In The Washington Post there was an article titled “The ‘London Whale’ trader lost $6.2 billion, but he may walk off scot-free.” Who is the London Whale and how can he walk away after a loss that substantial?
Bruno Iksil placed risky bets on complex financial instruments while working for JPMorgan Chase. This lose came to be known as the “London Whale” and started investigation to see how JPMorgan handles its trades. In 2015 the Obama administration said they would try to hold individuals responsible and not just the corporation.
Iksil was part many investments “designed to hedge JPMorgan against other risky bets the bank was making.” In 2012 the investments started to cost the bank money originally estimated at $2 billion but later released to be $6.2 billion. Prosecutors began to build cases against JPMorgan but then the U.S. attorney for Manhattan said the office had a “nonprosecution agreement” for Iskil’s cooperation. Preet Bharara, former U.S. attorney said “Although I don’t think you could call him blameless, he did sound the alarm more than once.”
Iksil said he was not to blame, he warned his superiors about the potential huge losses but was told to continue with the trades. Iskil said “In fact the losses… were not the actions of one person acting in an unauthorized manner. My role was to execute a trading strategy that had been initiated, approved, mandated and monitored by… senior management.”
In this class we talked about Consequentialism and the balance of good and bad consequences. But how do we determine the right action. There are steps to take to apply consequentialist reasoning. Did Iskil go through these steps to try and find the right action for the bank?
- Identify what is intrinsically good
- Identify what is intrinsically bad
- Determine all of your options
- For each option, determine the value of its results
- Preform the action that yields the highest ratio of good to bad results
Iksil was looking at these investments and chose to continue with them thinking they would be intrinsically good for the company in some way. Bharara said Iksil did alarm people that some investments were bad for the company trying to get them to stop and warn them of the possible losses. Iksil determined some of his options but not the right ones. He should have looked for better maybe safer investments for the company that would produce more good. He said he warned of the potential losses of the investments. He knew the results would be bad and loose the company money. He did not perform the action that yields the highest ratio of good to bad. He just listened to what his supervisors said to do. He knew the action was wrong but did it anyway. He should have done more knowing the investments were bad.