Why JPMorgan's Suit Against the London Whale's Boss is Good News

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Whales, as we all know from school and trips to Sea World, frequently need to come up for air. Just like it's biological cousin, finance's London Whale also apparently needs to keep resurfacing.

JPMorgan Chase (NYSE: JPM  ) is reportedly suing Javier Martin-Artajo, supervisor of Bruno Iksil, the so-called London Whale whose outsize trading position in the derivatives market cost the bank at least $5.8 billion over the past year. No details of the claims against him have been made public, but this could be the superbank's way of directing the blame, staying one step ahead of regulators, and possibly blunting any action they might be considering.

Tired as investors might be of this story, this is good news for them.

The control freak
According to Financial Times, JPMorgan filed its claim against Martin-Artajo in London's High Court last week. Martin-Artajo, however, apparently hasn't been served with the claim himself. Under British law, JPMorgan has up to four months to do this, at which point he can respond to the charges.

We may then learn more about exactly what JPMorgan is up to here, but for the moment, it's clear that the Wall Street titan at least hasn't let up in its crusade to root out everyone and everything behind this expensive and embarrassing mess. This is very much in keeping with the style of Jamie Dimon, JPMorgan's infamously thorough and tough CEO.

Dimon is notoriously risk averse. JPMorgan Chase, which Dimon assumed control of in 2004, stayed largely out of the mortgage-backed securities and credit-derivatives mess in the run-up to the financial crash largely because of his aversion to excessive risk. He and his senior management had ample opportunity to get involved in the worst financial excesses of the 2000s, but they studiously avoided them, undoubtedly to the consternation of investors, at times, who saw competitors like Goldman Sachs (NYSE: GS  ) and Bank of America (NYSE: BAC  ) reaping the share-price rewards generated from record profits made off of America's credit bubble.

As such, the London Whale trading debacle (a $100 billion dollar bet gone wrong, almost the definition of excess in and of itself) was a tremendous shock to the careful Dimon and his like-behaving bank -- one he's been relentlessly on top of since news of the screw-up broke.

Blood in the water
Yes, this is the story that just won't go away, but it's better that Dimon and company are getting out ahead of things as much as possible. There are still numerous regulatory investigations in process, including the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Reserve, and the U.K.'s Financial Services Authority. The Federal Bureau of Investigation is even looking into the matter, which means criminal action is a possibility.

If Martin-Artajo was unlawfully or unethically covering up Iksil's outrageous trading position, or the mounting losses, the bank would naturally want to get the jump on either U.S. or U.K. investigators. As Iksil's boss, Martin-Artajo is one of the people presumably aware of the bank's handling of the trade, so by going after him in this civil suit, the bank might be hoping to blunt whatever's coming down the line from regulators, or at least try and point them in a certain direction. By singling Martin-Artajo out, JPMorgan can say, "See, it was just this one guy causing all the trouble, and we got him already."

Of course, as we don't know full details of the filing yet. This is all speculation. But for the moment, it seems you can't keep a good whale down, especially a killer whale like Dimon. And for this, investors should be thankful.

Thanks for reading, and for thinking. Have we whetted your appetite for learning more about big American banks? The Motley Fool has just published an in-depth report on Bank of America. And while we can't promise you exciting tales of sea creatures gone wild in the London derivatives markets, we can promise you a thorough detailing of B of A's prospects, and three reasons to buy and three reasons to sell. Just click here for full access.

Fool contributor John Grgurich owns no shares of any of the companies mentioned in this column. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Goldman Sachs Group. The Motley Fool has a delightful disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2091720, ~/Articles/ArticleHandler.aspx, 10/26/2016 3:38:44 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 6 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:00 PM
JPM $68.80 Down -0.07 -0.10%
JPMorgan Chase CAPS Rating: ****
BAC $16.72 Down -0.05 -0.30%
Bank of America CAPS Rating: ****
GS $175.55 Up +0.43 +0.25%
Goldman Sachs CAPS Rating: ***