It’s been a bad run the last week for Wall Street Titans.Most notably, two longstanding untouchables, JPMorgan (JPM) chief Jamie Dimon and star hedge fund manager Steven Cohen, are now facing intense scrutiny for their roles in scandals that have resulted in billions of dollars of investor money being lost or pulled from their institutions.
As we noted last week, Dimon’s integrity was called into question when a new Senate committee report on the $6 billion “London Whale” trading loss put the focus on his credibility and truthfulness. As the New York Times noted on Monday morning: “An uncomfortable spotlight has swung back on Mr. Dimon all the same, as the (Senate) hearing and the panel’s report detailed his role in the trading blowup, potentially creating fresh challenges for a chief executive long praised for his risk-management process.”
The article, by reporters Ben Protess and Jessica Silver-Greenberg, noted that Dimon is not likely to face a serious threat to his power, even though some investors and members of the bank’s board “are growing frustrated with what one shareholder called his ‘off-putting arrogance,” Indeed, the Whale episode calls into question whether Dimon’s hubris will interfere with his management of the nation’s largest bank.
The news could be even worse for hedge fund prince Stevie Cohen, who last week wrote the biggest check ever for insider trading violations. His firm, the hugely successful hedge fund, SAC Capital Advisors, will pay a $616 million civil penalty to the Securities and Exchange Commission to settle two-insider trading cases.
In light of such a settlement, it’s probably safe to assume that it hasn’t just been Stevie’s superior business acumen that let to those outsized 20-30 percent annual returns over the last 20 years
As several news sources reported over the weekend, federal prosecutors and securities regulators continue to investigate Stevie and SAC.
To make matters worse, the SEC investigation and fine have essentially caused a run on the bank. “SAC has been trying to stem an investor exodus,” reported Michael Rothfeld, Jean Eaglesham and Chad Bray. Investors have recently issued requests to redeem $1.7 billion of SAC’s $15 billion in assets under management.”
It’s the underlings that typically fare worse in such inquiries. At least six former SAC traders have already pled guilty. Stevie, meanwhile, can keep writing checks and stave off a prosecution.
After all, money talks. And Stevie and Dimon have plenty of that, no matter how embarrassing the coming months prove to be.