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TAMPA, Fla. (Reuters)—The FBI has opened a probe into trading losses at JPMorgan Chase & Co., stepping up the pressure on the bank after the U.S. Securities and Exchange Commission and the Federal Reserve said they were also looking into the wrong-way bets that led to the losses.
Yet at the same time, shareholders backed embattled Chief Executive Jamie Dimon at the bank's annual shareholders meeting in Tampa, Fla., on Tuesday, voting against a proposal to split the CEO and chairman roles.
Though shareholders mostly gave Mr. Dimon a pass, pressure mounted on the bank to reclaim some of the millions of dollars it paid to the executives who oversaw the trades. Mr. Dimon said JPMorgan would pursue more disciplinary action against those who were responsible.
"We will do the right thing. That may well include clawbacks," he told reporters after the annual meeting.
The timing on any such move was not clear, though, and the various regulatory probes could add complications. A source familiar with the FBI investigation, opened by the agency's New York office, described it as being at a preliminary stage.
After two trading days of heavy losses, JPMorgan shares were up 3.9% to $37.20 in afternoon trade. Even so, the stock is down more than 8% since the trading losses were disclosed, wiping out $13 .5 billion of market capitalization.
"It affects my opinion of the entire financial industry," said Dennis Hong, principal with Altimeter Capital, a hedge fund that manages about $250 million.
"It's really shocking, because JPMorgan has been known as the most conservative in terms of managing their business risk. They may be losing their way," Mr. Hong said at an event in Boston.
In Washington, U.S. Treasury Secretary Timothy Geithner said JPMorgan's losses strengthened the case for reform.
"I think this failure of risk management is just a very powerful case for...financial reform," Mr. Geithner told an event sponsored by the Peterson Foundation.
"The test of reform is not whether you can prevent banks from making mistakes...the test of reform should be: 'Do those mistakes put at risk the broader economy, the financial system or the taxpayer?'"
Protests outside the annual meeting were relatively limited. Half a dozen Occupy Tampa protesters did media interviews and occasionally chanted, "Hey hey ho ho, big banks have got to go."
Nonetheless, retail shareholders expressed incredulity at the size of the losses.
"I am amazed that they think $2 billion is a bump in the road," said A. Reihl, an 85-year-old shareholder who said she has owned the stock for more than a decade. "This is not the time to be taking risk."
Rev. Seamus Finn of the Washington-based Interfaith Center on Corporate Responsibility described the outcome of the meeting as "pretty poor."
"I don't think we got any more clarity out of Mr. Dimon about what he got out of these recent experiences and what they're going to do," he said.
New York City Comptroller John Liu, who oversees the city's $400 million stake in JPMorgan, on Tuesday joined those calling for a "clawback" of compensation from executives responsible for the trading losses, including Ina Drew, chief of the hedging unit that racked up the losses.
She announced her retirement on Monday. Reuters was unable to reach Ms. Drew at her New Jersey home on Monday evening.
In its 2011 annual report, JPMorgan said its stock-based compensation awards were subject to clawback provisions. It said in its proxy filing that it could conduct a clawback review "as a result of a material restatement of earnings or by acts or omissions of employees."
JPMorgan can cancel unvested awards or require that the value of distributed shares be repaid when "the employee engages in conduct that causes material financial or reputational harm to the firm or its business activities," according to the proxy.
"We don't know the facts and culpability, but it appears she (Drew) did have a responsibility here along with a number of others," Sheila Bair, former chairman of the Federal Deposit Insurance Corp., said in an interview with Reuters Insider. "Clearly, the whole purpose of clawbacks is if you make a bad bet that results in losses, compensation should be clawed back."
While regulators probe the losses, most shareholders at the brief annual meeting seemed more concerned with the bank's mortgage servicing practices and with the proposal to split the roles of chairman and CEO.
That nonbinding proposal received 40.1% of the votes cast in favor. By way of comparison, 44% of AT&T Inc. shareholders and 46% of Honeywell International Inc. shareholders voted to separate the roles at their companies in meetings held last month.
"Obviously, all the media attention, all the political yammering of the past week, undoubtedly had some influence on people who had not voted up to that point," said Marshall Front, chairman of investment manager Front Barnett Associates in Chicago, whose firm voted against the proposal.