Stiff drinks for the staff at JP Morgan? A martini or two might have helped ease the pain from Friday’s Congressional hearing in Washington, which examined the firm’s now infamous $6 billion loss known as the “London Whale.” The trade generated not only steep losses but a level of scrutiny from regulators and the media that has had JP Morgan’s management on the hoof for months.
Friday’s hearing was brutal for JPM’s top brass. The list of accusations by the Senate’s Permanent Sub Committee on Investigations was simple enough: a risky proprietary trading strategy, concealing losses, manipulating pricing models, and lying to investors and regulators. Anything else? Actually, yes; the fallout continues as Senate aides are now pondering referrals to regulators and the Justice Department. This was a bad day for JP Morgan, and a very good day for the Senate’s PR machine.
Despite a parade of embarrassing and contradictory testimony, the thrust of JP Morgan’s response remains unchanged: “Management always said what they believed to be true at the time, period. In hindsight we discovered some of the information they had was wrong.” Fair enough, but unlikely to break the momentum on a train wreck of an issue that continues to gain momentum.
THE PR VERDICT: “C” (Distinctly OK) for JP Morgan. A straightforward and expected defense, though it’s unlikely to make much of a difference.
THE PR TAKEAWAY: Life is not always fair. Despite its clout, JP Morgan was always going to be outgunned in a public hearing concerning its embarrassing losses. The bad news for the firm is that there is little that can be said to disrupt the forward movement on this issue, apart from what they’ve already said. Admitting you got it wrong may not be enough in an environment that continues to be out of love with banks. It will take more critical and remedial changes in management and strategy before the heat is turned down. Until then, another round, please…