Synthetic Credit Portfolio: JP Morgan Chase

These investments made with this money were supposed to be safe and low risk, which would also keep it in compliance with the standards set by JP Morgan Chase. Unfortunately, the transactions made in this area of the company were known as the Synthetic Credit Portfolio. This portfolio was a high risk portfolio that would either generate a large amount of profits or create massive losses overall. As a result, JP Morgan Chase had to face and handle the situation with massive losses. The losses were hidden by wire fraud, false Security and Exchange Commission filings, falsifying the books and other conspiracies (Fontevecchina 2013). Key players in this event are the CIO, who authorized all of the transactions and trades made to lead to the 6 billion
JP Morgan Chase clearly states on its website that is has a strong Corporate Governance Guideline and describes the Code of Conduct and Code of Ethics. The issue is that no one was enforcing these rules at the Chief Investment Office in London and no ethics training or ethics education was provided in London. There should have been someone in a different area of the company checking on them and asking the appropriate questions. Are the investments being made properly? Are the investments too risky? What are the limitations? Who is approving these transactions? As such an important company globally, it is inexcusable that something like this so large could have happened. It is clear that money and power were the goals in sight. Additionally, money must have been a big issue to make it happen. Employees with million dollar salaries are expected to produce millions. Since there were millions produced previously by using risky measures, then it must be a fool proof way to invest. In the end, each of the people was thinking of themselves. The CEO wanted to keep getting a high yield from investments. The Chief Investment Officer was the manager of the office that was producing this high yield. The London Whale had his approvals for investing the money. Even the Managing Director was supporting him and pushing him to make the decision, so why would he not take
Its business includes equity and fixed-income sales and trading, private equity investment banking, and private banking investment management (Leynse 2011). Lehman expanded quickly and became the fourth-largest investment bank in the US in 2000. However, in 2008, Lehman Brothers filed for the largest bankruptcy in history with $639 billion in assets and $619 billion in debt. The main reason for the bankruptcy was the high-growth business strategy. It switched to a high-risk capital-intensive banking model from a low-risk brokerage model at the beginning of 2008 (Lubben 2011). Since Lehman’s investments had more uncertain forecasts and were less liquid than its traditional investments, this strategy increased business risk by continuously rolling over its debt and hundreds of billions of dollars were borrowed on a daily basis. To make it worse, as the economic crisis in 2008, Lehman slid into financial distress and had to reduce its leverage. The Lehman Brothers Code of Ethics is a five-page document outlining the behaviors expected of employees. Without any ethics education and non-clear company code of ethics, CEO and CFO of Lehman Brothers decided to lie about the company’s situation with painting a misleading picture of its financial condition by employing an accounting manipulation called “Repo105”. Leverage Ratio is the ratio of