[ by Larry Goldfarb ]

So who is Ina Drew?  We know she is a mother of two, a wife to a Periodontist, and she lives in Short Hills, NJ.  She is 56 years old and for a period which ended a couple of months ago, she was perhaps the most powerful woman on Wall Street.  In an almost 8,000-word article in the NY Times, Drew's business career is documented in minute detail -- from her roots at the Bank of Tokyo, to sitting next to James Lee at Chemical Bank to being responsible for managing hundreds of billions at JPMorgan.  

In reviewing the article, two threads run through it.  First, what was the basis of Drew’s success?  And second, how did the problem with the trade grow to end her career?

Basis on Drew’s Success

Ina Drew prided herself on knowing more about her area of expertise than anyone else.  It was possible because she was part of Treasury Department, an area not known for possessing the best and brightest.  In the mid-80s, Drew was working directly under an economist named Petros K. Sabatacakis, the head of Chemical Bank’s global treasury department.  Among the department’s tasks was managing interest-rate risk, ensuring that the bank did not find itself locked into paying out more in interest on the money it borrowed — bonds and deposits — than it was receiving in interest-rate payments from its loans.  In the mid-1980s, to hedge against falling interest rates, the group poured money into $3 billion worth of government-backed mortgage securities that grew more valuable when their call on interest rates proved right.  Still, the group was considered a sleepy backwater until Sabatacakis turned their attention a few years later to banking’s other major risk: credit default.  The bank was most vulnerable to its lenders defaulting in a recession;  in a recession, the Federal Reserve generally lowers interest rates to increase borrowing and spending. Sabatacakis determined they should continue to buy those securities whose value would rise in a recessionary environment.  "It was a trader’s mentality," says Glenn Havlicek, a trader who worked under Drew for 22 years.  "It may seem elemental, but at the time, the idea of mixing a trading solution and a credit-crisis solution — it was in its awkward infancy.”

"What was crazy about it," Sabatacakis says, "was that by the time we were finished, we were making more than 50 percent of the bank’s profits."  This kind of risk-balancing would continue to define Drew’s career — only the dollar amounts kept growing, and the instruments used to manage risk became more and more complex.

Second, she was pretty, girlish, and personable.  She was known for her small, girlish voice but could let loose with profanity when angered.  She was the daughter of a Newark lawyer and had a reputation as a tough adversary but practically blushed whenever she spoke about her husband, a periodontist who was her high-school sweetheart and played on the Johns Hopkins basketball team.  Tall, with expensive blond hair, she dressed impeccably for the office, favoring classic Chanel suits and Manolo Blahnik shoes, as well as a blinding emerald-cut diamond ring; but she and her husband never left the affluent but unremarkable suburban neighborhood in Short Hills, N.J., where they settled more than 20 years ago.

Wall Street is not exactly known as a warm place to work, but Drew had an unusually personal approach that engendered loyalty from her employees; even some employees who lost their jobs during various rounds of layoffs spoke of her glowingly.  A trader who once worked under her at JPMorgan Chase asked me for a guarantee of anonymity before making this uncontroversial claim: "I love her.  I love her to death."  She was unfailingly prompt for the 7:30 a.m. meeting she ran;  she was considered so knowledgeable that traders from other groups would show up for that meeting to gauge her insights into the market.  She personally picked baby gifts for low-ranking traders.  "She was like a Sheryl Sandberg figure to those of us in her group," said one former female trader, referring to Facebook’s chief operating officer.  "She had that mystique."  I called two other women who worked for Drew and they said the same three words — "She was phenomenal" — before hanging up.  Eight other former bosses, including two former chief executives and one chairman, all described her as plain-spoken and trustworthy, an outstanding risk manager and analytical thinker.

Third in an area of business that encouraged accountants and bureaucrats drew stood out.  Drew did not have a business degree, much less the skills of a quant, and yet, as banking evolved and her bank kept merging with other banks, Drew survived.  "When you merge, you get to see the other side’s business, and hers always looked better," said Don Layton, the chief executive of Freddie Mac, who oversaw Drew when Chemical merged with Manufacturers Hanover in 1991.  Moreover, her ability to comprehend minute details seemed to serve her well when dealing with high minded rivals, especially when the spoils are being handed out after a merger.  A case in point was the JPMorgan, Chase combination: Soon after the banks merged, Drew and her team sat in a conference room with their counterparts from JPMorgan, a group that included a banker named Patrick Edsparr, and talked about their respective backgrounds.  Drew’s team had all graduated from well-regarded schools, but unlike Edsparr’s group, they did not have Ph.D.’s in applied math; they weren't M.I.T. graduates or physicists from Caltech.  They weren’t quants.  "You could just feel in the room that there was this sense emanating from Patrick and his team that we were going to be lunch," Havlicek says.  Edsparr essentially told Drew that her way of investing — based on bottom-up economic analysis of markets, as opposed to abstract mathematical models — was on its way out. Both stayed after the merger. Drew continued to run the treasury department, managing its safer trades, while Edsparr was put in charge of the proprietary-trading desk, where the bank traded its own funds for profit.  Until Edsparr left in 2008, the tension between them was obvious.  When Edsparr disagreed with one of Drew’s opinions in a meeting with several other high-level executives, Drew shot back, “I don’t care what you think.” 

The trading problem that ended Drew’s career

It appears that the trouble that ultimately took down Drew resulted from a combination of severe political tension between the US and UK units, the fact that somebody leaked the trades to hedge funds and then the press, and the fact that the positions and strategies had grown so complex that even the intellect of Drew could not fully comprehend them.  In fact, when the traders responsible for the position came to NY, Drew checked in with Achilles Macris and Martin-Artajo, the two people who managed the group in London, about the position while the two men were in New York. They answered, but the executive, who understood the trade, remembers thinking that they did not give as full an answer as they could have.  "I think they glossed over details to the point where Ina knew the product, the size they were trading, but she did not know what the true P.& L." — profit and loss — "impact could possibly be in a stressful scenario," he said.  She was asking the right questions, he said, but did not seem to be picking up on what was not being said.  Why didn’t he say anything?  The usual reasons: less than total certainty, resistance to jumping rank, faith in Iksil’s judgment.  Plus, he liked the guy.

In the end, maybe Drew still believes — as Macris does, according to people at the bank — that the position could have worked out given enough time.  Maybe if she had asked the right questions sooner, her traders would have been forced to clarify or she would have sensed danger before it went out of control.  Many systems failed and perhaps, too, her judgment.

Drew was someone known for her grasp of the big picture, for internalizing historical trends and economic cycles to the point where her gut instincts were almost always right.  She was also someone known for having a personal touch.  But in this instance, she seemed incapable of grasping the complicated, interlocking human dynamics that can’t be measured by reassuring models — the idea that a position could be leaked, that the press might bear down, that the regulatory environment could compound all those problems.

Drew's resignation went down like this:

By the second week in May, the stress had taken a toll.  A colleague saw Drew walking around the executive floor, her mascara smeared.  A slight tremor in her hand left over from her illness seemed worse, a physical symbol of her emotional state.  Although she still came to work dressed impeccably, she had lost weight and looked somber, almost shut down.  The week that the bank decided to make a public disclosure, 20 senior people gathered in a meeting room on the 47th floor.  Everyone went around the room and spoke about what they had found out and what still needed to be learned.  After about 45 minutes, with the meeting drawing to a close, Drew, uncharacteristically, still had not said a word. Finally, John Hogan, the chief risk officer for the bank, asked: "Does anyone need anything?  Need some help?"  Drew raised her hand.  "I need help," she said.  It was a white flag.

On Mother’s Day, she drafted her resignation letter.  By Monday afternoon, she was gone.

For further details, go to [NY Times, 10/3/12].