THE BURNED OVER DISTRICT

Thanks to a lot of hard work and probably some ass kissing, he was allowed by the shareholders to remain as Chairman and CEO of J P Morgan Chase. Now he has to rebuild his organization following the financial and personnel losses from the London Whale.

Now Mr. Dimon plans to marshal the momentum from the shareholder victory to try to strengthen the bank’s compliance and audit controls, according to several people with knowledge of the matter. That cleanup work was already under way, but the victory gives him more of a mandate to tackle it head on, these people say.

As part of that push, JPMorgan is beefing up the staff under Matt Zames, JPMorgan’s chief operating officer, according to several people close to the bank. Mr. Zames was initially chosen by Mr. Dimon to take over the chief investment office in the aftermath of the troubled bets. By the end of the year, JPMorgan is on track to hire as many as 1,000 employees charged with compliance and controls.

Top bank executives are increasing the frequency of their trips to meet with regulators in Washington, the people close to the bank said. Gordon A. Smith, who is chief executive of JPMorgan’s community and consumer banking, has taken about one trip to Washington each month.

Mending the frayed relationships with Washington will be difficult, however, as the bank continues to contend with a series of regulatory missteps.

In January, the Office of the Comptroller of the Currency took an enforcement action against JPMorgan, faulting it for lapses in how the bank controls against the flow of tainted money. The Comptroller is also investigating whether JPMorgan failed to tell federal authorities of its suspicions about Bernard L. Madoff, subsequently convicted in the largest Ponzi scheme in history. The agency is now weighing a move against JPMorgan for using questionable documents to collect overdue credit card bills, according to officials with knowledge of the investigations.

“The regulators are not going away and JPMorgan still has a target on its back,” said Michael Mayo, a banking analyst for CLSA.

And despite the blessing of the bank’s shareholders, some regulators remain skeptical that Mr. Dimon and JPMorgan can truly overhaul a bank and a culture where requests from regulators were sometimes met with outright resistance.

Any regulatory & compliance changes will most likely be of a Potemkin-like nature. He can't afford to change the criminal culture of JPM if he wants to keep Wall St. happy.