Stuff JP Morgan bankers say: "There’s no hope. … The book continues to grow, more and more monstrous."

The London Whale report, digested.

The first major investigation into the London Whale scandal is underway - JP Morgan has been accused of "lying to investigators" as losses escalated last year. The losses came from a synthetic credit portfolio - a series of wagers on credit derivatives - which grew rapidly to $6bn. According to the report, the downward spiral was evident by March, but CEO Jamie Dimon pretented it wasn't, calling it a "tempest in a teapot" in early April.

The report is here, (warning, it's over 300 pages). It gathers together a juicy selection of emails, telephone conversations and instant messages, which amount to an interesting reminder that, whether discussing libor-rigging or a trading-loss cover-up, whether at Barclays or JP Morgan, banker communications are all cut from the same cloth.

It charts their last-minute attempts to forstall the multi-billion dollar loss - which get increasingly burlesque:

I can’t keep this going, we do a one-off at the end of the month to remain calm. I think what he’s [Mr. Martin-Artajo’s] expecting is a remarking at the end of the month, you can’t do it unless it’s month-end. … I don’t know where he wants to stop, but it’s getting idiotic. … [N]ow it’s worse than before … there’s nothing that can be done, absolutely nothing that can be done, there’s no hope. … The book continues to grow, more and more monstrous.

At one point, bank executives "yell at" OCC examiners and call them "stupid":

When asked if the CIO’s aggressive reaction to the 2010 examination of the CIO was unique, the OCC indicated that it was not. In fact, the OCC Examiner-In-Charge at JPMorgan Chase told the Subcommittee that it was “very common” for the bank to push back on examiner findings and recommendations. He recalled one instance in which bank executives even yelled at OCC examiners and called them “stupid.” In another example, in early 2012, according to the OCC, the most junior capital markets OCC examiner arrived at a meeting at the bank to discuss with his bank counterpart the results of a recent OCC stress examination. But instead of meeting with a single risk manager, he was, in his words, “ambushed” by all the heads of risk divisions from all the lines of business at the bank, including JPMorgan Chase’s Chief Risk Officer, John Hogan. Given the senior rank of the bank officials, the junior OCC examiner normally would not have led the meeting, but the bank officials pressed him to disclose the OCC’s preliminary conclusions. According to the OCC examiner, on every issue, the bank’s risk personnel criticized the OCC’s findings and recommendations, and the meeting assumed a loud and “combative” tone.

The report details an email sent by Bruno "the London Whale" Iksil to Javier Martin-Artajo on 30th January in 2012, worrying about increasing losses from the bet. He said that it had become "scary". A second email to Martin-Artajo came from Achilles Macris, equally worried. He says that "the book doesn’t behave as intended”.

Nothing was sorted out, and in the weeks that followed, things got worse. On March 22nd, traders were told to stop trading, able to mask the losses by presenting them in a favourable light. However, the differences between these favourable valuations of the derivatives and the actual midpoint prices had by this point "increased to 300" (that's £300m), and traders found they had become unsustainable.

By the time Jamie Dillon made his teapot remark, the report found that he was “already in possession of information about the . . . complex and sizeable portfolio, its sustained losses for three straight months, the exponential increase in those losses during March and the difficulty of exiting the . . . positions”.

The Senate panel said that “the written and verbal representations made by the bank were incomplete, contained numerous inaccuracies, and misinformed investors, regulators, and the public”. The investigation continues.

JP Morgan is being investigated. Photograph: Getty Images

Martha Gill writes the weekly Irrational Animals column. You can follow her on Twitter here: @Martha_Gill.

Photo: Getty Images
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Why are boundary changes bad for Labour?

New boundaries, a smaller House of Commons and the shift to individual electoral registration all tilt the electoral battlefield further towards the Conservatives. Why?

The government has confirmed it will push ahead with plans to reduce the House of Commons to 600 seats from 650.  Why is that such bad news for the Labour Party? 

The damage is twofold. The switch to individual electoral registration will hurt Labour more than its rivals. . Constituency boundaries in Britain are drawn on registered electors, not by population - the average seat has around 70,000 voters but a population of 90,000, although there are significant variations within that. On the whole, at present, Labour MPs tend to have seats with fewer voters than their Conservative counterparts. These changes were halted by the Liberal Democrats in the coalition years but are now back on course.

The new, 600-member constituencies will all but eliminate those variations on mainland Britain, although the Isle of Wight, and the Scottish island constituencies will remain special cases. The net effect will be to reduce the number of Labour seats - and to make the remaining seats more marginal. (Of the 50 seats that would have been eradicated had the 2013 review taken place, 35 were held by Labour, including deputy leader Tom Watson's seat of West Bromwich East.)

Why will Labour seats become more marginal? For the most part, as seats expand, they will take on increasing numbers of suburban and rural voters, who tend to vote Conservative. The city of Leicester is a good example: currently the city sends three Labour MPs to Westminster, each with large majorities. Under boundary changes, all three could become more marginal as they take on more wards from the surrounding county. Liz Kendall's Leicester West seat is likely to have a particularly large influx of Tory voters, turning the seat - a Labour stronghold since 1945 - into a marginal. 

The pattern is fairly consistent throughout the United Kingdom - Labour safe seats either vanishing or becoming marginal or even Tory seats. On Merseyside, three seats - Frank Field's Birkenhead, a Labour seat since 1950, and two marginal Labour held seats, Wirral South and Wirral West - will become two: a safe Labour seat, and a safe Conservative seat on the Wirral. Lillian Greenwood, the Shadow Transport Secretary, would see her Nottingham seat take more of the Nottinghamshire countryside, becoming a Conservative-held marginal. 

The traffic - at least in the 2013 review - was not entirely one-way. Jane Ellison, the Tory MP for Battersea, would find herself fighting a seat with a notional Labour majority of just under 3,000, as opposed to her current majority of close to 8,000. 

But the net effect of the boundary review and the shrinking of the size of the House of Commons would be to the advantage of the Conservatives. If the 2015 election had been held using the 2013 boundaries, the Tories would have a majority of 22 – and Labour would have just 216 seats against 232 now.

It may be, however, that Labour dodges a bullet – because while the boundary changes would have given the Conservatives a bigger majority, they would have significantly fewer MPs – down to 311 from 330, a loss of 19 members of Parliament. Although the whips are attempting to steady the nerves of backbenchers about the potential loss of their seats, that the number of Conservative MPs who face involuntary retirement due to boundary changes is bigger than the party’s parliamentary majority may force a U-Turn.

That said, Labour’s relatively weak electoral showing may calm jittery Tory MPs. Two months into Ed Miliband’s leadership, Labour averaged 39 per cent in the polls. They got 31 per cent of the vote in 2015. Two months into Tony Blair’s leadership, Labour were on 53 per cent of the vote. They got 43 per cent of the vote. A month and a half into Jeremy Corbyn’s leadership, Labour is on 31 per cent of the vote.  A Blair-style drop of ten points would see the Tories net 388 seats under the new boundaries, with Labour on 131. A smaller Miliband-style drop would give the Conservatives 364, and leave Labour with 153 MPs.  

On Labour’s current trajectory, Tory MPs who lose out due to boundary changes may feel comfortable in their chances of picking up a seat elsewhere. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.