Ina Drew in 2008
In February of 2011, Jamie Dimon, the chief executive ofﬁcer of JPMorgan Chase, approached the podium of one of the ballrooms at the Ritz-Carlton Hotel in Key Biscayne, Fla., where 300 senior executives from around the world were attending the bank’s annual off-site conference. By that time, the cold fear of the financial crisis was cordoned off in the near-distant past, replaced by a dawning recognition that the ensuing changes in business — the comparatively trifling risk limits, the dwindling bonuses, the elevated stress levels — might actually be permanent. That day, Dimon took the opportunity, according to a bank employee in attendance, to try to inspire his team, to rouse them from the industrywide sense of malaise. Yes, there were challenges, Dimon said, but it was the job of leadership to be strong. They should be prudent, but step up — be bold. He looked out into the audience, where Ina Drew, the 54-year-old chief investment officer, was sitting at one of the tables. “Ina,” he said, singling her out, “is bold.”
Perhaps by now when bankers hear that kind of public praise, they simultaneously hear a distant clanging, a dim alarm that provokes an undercurrent of anxiety. It seems inevitable that an acknowledgment of such star power will eventually lead to a fall, a big one, and one year and three months later, Drew succumbed. Her team had been bold, so bold that along with Dimon, she had become the public face attached to a $6 billion mistake, a trading loss so startling in size that it dominated the business press, put Dimon on the defensive and cost Drew her job. Over and over again, online and on television, in stories about the loss, the same corporate headshot appeared: a woman wearing a hot pink bouclé jacket, showing a smile so faint it was almost frank in its discomfort.
Drew never craved public recognition, which is one reason, up until the trading error, almost no one outside of Wall Street had heard of her. Her longstanding anonymity is astonishing only in retrospect: All told, she invested nearly $350 billion for JPMorgan Chase. Drew had her hand on a major economic lever and was one of the key figures whose judgment Dimon relied on in keeping the bank steady through the financial crisis. Drew was part of the team that helped establish him as a model of restraint at a time when other bankers offered only tongue-tied defenses of their reckless behavior. Now she was responsible for the traders who had made Dimon look as fallible as everyone else, and at the very moment when he was trying, once again, to assure government regulators that banks could manage themselves, that bankers could risk-proof their balance sheets.
The $6 billion blunder has turned out to be no more than a minor ding on JPMorgan Chase’s mighty balance sheet. The company’s stock has rebounded strongly, and the financial world has moved on to other obsessions. But for Ina Drew, this is a scorching moment of failure from which it could be hard to recover. In 30 years in the banking industry, she ascended to a level of power and wealth that few women have known. Her rise tells an unlikely story of what it takes to succeed as an interloper in the Wall Street boys’ club. Her fall is a murkier tale about how executives are coping with the growing public scrutiny and skepticism about what exactly banks are doing with all our money. Five years ago, would anyone have cared about a large trading loss incurred by a strong, well-capitalized bank? When the business press, including this paper, first started digging into the debacle, it seemed possible that Dimon himself could go down. He didn’t, of course, but the conversation reflects how precarious power in banking has become. Nobody understands that better now than Ina Drew. But who exactly was she? She has declined to speak to the media, and various investigations are continuing that will reveal a more complete picture of the story. But interviews with dozens of friends and former colleagues over the last three months begin to fill in the picture of a woman whose career traced a period of dramatic change on Wall Street.
James Lee, who eventually became one of the biggest dealmakers on Wall Street, started out at Chemical Bank in New York sitting next to Ina Drew. He remembers talking to a client on the phone one day, trying to answer some questions about a deal the bank was proposing. “So I told the client what I thought, and I’m answering and answering, and I say, ‘So what do you think?’ ” Lee says. But there was no response. Lee looked at the phone and then looked around. Drew, a foot away, was in the middle of a different phone conversation, but her eyes were on him, and she was shaking her head back and forth — no, that’s not right — and waving her hand to show she had something in it: the phone jack. “She heard part of what I was saying, which was obviously incorrect,” Lee says. “She literally pulled the plug on me.”
It was 1983, and Drew, just 26, had been in the business for only three years, but she proved herself quickly and was already running a small group of traders. A graduate of Johns Hopkins with a master’s degree in international relations from Columbia University, Drew had hoped for a job in corporate lending, the clubby, relationship-based business that was the track to the prestigious commercial-banking group. But corporate lending did not open its doors to a young woman from New Jersey with no M.B.A. After 23 interviews, Drew landed a decidedly less glamorous job, on the trading floor of the Bank of Tokyo Trust. Thrown in with no training, she cried every day, she used to tell junior people at JPMorgan Chase. But then one day, it clicked: Not only did she get it, she was good at it.
In 1981, she moved to Chemical Bank, then considered a step up — barely. “They used to call it comical bank,” Tom Block, who was in charge of government relations there, recalls. Nothing about the bank at the time would have suggested that over the next 30 years it would merge and acquire its way to become the megabank known as JPMorgan Chase.
By the mid-1980s, 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.
Drew was something of an unusual figure on Wall Street and not easily categorized. 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.
One of the rare women to rise steadily into the management ranks on Wall Street, Drew stood out, sometimes awkwardly so, in a mostly male work environment. Havlicek recalls hearing her address a roomful of 200 male traders not long after Chemical merged with Manufacturers Hanover in 1991. “I didn’t plan any of this for my career,” she told the traders. “For God’s sake, I was captain of the twirling team in high school.” Her words were met with silence. “There were dozens of guys that were just cringing for her,” Havlicek says. “She didn’t fit their picture of what a senior trader should look like.” For Drew, there were a lot of moments like that: guys rolling their eyes, muttering under their breath about something she just said. “She never seemed to care,” Havlicek says. “She just kept doing what she was doing.”
In the early 1980s, Chemical was making a push to hire women as traders, but that did not mean the workplace was particularly enlightened. Dina Dublon, who was one of Drew’s closest colleagues, joined the bank the same month that Drew did. “To say the environment was not welcoming to women is an understatement,” says Dublon, who rose through the ranks alongside Drew and retired in 2004. Dublon sat next to Drew in the early days, and the women went through packs of cigarettes every day, a cloud of smoke hovering around their desks like a barrier to the barrage of tasteless jokes.
Many women quit; others responded to advances with polite refusals. Drew tended to deflect with brusque, direct humor. She was once summoned to the office on a Saturday for what she thought was a business meeting, Havlicek said, only to find the colleague who called her in had something more intimate in mind. “I don’t know exactly what she said, but knowing Ina, it would have been something like, ‘You’re out of your mind, I’m going home,’ ” Havlicek said. “In the future, she laughed about it.”
The traditional narrative of the woman who made it on Wall Street in the 1980s and 1990s usually entails great feats of the superwoman variety — the female executive who is phoning in directives to the office while she is in labor, the working mother who whips up, as Morgan Stanley’s Zoe Cruz once did, a batch of cookies at 4 a.m. for the bake sale, and then arrives at work by 5:30. But once in the office, family matters would often be hidden. Stephanie Newby, who was chief operating officer of Global Equities at JPMorgan in 1997, says she made sure never to have pictures of her young children at the office or even to mention them. “You never wanted there to be an excuse for why you couldn’t get ahead,” Newby says.
Drew, who has a son and a daughter, wasn’t making excuses for her career or her family. She called her children regularly when they got home from school, even if that sometimes meant interrupting a meeting. She taped their drawings to her office wall and took them to work during school vacations, her son glued to his Game Boy as she engaged in global finance. Traders have early work hours, but Drew was particularly insistent about making it home for dinner with her family; for most of the 1990s, she showed up for work at 7 a.m. but left at 4:30 p.m. “Ina was tough about it,” Dublon says. “If one of her bosses tried to schedule a meeting after 4:30, Ina would say, ‘You can have your meeting, but I will not be there.’ It was not easy to do. It played into stereotypes some of us women climbing the ladder were not willing to confront.”
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.
William Harrison, who was chairman of JPMorgan Chase until 2006, recalls her fondly as someone who was “balanced and respected” but who didn’t make a big deal of being a senior woman in the workplace. In fact, in the mid-1990s, Drew started serving on diversity committees, challenging the bank to increase the number of women in management; she spent more than a decade on the board of the NOW Legal Defense and Education Fund, a group that was involved in prominent sexual-discrimination and sexual-harassment lawsuits. “She and Dina Dublon — those were women I looked up to,” says Amy Butte, a former chief financial officer of the New York Stock Exchange, who started out as an analyst at Merrill Lynch. “They set a standard for how women on Wall Street should treat each other.” And stand up for themselves.
When the bank was trying to retain female talent after one merger, she refused to accept a position with less responsibility. “I remember being in her office, and there was Ina, pounding her desk, saying, ‘The last time I checked, I had breasts, too!’ ” Dublon says.
Drew was ambitious but never sought to acquire the kind of experience that would have groomed her for the role of chief executive. Her focus was part of the reason her bosses trusted her; she clearly was not angling for their job. While Dina Dublon took on new roles in different parts of the bank, eventually becoming chief financial officer, Drew stayed, for the most part, in the same role in which she knew she had unparalleled expertise. “She didn’t veer into areas where she was not an expert,” Dublon says. “Her confidence is totally built on knowledge.”
If Drew was good at what she did, says Lesley Daniels Webster, who managed market risk for the bank until 2005, that was partly because she toiled in the ranks for so long. “Women in business often grow from the bottom up, learning all the complicated ins and outs rather than coming in at a higher level,” Daniels Webster says. “Nobody plucked her out and said, ‘Oh, she looks and sounds just like me at this age, so I’m going to have her move from division to division every three years so she can build up her resume.’ No, women succeed by building a steady string of successes.”
In the 1970s, trading bonds was a fairly straightforward business, and anyone with enough hustle could get on a trading floor; but by the 1980s, because of technology and globalization, bonds became more complex, and as the money got bigger, the competition got fiercer. Banks competed to develop investment products that would give them an edge and traders started relying on complex algorithms to beat the market. By the early 2000s, “tech-savvy investors had come to dominate Wall Street, helped by theoretical breakthroughs in the applications of mathematics to financial markets,” Scott Patterson wrote in “The Quants,” a book about the bankers who wield those tools. These days, banks compete for the top physics and applied math Ph.D.’s from around the world.
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.
Drew made it through yet another merger, in 2000, when Chase merged with JPMorgan. Every merger is painful, entailing massive layoffs, factionalism and blatant power grabs. But the mutual disregard in this merger was especially high. JPMorgan had a sterling pedigree, and its bankers perceived themselves as innovators of gourmet financial products like structured derivatives. They experienced the merger as a comedown, as if they were Dean & Deluca and they had just been bought by Stop and Shop. They made little effort to conceal their disdain.
Drew’s deals essentially turned on one key question she seemed to answer correctly more often than most (or at least when it mattered most): Would interest rates go up or down? That insight seemed valuable but hardly cutting edge to her new colleagues. “She was like the idiot savant of ‘I’m long’ or ‘I’m short,’ ” says one former JPMorgan employee, summing up how some of his colleagues perceived her success.
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 Patrik 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.” (Edsparr declined to comment.)
No one achieves Drew’s level of power on Wall Street without fighting for turf, and Drew knew how to protect her territory. “Ina had this ability to tell senior people, in a very nice way, without actually saying it, that the question they had asked her about her business was a very foolish question,” says a former JPMorgan Chase executive who went head to head with Drew more than a few times. “I admired it in a perverse way.”
In 2004, Drew survived yet another change at the bank, a result of a merger with Bank One that the following year made Jamie Dimon the chief executive. Dimon not only kept Drew on; he also put her on his operating committee, which was made up of the people who answered directly to him. “It’s a complicated business, and she knew her stuff,” says Dimon, who was aware of her success, and trusted her increasingly over time. “If I had a bad idea, she’d tell me it was a bad idea. She had her opinion. She was strong and a team player and very ethical.”
As the head of the chief investment office and the manager of the bank’s investment portfolio, Drew had direct control over more money than most players on Wall Street — on the level of the top asset managers in the country, including BlackRock and Pimco. In that role, Drew had access to information that might have been useful to investment bankers at JPMorgan Chase and their clients; some information she wasn’t at liberty to share, but some fell in a gray area, and about that, too, she could be tight-lipped. What she might have seen as discretion, colleagues in other parts of the bank perceived as insularity. “She did not welcome anyone questioning any part of her business or her team,” recalls a former senior banker at JPMorgan Chase. He said a general lack of transparency about risk management, among other things, “drove her partners at the retail bank and the investment bank crazy.” Drew’s defenders say that she shared information with the people she felt needed to know, but that those inquires may well have been power grabs.
Drew’s bosses heard the complaints about her over the years, but they generally dismissed them as mere jealous griping. “She oversaw a lot of money,” one former boss said. “There are always rivalries at that level. And anyone who disagrees with you? They must be stupid.”
It is surprising how much time you can spend talking to bankers without ever hearing the word “money.” Bankers talk about yield and credit spreads and compensation and P.& L., and what they talk about, maybe more than any of those things, is risk, without which there can be no gain. Risk is the oxygen of investment, and the ability to take a lot of risk is a signifier of prestige. Drew had some of the most generous risk limits at the bank. “They say that managing risk is as much as anything about managing your emotions,” Havlicek says. “Ina was unafraid. She was a natural.”
Some of that confidence may have come from her faith in her longstanding team, many of whom had been with her from the Chemical days. They managed risk by buying and selling mostly safe assets like U.S. Treasury bonds and high-quality mortgages; their value would generally rise with falling interest rates and vice versa. But in 2006, she and Dimon together decided that her group should branch into more complex products to hedge the expanding, ever-more-complex holdings of the bank. To help build international range for her group and to diversify her positions in the market, Drew hired a team that would trade foreign bonds and corporate bonds — and would have the quantitative skills to trade more complex and riskier credit derivatives.
To lead the effort, Drew hired Achilles Macris, who had worked at the bank Dresdner Kleinwort Wasserstein. Originally from Greece, he was a charming but volatile figure with a reputation for brilliance. He in turn hired Javier Martin-Artajo, an opinionated trader from Spain, and Bruno Iksil, a quiet, bookish man from France, both known to have strong quantitative backgrounds.
The year 2008 was a time most bankers would like to forget; for Drew, it was one of the highlights of her career. Starting in late 2007, her group piled money into secure, long-term government-backed bonds, close to $200 billion worth. Those soared in value as it became clear that interest rates would have to drop and every other product on the market looked like a bad bet. After the financial collapse, the group reviewed some collateralized loan obligations, financial products that were deemed toxic, and bought the safest aspects of those products. Those purchases were vastly riskier than Treasuries — some argued too risky for an operation intended to hedge risk — but the spending spree of the chief investment office ultimately reaped billions in profit for the bank. “Going into the crisis, the C.I.O. positioned us well for the turmoil ahead,” Dimon says. But it also served a larger purpose, stabilizing the market when few others had the ability to do so. “They took risk with those collateralized loan obligations,” Mark Williams, who teaches finance at Boston University, says. “They provided an important service.”
Despite its success, Drew’s group — the bond traders in New York and the credit group based mostly in London — clashed. Temperament accounted for some of the battles. Althea Duersten, a trader who had worked with Drew for more than a decade, ran the group in New York. She “was so risk averse,” says one former trader, “that even in retrospect, knowing everything we know, she still may have been too risk averse.” As for Macris, said another former executive in the chief investment office, “He was a gunslinger — he was more on the ‘I love this trade, put it on huge’ side.” (Most of the people interviewed about Drew and the chief investment office asked not to be identified because they were not authorized to speak or feared professional repercussions.)
Drew had created within her own group the same dynamic that had vexed her since the merger with JPMorgan: one group of traders, who mostly handled straightforward assets, felt insulted and underestimated by another group, who prided themselves on the sophistication of their quantitative skills and conveyed their disdain openly in videoconference calls. “New York hated London,” says one former trader who worked in New York. “They got to take more risk, so they got to make more money.”
The worst of the fighting occurred when Drew, ill with Lyme disease for most of 2010, was out of the office. When she came back, Duersten had just turned 60 and retired in January 2011. Macris was shocked when Drew brought in Irene Tse, a hedge-fund recruit, to replace Duersten, rather than making him the sole deputy. “He was devastated, he was outraged,” says the bank employee who says he heard this from Macris himself. Macris started telling people in the European office of the investment bank that Drew did not understand the business, according to two people. He also told them that he technically answered to Drew, but that he really reported to Dimon. (Through a lawyer, Macris declined to comment; and JPMorgan says Macris reported to Drew.) He started openly challenging Drew’s opinion in front of others. She would take it stoically while the two of them were in public; later, via videoconference or in person, “she would let him have it,” says the bank employee, who observed one such confrontation. “And she could be tough. I mean, talking about severing key body parts.”
The trouble that eventually ended Drew’s career at the bank started out, the bank argues, as a precaution, the same kind of precaution, in fact, that set her on a successful career path at Chemical Bank: a major hedge against the possibility of a credit crisis.
Back in 2007, the bank asked the London office to execute a credit derivative hedge that would protect the bank in the event of a major crisis. (Some credit derivatives are, essentially, a bet on an outcome, like a corporation or government defaulting on their financial obligations.) The hedge not only protected the bank but also made money in 2008 when the markets collapsed.
Following the crisis, the team in London, including Iksil, continued to expand the position. (A credit trader’s position can be thought of as a collection of bets on outcomes.) Iksil’s position was eventually so large that he became known as the London Whale before his identity was confirmed. At some point in December of last year, a former executive from the group says, Drew checked in with Macris and Martin-Artajo 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 any case, there were several layers of people at the bank whose job it was to evaluate risk. Being the risk manager at a bank, of course, is like being the chaperon at the dance: your authority is more than matched by the desire of others to subvert it. “The trader in the world of Wall Street is a lot more important than the person with a whip and a chair attempting to keep the traders from blowing up,” says Brad Hintz, an analyst at Sanford C. Bernstein. To try to mitigate that very human dynamic, banks also rely on a variety of statistical models, including those known as “value at risk” models, which theoretically provide bankers with a certain degree of probability about how much they could stand to lose on any given day under adverse circumstances. Those V.A.R. models did little to help bankers when the unforeseeable happened in 2008, which is why they are generally viewed with some skepticism these days. Sometimes the models miss key information, sometimes the people who use them miss what the models are telling them and sometimes traders manage to work around them.
A former executive said he warned Dimon for years that the quality of risk control in the chief investment office was not transparent enough, compared with that in the investment bank; Drew brushed him off, and Dimon told him, he says, essentially, to “mind my own business.” “Honestly, I don’t care what second-guessers say in life,” Dimon told me when asked about the warnings. “If anyone in the company knew, they should have said something. No one came to us beforehand and said we have a problem we should be looking at.”
A review of the risk limits at the chief investment office was moving slowly along in 2011. By late November, Drew realized she needed a more experienced risk officer than the one in place, Peter Weiland, who had been there for several years. A well-liked if mild-mannered person, Weiland was up against some very strong personalities, many of whom had superior quantitative skills. (Weiland did not respond to requests for comment.) But it was February before she hired Irvin Goldman, a former Credit Suisse First Boston executive, as the chief risk officer of the unit. It is possible that Drew, who had a reputation as an excellent risk manager, did not feel an urgency to fill the job of the risk officer. “She and her team had a great track record,” a senior executive said. “We all thought they had it under control.”
Later, when the trade collapsed, it was reported that Goldman was the brother-in-law of Barry Zubrow, an operating committee member at the bank. This was interpreted as further proof of the shoddy risk standards at the unit. Goldman, however, was a classic hire for Drew: he was a longtime professional friend, a trusted ally with whom she had talked shop for 20 years.
Goldman started pushing forward a review of the risk limits, which generally needed more specificity. One serious defect in the risk evaluation of Iksil’s position was that its limit was folded into the aggregate risk of the unit’s entire portfolio. In other words, Iksil could continue to increase the position without triggering alarms. Even more problematic, a new value-at-risk model was implemented in January, which, unknown to the team ultimately allowed for even more leeway, creating a false sense of security.
In December, Drew and other senior managers determined that the unit should reduce the overall exposure to risk, mostly because of soon-to-be-implemented regulations imposing more stringent capital requirements. London came up with a strategy that Drew approved although she left it to that office to determine the execution. As an interim measure, they would hedge the hedge, rather than flood the small market for that type of security and take a loss. The main position was essentially a bearish bet on a bond index; the hedge was essentially a bullish bet on a similar but different index. The end result, however, made the total position even bigger.
Iksil’s colleagues liked him, but he was not popular among some Wall Street dealers who brokered his trades. The London group had a reputation for using the weight of the bank to muscle the rest of the market and for being a little arrogant. “They thought they were geniuses,” said a hedge-fund manager on the other side of the trade that ultimately brought Iksil down. “They just had access to cheaper capital than everyone else, because they worked at JPMorgan,” that manager said. “It’s sort of like race cars — everyone else is in a Camry, and you’re in Porsche, and you think you’re the best driver.”
Disgruntled dealers might be more likely to gossip, and in March, Martin-Artajo, always a little nervous, got positively jittery, said the bank employee. The dealers on the street were talking, he told his bosses; they knew too much. Knowledge, for the hedge-fund managers who buy from the dealers, was power. Martin-Artajo had reason to feel nervous: the hedge-fund managers had figured out that JPMorgan’s position had grown so large that it was dominating the market, which meant there were few options if the bank wanted to unwind the position. This gave the few buyers Iksil could turn to tremendous negotiating power.
By the third week of March, after several days of losses, Drew was concerned enough to order her traders to stop trading the portfolio. At the same time, she started holding daily teleconferences with London to try to manage the position. Martin-Artajo’s worst fears were realized on April 6, when The Wall Street Journal ran an article with the headline: “ ‘London Whale’ Rattles Debt Market.” The whale was Iksil, whose position was so large, the article said, that traders on the street had given him that nickname.
Tension at the bank escalated, and Dimon, who was traveling, started checking in with Drew. She was concerned about the position but also seemed a little bit riled up: The hedge funds were trying to squeeze the bank, she told Dimon, but the bank was O.K. They didn’t seriously consider the possibility that they might have to unwind the position quickly, which would render them vulnerable to a market that would take advantage of their desperation. Most of the key players in the unit thought the same thing: this was a long-term position, and no one had the firepower, the capital, to force mighty JPMorgan Chase to fold.
Drew and her team had backed themselves into a corner. Then, on April 13, during the first-quarter-earnings call, Dimon slipped. An analyst asked about the “tempest in the teapot nature” of the stories in the press, and Dimon, as if enamored of the phrase, repeated it back: “It’s a complete tempest in a teapot,” he said. It was quotable, unlike the bland corporate-speak in which he continued. It gave the story legs. And if his assessment turned out not to be true, it would make Dimon look like either a dissembler or a manager with a weak grasp of the facts.
The trade started losing even more money. A war-room mentality took over, moving from the chief investment office to more and more players at the bank. A team flew to London, working around the clock and making so many demands that one of the men running databases, who had a heart attack in the past, quit, afraid the stress would literally kill him. Macris and Martin-Artajo were conducting frequent video conferences with New York. Martin-Artajo labored nervously through long-winded explanations, with Macris occasionally turning angrily on him. Drew struggled to maintain composure, although occasionally, a tone of voice revealed just how tense the situation was becoming. “That’s not what I asked for,” she snapped at Macris, and another time barked, “I need it now!”
When other crises hit the bank, Drew had seemed, by all accounts, her most alive and alert. But in this instance, she seemed unable to step back and look at the big picture. Faith in Drew’s ability to handle the crisis started to seep away. In May, John Hogan, the bank’s chief risk officer, took over management of the position. It was officially out of Drew’s hands. Drew still seemed to think the damage could be contained; the famously cleareyed risk manager started to sound like someone in denial. To everyone else, it became apparent that the bank was going to have to make a public disclosure about the loss. This would be a huge embarrassment, an admission of failure just as Dimon was trying to convince regulators and Congress that banks could manage themselves, if only they were careful enough and had the right, prudent people in place. It meant, in the near term, that the stock would plummet.
The mood around Drew got darker. Word spread around the building that some members of the operating committee were urging Dimon to fire her. “Ina had to have known,” the bank employee said. “Everyone knew, and she was very well connected. This was not a matter of your colleagues not having your back. This was them sticking the knife in it.”
Even Dimon was sickened by the wash of rage toward Drew. During a crisis, “some people will act like children and most will rise to the occasion,” he said. “To those who attacked Ina, I said: ‘This is Ina. This was always Ina. What are you talking about?’ ”
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.
In July, the bank restated its earnings, announcing concerns that traders at the unit had not revealed “the full amount of the losses in the portfolio during the first quarter,” mismarking, in their favor, the numbers that would indicate their theoretical losses or gains at the end of the day. (The Wall Street Journal reported sources close to the investigation saying that Martin-Artajo had prodded Iksil, whom he supervised, to raise the valuation of his position’s holdings at the end of the day.) Greg Campbell, Martin-Artajo’s lawyer, says, speaking of his client, that there was “no direct or indirect attempt by him to conceal losses.” Iksil declined to comment. Whether or not the numbers were mismarked, it was baffling that the size of the position and its obvious vulnerability did not warrant a closer look, says Peter Tchir, a consultant to hedge funds and other institutions. No one has been charged with fraud, but investigations are continuing.
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.
For a few years, one of Drew’s friends had been talking to her about retiring. For that friend, it was yet another matter of risk calculation: If she was going to retire soon enough anyway, her friend advised, do it while she was still on top, before time stopped being on her side. Wait long enough, and someone else might decide for her. Or something might go wrong, as things do.
Even Drew’s friends do not feel that she could have stayed in her job, especially in the current regulatory environment. She was, after all, in charge of the unit that lost $6 billion. “She had to go,” one friend said, “and she would have seen that.” One Wall Street headhunter said: “That’s what they pay you so much money for. To take the fall when things go wrong.”
Drew forfeited two years’ worth of compensation. But she was also very wealthy and was allowed to keep stock upon her resignation. There are critics who wonder why Dimon has not surrendered some of his own compensation.
Drew spent the first weeks after she left JPMorgan doing what she always did: heading into Manhattan, to the corner of Park Avenue and 47th Street. Instead of entering 270 Park, however, she went to 277 Park, directly across the street. Many large companies have offices known to some as elephant graveyards, where retired chief executives are given offices and a secretary. As she was being debriefed by company lawyers, Drew was given a temporary office in JPMorgan Chase’s elephant graveyard, which happened to be in the old Chemical building, where Drew spent so many years on the ascent. She was surprised and pained that Dimon didn’t call her right away. “I’m sure it’s for legal reasons,” she told a friend. She described herself as “devastated.”
After a few weeks, the lawyers’ questions slowed down. And Dimon went out of his way to publicly praise Drew and the work she did. “Let me just say a word about Ina Drew,” he said in the middle of the second-quarter-earnings call in July. “I have enormous respect for Ina as a professional and as a person; she has made some incredible contributions to this company.” She has not been accused of malfeasance, and as the investigations wear on, the bank still seems comfortable defending her integrity.
For Drew, Dimon’s comments marked a turning point: at least she knew — and the world knew — that Dimon did not consider her a bad actor. She started planning a trip to Eastern Europe. Her friends thought she sounded better, but seemed physically weaker.
Drew’s old friend Glenn Havlicek, who left the bank in 2005, now spends much of his time in Palo Alto at a company called GLMX, building a high-tech trading platform. When the news broke, he thought a lot about Drew and those days when they first starting hedging interest-rate risks, a move that seemed so innovative at the time but so simple now, compared with the modern multibillion-dollar deals that twist and turn on themselves. The two spoke several times, most recently right before Drew left for her trip. It pained him to hear Drew, whom he recalls as one of the toughest, funniest, warmest women he knows, sounding so defeated. “You know, Ina,” he said, “sometimes I think I’d give my right arm to go back to those days at Chemical, you know?”
“Yeah,” Drew said to him quietly. “I do.”
A version of this article appeared in print on October 7, 2012, on page MM32 of the Sunday Magazine with the headline: Exile on Park Avenue.