Posted on Wed, Jun. 13, 2012
last updated: June 13, 2012 06:15:01 PM
JPMorgan Chase CEO Jamie Dimon told Congress on Wednesday that he bore ultimate responsibility for a $2 billion trading loss, but that the bank might financially penalize some of the executives involved.
Two months ago to the day after telling analysts that concerns about the companys trading practices were a tempest in a teapot, Dimon said he was dead wrong and admitted that his management had been flawed. Since Dimon became the chief executive in 2005, hed pushed for the companys chief investment office to make more profits with bigger, riskier bets.
Im absolutely personally responsible, Dimon told the Senate Banking Committee. He sidestepped his personal role in the trading strategy that led to the loss, however, saying, I was aware of it, but I didnt approve it."
Dimon said some executives could be required to give back pay or bonuses under bank policy in the wake of the $2 billion loss, which the nations largest financial institution revealed last month after a risky multi-billion-dollar bet made by London traders. At the end of this, the board will review every single person involved, what they did and whether it was appropriate, Dimon said.
He said he had great employees who treat everyone like their friends and parents. . . . Its in their heart to do the right thing all the time, every day. And if theres a mistake, we try to acknowledge them and fix them.
Dimons appearance was marked at the outset by demonstrators in the Senate hearing room. This man is a crook! one protester yelled before the hearing, as Dimon took his seat. A group of dissenters chanted Stop foreclosures now! as police escorted them out.
Despite that, Dimon entered the hearing as one of the less controversial titans of Wall Street The New York Times in 2010 called him Americas Least-Hated Banker. And he emerged relatively unscathed.
"The intent here is really not to sit in judgment," said Sen. Jim DeMint, R-S.C.
Even with a $2 billion loss, DeMint said the bank remained strong. He compared the bank favorably with the federal government, which he said lost $2 billion every day through deficit spending. You appear to be in much better fiscal shape than we are as a country, the senator said.
Sen. Bob Corker, R-Tenn., called Dimon one of the "best CEOs in the country for financial institutions." He called the $2 billion loss a blip on the radar screen but wondered aloud whether banks are getting too big and complicated to manage.
Democrats challenged Dimon over his previous vocal opposition to federal bank regulation in the wake of the 2008 Wall Street collapse. He called one international requirement for greater cash reserves anti-American.
"You railed against us when we were in fact trying to pursue great capitalization of these banks," said Sen. Robert Menendez, D-N.J. It seems to me that the American people are a big part of helping to make your bank healthy."
Dimon emphasized that the institutions regulators werent to blame for the loss, saying it was entirely the fault of management, which he said was too complacent. He repeated that regulators on the companys risk-managing committee were misinformed and wouldnt have been able to prevent the loss.
I dont think, realistically, they can stop something like this from happening, he said.
Dimon also praised actions by regulators that successfully carried the company through the 2008 economic crisis.
This risk committee took this company through the most difficult financial crisis of all time with flying colors, Dimon said. He said the company had survived because of certain bets, called portfolio hedging, that it made to generate revenue in emergency situations.
The ability to make these types of bets, the same kind that caused the recent losses, is why Dimon doesnt support legislation that would prevent banks from making trades for their own profit, the so-called Volcker Rule.
The rule will go into effect in July but it hasnt yet been finalized. Several senators expressed their support for it, implying that the nation needs more extensive change in the banking system to reduce the types of risky, profit-seeking trades that led to JPMorgans loss.