Fed inspector general: NY Fed stumbled in handling of JPMorgan London Whale

[WASHINGTON] The Federal Reserve's inspector general arm found several flaws in the way the New York Fed handled J.P. Morgan's huge credit derivative losses in 2012, including limited resources and competing priorities.

J.P. Morgan incurred around US$2 billion in losses due to a complex trading strategy involving credit derivatives in Europe that year, in a case that became known as the London Whale.

The Fed's Office of Inspector General said in a report released on Tuesday that among the flaws in the New York Fed's handling of the issue was limited resources and an over-reliance on certain personnel.

The report also said that New York Fed examiners identified London Whale risks as early as 2008 but did not conduct planned follow-up examinations.

REUTERS