind of fix-it man. He was brought in to turn around the bank’s struggling mortgage unit, which has been dogged by complaints of wrongful foreclosures and other processing flaws.

During Mr. Dimon’s nearly six-year reign, JPMorgan has had many management overhauls. In fact, few of the executives who made up Mr. Dimon’s inner circle during the financial crisis – including Bill Winters, Steve Black and Heidi Miller – remain.

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