Don’t Get Mad – Get JP Morgan
The New York Times reported on January 28, 2009 that JP Morgan conducted a “wide ranging review” of its hedge fund exposure. JP Morgan asked Bernard L. Madoff’s funds questions and did not like the answers. JP Morgan withdrew the money it invested in 2008, prior to the implosion caused by the discovery that Madoff was the greatest Ponzi-scheme offeror in history. But, JP Morgan did not tell its own customers about its experience with the Madoff-linked funds.
No doubt the personnel at JP Morgan that conducted the review, got the answers from the Madoff-linked funds, decided the answers were insufficient, and recommended fund withdrawals, rather than being given a corporate gold star by JP Morgan, will end up being used as cannon fodder while JP Morgan management tries to defend itself against its own unhappy customers that believe JP Morgan should have alerted them, too. JP Morgan will no doubt claim that there was a Chinese wall between its internal corporate investment advisors and its external fund managers. The managers of the funds of JP Morgan customers will no doubt claim they did not get the word from the internal corporate advisors.
The New York Times reported that JP Morgan got itself out of the Madoff-linked funds when the funds were reported to be up five percent while the broad market was down thirty percent. Also, the news report indicated that Madoff accounts were held at JP Morgan, in other words, Madoff was a bank customer, too. Was JP Morgan able to use what it learned from those accounts to protect itself but unwilling, or unable, to use that information to protect all of its customers?
It will be interesting to see whether JP Morgan gets sued in a claw back claim by the regulators. After all, the money JP Morgan withdrew was arguably not their money, but the money of some other dupe.
