JPMorgan Faulted by Feds on Controls and Disclosure in Trading Loss

One regulator wrote in a May 2012 e-mail that the position was a “make believe voodoo magic ‘composite hedge.’ ”

As the traders in London assembled increasingly complex bets, JPMorgan ignored its own risk alarms, according to investigators. In the first four months of 2012 alone, the report found, the chief investment office breached five of its critical risk controls more than 330 times.

Instead of scaling back the risk, though, JPMorgan changed how it measured it, in a metric known as value at risk, or VaR, in January 2012, enabling the traders to continue building the big bets, the subcommittee found.

The report provides further detail about what Mr. Dimon knew about the changed alarm system. Mr. Dimon told the subcommittee that he couldn’t “recall any details in connection with approving the VaR limit increase.”

But Mr. Dimon personally authorized JPMorgan to temporarily increase the measure, writing in a January 2012 e-mail, “I approve.”

[link to dealbook.nytimes.com]

How will Mr. Dimon be punished? What slap on the wrist will they get now?