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JPMorgan CEO testifies in Senate Banking hearing

06-14-2012 10:25 BJT

What led to JPMorgan Chase's multi-billion dollar loss and could tougher regulations prevent it from happening again?  These were some of the questions CEO Jamie Dimon faced Wednesday in a Senate Banking hearing.

It was a dramatic start to CEO Jamie Dimon’s U.S. Senate testimony. Demonstrators turned out to heckle the executive once called “America’s least hated banker.”

President and CEO of JPMorgan Chase Co. Jamie Dimon testifies before the Senate
Banking Committee.

Just 2 months after playing down concerns over his bank’s losses as “a tempest in a teacup”, U.S. lawmakers grilled Dimon on the bad trades that could result in losses that eventually top 3 billion dollars, according to some analysts. Dimon now describes the bank’s trading as “indefensible.”

Jamie Dimon said, “This portfolio morphed into something that, rather than protect the firm, created new and potentially larger risks.  As a result, we have let a lot of people down, and we are very sorry for it.””

Ironically, the trades made by the company’s Chief Investment Office in London were part of a hedging strategy to protect the bank against losses in a financial crisis. Dimon acknowledged that it backfired to the tune of 2 billion dollars, when the company miscalculated and assumed too much risk.

Tim Johnson, Senate Banking Committee Chairman, said, “Did you, Mr. Dimon, make the decision to exempt the CIO from any review or risk controls outside of the unit? Why was no-one watching?”

Jamie Dimon said, “I think the first error we made was the CIO unit had done so well for so long that I think there was a little bit of complacency about what was taking place…maybe overconfidence.”

Dimon insisted that no customer funds were involved in the trades and that his management team learned their lessons. Dimon spoke confidently about what he called the bank’s “fortress balance sheet” with almost $200 billion in equity.  But given the $25 billion in bailout funds given to the bank during the financial crisis, his comments were not well received.
Robert Menedez, Democratic Senator, said, “I’d like to remind you that the ‘fortress balance sheet’ has a moat that was dug by taxpayers. So it seems the American people are a big part of making your bank healthy.”

But would more regulation prevent bankers from taking risky bets in the future? 

Jamie Dimon said,“What we set up is a system with more and more regulators; we don’t actually know who has jurisdiction over many of the issues we are dealing with any more. I would prefer a simple, clean, strong regulatory system, with real intelligent design, but that’s not what we did.  There’s less collaboration between banks and regulators.  It’s much more adversarial.”

 Dimon’s responses were sparse on detail during Wednesday’s hearing, saying he would reveal more information to JPMorgan shareholders at the end of July.

Protesters heckle JPMorgan Chase Chief Executive
Jamie Dimon before he testifies to a Senate committee.

JPMorgan Chase CEO Jamie Dimon, head of the largest bank in the US, testifies on
Capitol Hill in Washington, Wednesday, June 13, 2012, before the Senate Banking
Committee about on how his company recently lost more than $2 billion on risky trades
and whether its executives failed to properly manage those risks.

JPMorgan Chase CEO Jamie Dimon went before Congress to explain
how the bank, the largest in the United States, lost $2 billion
on risky trades and whether it failed to properly manage risk.

 

 

Editor:James |Source: CNTV.CN

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