Home > finance, rant > Ina Drew: heinously greedy or heinously incompetent?

Ina Drew: heinously greedy or heinously incompetent?

April 11, 2013

Last night I went to an event at Barnard where Ina Drew, ex-CIO head of JP Morgan Chase, who oversaw the London Whale fiasco, was warmly hosted and interviewed by Barnard president Debora Spar.

[Aside: I was going to link to Ina Drew’s wikipedia entry in the above paragraph, but it was so sanitized that I couldn’t get myself to do it. She must have paid off lots of wiki editors to keep herself this clean. WTF, wikipedia??]

A little background in case you don’t know who this Drew woman is. She was in charge of balance-sheet risk management and somehow managed to not notice losing $6.2 billion dollars in the group she was in charge of, which was meant to hedge risk, at least according to CEO Jamie Dimon. She made $15 million per year for her efforts and recently retired.

In her recent Congressional testimony (see Example 3 in this recent post), she threw the quants with their Ph.D.’s under the bus even though the Senate report of the incident noted multiple risk limits being exceeded and ignored, and then risk models themselves changed to look better, as well as the “whale” trader Bruno Iksil‘s desire to get out of his losing position being resisted by upper management (i.e. Ina Drew).

I’m not going to defend Iksil for that long, but let’s be clear: he fucked up, and then was kept in his ridiculous position by Ina Drew because she didn’t want to look bad. His angst is well-documented in the Senate report, which you should read.

Actually, the whole story is somewhat more complicated but still totally stupid: instead of backing out of certain credit positions the old-fashioned and somewhat expensive way, the CIO office decided to try to reduce its capital requirements via reducing (manipulated) VaR, but ended up increasing their capital requirements in other, non-VaR ways (specifically, the “comprehensive risk measure”, which isn’t as manipulable as VaR). Read more here.

Maybe Ina is going to claim innocence, that she had no idea what was going on. In that case, she had no control over her group and its huge losses. So either she’s heinously greedy or heinously incompetent. My money’s on “incompetent” after seeing and listening to her last night. My live Twitter feed from the event is available here.

We featured Ina Drew on our “52 Shades of Greed” card deck as the Queen of diamonds:


Back to the event.

Why did we cart out Ina Drew in front of an audience of young Barnard women last night? Were we advertising a career in finance to them? Is Drew a role model for these young people?

The best answers I can come up with are terrible:

  1. She’s a Barnard mom (her daughter was in the audience). Not a trivial consideration, especially considering the potential donor angle.
  2. President Spar is on the board of Goldman Sachs and there’s a certain loyalty among elites, which includes publicly celebrating colossal failures. Possible, but why now? Is there some kind of perverted female solidarity among women that should be in jail but insist on considering themselves role models? Please count me out of that flavor of feminism.
  3. President Spar and Ina Drew actually don’t think Drew did anything wrong. This last theory is the weirdest but is the best supported by the tone of the conversation last night. It gives me the creeps. In any case I can no longer imagine supporting Barnard’s mission with that woman as president. It’s sad considering my fond feelings for the place where I was an assistant professor for two years in the math department and which treated me well.

Please suggest other ideas I’ve failed to mention.

Categories: finance, rant
  1. April 11, 2013 at 7:50 am

    It’s OR not XOR.


  2. Aaron
    April 11, 2013 at 7:53 am

    Have you considered editing Drew’s wikipedia page?


    • April 11, 2013 at 7:54 am

      I’m not a wiki editor.


      • KFritz
        April 12, 2013 at 6:07 pm

        Anyone can create an editor’s name for him/herself. From there, it’s a matter of learning to operate their program using the sandbox. Caveat emptor: the operating instructions are badly organized and sprawling.

        I checked the history of the article. It was created on 14 May 2012. It was more PR when started–someone edited it to make it less complimentary to Ms. Drew–skillfully, following Wikipedia’s rules to the letter. If some reader knows where to locate sources reliable according the Wikipedia’s criteria, they can have at it. Your own article and its main contentions may be a reliable source–if properly utilized.


      • KFritz
        April 12, 2013 at 6:12 pm

        PS: By “operating instructions,” I meant the rules of editing, not the actual act of editing–that’s pretty much ‘learn as you go.’


  3. gMarg
    April 11, 2013 at 8:02 am

    Boy Cathy, you sure do know how to burn bridges.


    • April 11, 2013 at 8:06 am

      I prefer thinking of it as speaking truth to power. But whatever you say.


      • April 11, 2013 at 8:22 am

        I believe the current euphemism is: “Career-Limiting Move”. I should know, I’m one the poster children.


  4. April 11, 2013 at 8:13 am

    I offer another possible answer:

    4. They Don’t fucking care. As Dick Cheney might say, “it’s their due”: They are the winners by virtue of their wealth and power; everyone else below their station simply doesn’t count. To now borrow from Nietzsche, morals are for the losers who want to take power from the powerful; and from Thrasymachus, what ever serves the interests of the powerful is just (see, Plato’s Republic Book I).

    Thus, the sign of true power is not having to care about what you do or whom you hurt. Too Big to Fail = Too Big to Jail = Too Powerful to Care.

    Now PIss Off! 😉


  5. FogOfWar
    April 11, 2013 at 8:15 am

    “Is there some kind of perverted female solidarity among women that should be in jail but insist on considering themselves role models?”

    Love it. Add the other three queens from the 52 shades of greed, throw in Martha Stewart (except she did her time) and my guess is you’re just getting started.

    Beware the “halo effect”–it’s a pernicious cognitive bias. We want to believe a class is “good” and so overlook the negatives that we would otherwise excoriate, allowing us to confirm our thesis and take one small step away from objective analysis.



  6. April 11, 2013 at 8:17 am

    “Why did we cart out Ina Drew in front of an audience of young Barnard women last night?”

    She’s a woman in a leadership position on Wall Street. Isn’t that enough?


    • 32000days
      April 11, 2013 at 8:18 am

      (Also see: “She made $15 million per year for her efforts […]”)


  7. Bonnie Fazzio
    April 11, 2013 at 8:33 am

    Instead of asking, sarcastically, “WTF Wikipedia?” you might consider updating Ina’s wiki page with whatever relevant facts and background you feel might me necessary or illuminating. Wikipedia is a community project.


  8. faustomics
    April 11, 2013 at 8:35 am

    Love reason #4 above, thank you moosesnsquirrels.
    Also, received my full deck of 52 Shades of Greed last week. Ingenious and very well done!


  9. govwhistleblower
    April 11, 2013 at 9:25 am

    That was great, Mathbabe. You know how to pierce right through the bull-shit to get to the core of the issue. Well done, I really enjoy your site. I think we are always going to have “London” and “New York” whales until federal regulators can get their “shitake” together as shown in my following comments:

    To Edward Ingram, Head of the INGRAM SCHOOL OF ECONOMICS

    It is always a delight to read your research and comments.

    You do make the complex easier to understand. This is so important in today’s unpredictable and chaotic world where we look to science and mathematical models to provide certainty and answers – and then blame such when things go wrong.

    There have been some important writers/theorists such as yourself who have shown why our faith in scientific certainty may be a dangerous illusion, and how only by embracing science’s inherent ambiguities and paradoxes can we truly appreciate its utility and harness its potential to better society.

    The recent financial crisis has shown in vivid color how Wall Street’s over-reliance on algorithms to provide certainty in uncertain markets and to undecidable problems in risk management gave bankers and regulators an illusion of protection.

    The government considered the financial crisis a sector specific problem – the banking industry problem and took a policy response that focused only on the banking industry when passing the Dodd-Frank Act. Unfortunately, all recent crises, mortgage/banking/finance crisis; economic crisis; environmental crisis; international crisis in relations between secular and religious worlds (i.e. Middle east and Africa); currency and trading crisis; and political crisis are likely connected.

    These events are not disparate, one-off crises but a continuum of harmful consequences from the discord inherent in our modern culture. We have too many contradictions where the huge divide in education, commerce, and technology between sovereign nations allows the apple cart to topple over more easily and spill over to other areas, causing disparate crises.

    It is easy to say we need to come up with a radical different way of thinking, such as the cliche, “got to think outside the box.” How do we do that? Of course the box has gotten much bigger over time. There are greater interconnections facilitated by media, computer, band-width/Internet, globalization, ad infinitum.

    Looking just at banking. Regulators are pinning their hat on preventing the next crisis by having all large and complex bank self-prepare a resolution/liquidation plan in the case that the bank fails. This is out and out foolishness and only placates the public by suggesting regulators are doing something to prevent the next crisis. On top of this, international regulators are pushing all central bankers to require sovereign banks to apply the same bank capital mode, by requiring implementation of Basel III capital requirements. This is nonsense and merely shows politicians took expedient action without seeking the optimal response and best solution to ward off any future crisis.

    The government needs, instead, to take a better look at “science of risk and certainty” and see how best to harness it. For sure, one cannot capture all uncertainty in a model or algorithm. There will always be blind spots and frailties that cannot be described. This, however, does not negate the efficacy and utility that risk management tools and models can bring. By denying that their are blind spots and denying the concept of the “loss of certainty,” we set the stage for not making the progress we need to identify and eliminate risk.

    Obviously, the financial crisis, too, has shown us how black swans statistical models can be misused and provide a false sense of security to banks and to regulators (London whale at JP Morgan Chase s a recent example.) If we do not spend time applying science and mathematics in finding a better means to identify black swans and prevent risk model flare-ups, we are always going to have unexpected crises.

    We need academics, economists, and regulators to work hand-in-hand to determine if black swans (flare ups that occur due to blind spots) can only be identified or predicted after the fact. After they occur. Is there really intrinsic randomness and unpredictability in the financial world, in derivatives trading, etc. If this is the case, then it is fine for federal regulators to require the largest and most complex banks to prepare resolution/liquidation plans since failure is not preventable. Is this really the conclusion that our national leaders have taken? Or, was this solution taken out of expediency?

    It would appear essential for large banks, academics, thought-leaders, to take a better look at the science of uncertainty and see how it can be harnessed to prevent any future crisis, no matter the industry most affected. Also, this inquiry needs to focus on the interconnected on what has traditionally been seen as disparate, on-off events, or singular crises. We are doing society a disservice if we do not spend more time to determine how crises are interrelated.


  10. April 11, 2013 at 9:50 am

    I think #2 is basically it, while of course #1, #3 and the proposed #4 apply. It’s power elite solidarity generally, faux-sisterhood being the garnish in this case. The most essential thing the country club members do for each other is to celebrate their failures, or ignore these altogether if too heinous to mention. These are failures only in some nominal universe where America is a democracy and society works for the general good, etc. Bottom line is this interchangeable component of the death system, whoever she is, made $XX million a year for whatever opportunistic cannibalism she oversaw and promptly forgot. That is the pinnacle of righteous living in late capitalism, glorified on every magazine cover. It’s what we all should aspire to! It’s what we all secretly desire! It makes us better people, raises us out of whatever it is we’re supposed to escape. The system worked because it delivered materially-defined rewards to its owners and top operators.

    Also note the answer of gMarg, as one example. However ironically it’s meant, it’s the reality. Talking truth is a way to get people both to admire you and ostracize you. The herd mentality and desire to follow those defined as winners is near-overwhelming. Consider that this society’s image of a “loser” is of someone who didn’t make a lot of money, not of someone who participates blindly in processes that burn the planet or murder millions. Consider the sainting accorded to monsters like Reagan or Thatcher when they happen to drop dead, as we are seeing this week. (You’re going to see this even with Kissinger! I bet he’s also been an honored guest at Barnard.)

    People will not just rearrange deck chairs on the Titanic as it sinks, they will also silence those who prematurely claim that it’s sinking. Please don’t see what’s happening until the shipping line issues a press release.


  11. Recovering Banker
    April 11, 2013 at 10:35 am

    I think it’s possible for them to think she hasn’t done anything wrong without it being weird and creepy, even though the whale episode was at minimum a huge cock-up and a massive loss.

    Possible arguments:
    a) She got to be a major player in trading and banking, there seems to be a tradition of having such people give talks at colleges (might help colleges with fundraising, might help students with seeing what such a person looks like).
    b) She had a long career. We don’t always judge athletes and politicians by their final year.
    c) It’s inherent to the game she was in to risk losing money.
    d) Better for academic institutions to err on the side of free expression. Are they not permitting talks giving another point of view?


    • Zathras
      April 11, 2013 at 1:02 pm

      (a) Is true and an important reason here.
      (b) Perhaps, but we don’t have data on prior years.
      (c) You might want to rethink whether the scope of the game actually includes what happened here
      (d) Misses the point. The question isn’t whether they have the right to, just whether they ought to.


  12. Blob
    April 11, 2013 at 11:34 am

    Has the story really evolved substantially from this summary (http://www.nytimes.com/2012/05/20/business/discord-at-jpmorgan-investment-office-blamed-in-huge-loss.html?pagewanted=all)?

    1) Ina Drew out of office for substantial amount of time with Lyme Disease
    2) Power play between CIO office (Achilles Macris?) in London against NY, exacerbated by the profitability of the profitable (at one point!) credit plays

    Maybe she should have been tougher, while she was sick, against the plays for her job made by a group that had been successful trading what had been a distressed asset (and maybe more than a little lucky, re: AMR default)? Either heinously greedy or incompetent sounds like a stretch to me, but maybe I’m just being an apologist.


  13. April 11, 2013 at 12:18 pm

    Yeah, lyme disease makes you dumber and more tired for the rest of your life and treatments to get you back up to speed are extremely expensive.

    I forgot about that angle.


  14. April 11, 2013 at 12:30 pm

    I think #3 applies pretty heavily. “It’s not my fault, I was just doing my job as best I could, it’s the system that causes these big problems, I didn’t do anything wrong, bad stuff just happens sometimes.” That sort of thing. Probably #2 is important in getting people to accept this kind of reasoning behind #3. And the proposed #4 is important in minimizing the amount of badness perceived in the bad stuff. #1 might be in there as a tiebreaker but I don’t think it could be the important reason; it wouldn’t override anyone thinking she had really done something bad.


  15. April 11, 2013 at 1:36 pm

    Great, enjoyed this one. You really drive the point home about those at the top using the folks with the talent and they get little or no recognition, and depending on the situation at hand some may not want some of the recognition:) I said the other day would a code of ethics be needed if this were not happening?

    I make similar comparisons in government with figureheads getting sucked in with no tech in their background, just a little would help. I certainly see your point here in questioning about intelligence or ignorance. Of course ignorance will be the course of action taken by most as how many times did we hear Jamie Dimon when asked about their models and if the Volcker was working…”I don’t know”..I remember seeing on video but a year before that he said it was not necessary:)

    How often are folks run of the cliff with buying to numbers, stats, studies, etc. when some instinct tells them there’s something wrong? Nobody asks, and to use GPS as an example, folks may see that the software is making a potential error, but they follow it anyway, over the cliff because the software “said this was what to do”…an analogy of sorts here:)

    I don’t know what your feelings are here but we seem to see many in government falling over this cliff as they don’t know any better and are unprepared to take off the rose colored glasses and see what’s really happening with technologies or learn? I tend to think in government though, so many really are still in the old world as I read the news and they have no clue about the intangible world and how it works.


  16. dworfrecaut
    April 11, 2013 at 4:08 pm

    Because in order to be able to afford Barnard you need to either have a mom who works in finance or to find a job that pays enough to repay your student loans and finance is where the well paying jobs are.


  17. April 12, 2013 at 8:29 am

    This is a pretty bold and much needed antidote to the obvious glory that has been showered on this woman as woman as financial leader.
    There are definite resonances with another recent, clarion example of a similar type and class: namely, Margaret Thatcher, laterly Baroness Thatcher.
    For a Mathbabesque and equally just excoriation please see British MP, Glenda Jackson’s, speech to the House of Commons a couple of days ago.

    Mathbabe you are in excellent company!
    Thank you!


    • beewhy2012
      April 12, 2013 at 8:39 am

      Two notes on my previous post:
      First, Ms Jackson’s side of the house (Labour’s) is largely empty to show disdain for the general tenor of the “discussion” which was supposed to be in honour of Thatcher, as is so unctuously noted by Tony Baldry on the Conservatives’ side.
      Second, it’s a tribute to parliamentary democracy that the speaker, John Bercow, very nicely puts Mr. Baldry in his place.


  18. Phil Koop
    April 12, 2013 at 8:55 am

    When playing “Crook or Moron?”, the smart money is on Crook. Yes, the possibilities are not exclusive, but to reach a high executive position requires a degree of cunning beyond mere ruthlessness and ambition. And remember incentives: 15mm p.a. buys a lot of “stupidity”.

    As for your question: I think that money is worshiped for its own sake. When contemplating an ex-success, the ex part is easily forgotten.


  19. Chris
    April 12, 2013 at 9:57 am

    Just hit the edit button on Wikipedia – she’s now incompetent, although I think it’s a fun argument to have over whether she’s stupid or evil.


    • beewhy2012
      April 13, 2013 at 2:07 am

      Her “incompetence” was temporary and was undone about an hour and a quarter later by whoever monitors the WikiPedia entry. As this editor noted, the term “clearly violated WP:BIO” guidelines.
      It would be preferable to find an objective assessment of Drew’s actions to refer to in the bio. Mathbabe’s is one most of us can understand and credit, but is unlikely to pass muster on WP.
      Do we have any candidates?


  20. RWForce
    April 12, 2013 at 1:13 pm

    When a college president unctuously “honors” an individual, it’s usually because they expect to be “honored” by a generous donation in return.


  21. ed
    April 12, 2013 at 4:12 pm

    Let’s say she was “heinously greedy”, why do you think she should go to jail for that? This is a question in two parts – one is about current laws, and two is why you think it’s a good idea to have a law that would put her in jail?


    • April 12, 2013 at 7:52 pm

      Sarbanes-Oxley. She lied to Congress about what happened under her watch.


  22. dbk
    April 12, 2013 at 5:38 pm

    Great post, it takes courage to confront these issues (“speaking truth to power” doesn’t come easily to most people). Just wanted to say that I joined facebook today, and this was the second link I posted after one to Yves Smith’s link yesterday to the BBC feature story on child poverty in America.


  23. Nathanael
    April 14, 2013 at 9:29 pm

    “Heinously greedy or heinously incompetent?”

    BOTH. Remember, they’re not mutually exclusive.


  24. April 15, 2013 at 1:10 am

    MathBabe, perhaps now she should write a book telling women how to behave, like Sandberg!


    • April 15, 2013 at 7:16 am

      I was thinking of writing a female version of “The Game” for women, called “Wingwoman”. It’s like learning to be a pick-up artist to get hot chicks, except it’s learning how to help your girlfriends get really nice guys.


  1. April 11, 2013 at 6:06 pm
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