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The problems that caused the $2 billion and counting loss at JPMorgan are the same as what tripped up other Wall Street banks. When your compensation plans reward high return and don't brutally punish high loss, your team is going to be playing with fire. When management goes along with the game for years - because they're also getting the mega-bonuses and living large - there will always be a problem. Always.
Now that it's coming out that JPMorgan was warned about risky trades since (at least) 2007, can we stop this nonsense of talking about Jamie Dimon and JPMorgan as risk experts? JPMorgan was more lucky than smart. More on the years or risky trading and bullying of risk managers at the NY Times:
In the years leading up to JPMorgan Chase’s $2 billion trading loss, risk managers and some senior investment bankers raised concerns that the bank was making increasingly large investments involving complex trades that were hard to understand, the New York Times reports.
But even as the size of the bets climbed steadily, these former employees say, their concerns about the dangers were ignored or dismissed.
An increased appetite for such trades had the approval of the upper echelons of the bank, including Jamie Dimon, the chief executive, current and former employees said.