[ by Howard Haykin ]

 A U.S. Senate committee has launched a probe into JPMorgan Chase's "London Whale" trading losses, according to a source familiar with the investigation.  The Permanent Subcommittee on Investigations, chaired by Senator Carl Levin, is interviewing current and former employees of JPMorgan's Chief Investment Office in connection with the bank's $5.8 billion loss on trades in an obscure corner of the credit market, according to the source.

By now, it's common knowledge that JPM's losses stemmed directly from bets taken by London-based CIO trader Bruno Iksil on an index for credit default swaps.  His penchant for taking outsized positions earned him the nickname "London Whale" from the hedge fund traders that took the opposite side of his positions. 

JPMorgan's ongoing internal investigation reportedly has revealed the possibility that trades may have been deliberately mismarked in JPMorgan's books to make the losses look smaller.    So far, 7 current and former JPMorgan employees have hired lawyers to help them navigate the investigations. 

According to Columbia Law Professor Daniel Richman, the Senate Committee is getting involved at this time - even while other government investigators conduct probes - because they want to better understand why more prosecutions are not being brought against financial institutions. 

This isn't the first time that Levin's committee has examined big banks' behavior.  Iin the past, reports issued by the committee have become part of the foundation for new financial regulation.  So, even though "this subcommittee has no legislative jurisdiction ... it has formidable clout," said Karen Shaw-Petrou, co-founder of Federal Financial Analytics in Washington.

"It can't move legislation, but it can change public opinion in ways that force the hand of both other Senators and, even if Congress is stymied, regulators. A clear case in point is the subcommittee's recent hearing on HSBC, which is having far-reaching impact on enforcement actions related to Iran sanctions," Ms. Karen Shaw-Petrou added.

On the other Paul Miller, managing director at FBR in Washington, said he thought the investigation would in the end have little impact, and that the events that prompted it did not warrant so much attention.  "This never put JPMorgan in a failure mode, it was contained," he said of the losses on the CIO desk.  Mr. Miller went further, labeling the investigation as "overkill," given the fact that the stock has been punished, and CEO Jamie Dimon's reputation has been tarnished." 

[C-I Note:  Differing or opposing opinions are what make horse racing.  On any given day, there alwas will be someone who's ready to put money on the horse with the lowest odds of winning.  That is a fact, whether we're talking about a "win," "show" or "place" bet. Any way, there are too many unanswered questions with the JPMorgan trade loss matter.  Until some regulator/investigator indicates that they have made a substantive determination as to what happened, we can never have too many government investigators involved. ]
 

For further details, go to:  [Reuters, 9/6/12].