JPMorgan CEO again defends actions in $2b trading loss

JPMorgan chief executive Jamie Dimon testified before the House Financial Services Committee on Tuesday.
Chip Somodevilla/Getty Images
JPMorgan chief executive Jamie Dimon testified before the House Financial Services Committee on Tuesday.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told US House members that he complied with disclosure rules in warning investors about changes that contributed to the bank’s trading loss of at least $2 billion.

“We disclosed what we knew when we knew it,” Dimon told lawmakers today at a House Financial Services Committee hearing in Washington.

Dimon’s comments came during his second appearance on Capitol Hill in less than a week to explain how the firm lost billions on derivatives trades. US Securities and Exchange Commission Chairman Mary Schapiro, speaking from the same witness table earlier, said the agency has a “wide panoply” of penalties at its disposal in pursuing sanctions against JPMorgan. The bank could pay penalties if investigators find that it violated disclosure or other rules, she said.


Since Dimon announced the loss on May 10, investors and regulators have questioned JPMorgan’s disclosures of changes made during the first quarter to its “value at risk” or VaR calculation. Dimon told investors on May 10 that the company used a new model, which later proved to be “inadequate,” to calculate VaR some time during the first quarter.

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He told lawmakers today the the model change didn’t directly cause the loss.

“It may have aggravated what happened,” he said. “I wouldn’t say it was the cause of what happened.”

VaR is a measure of how much a company estimates it could lose on securities on 95 percent of days.

Loss Growing

Dimon has warned that the $2 billion loss could balloon as the bank unravels some of its questionable trades. He told lawmakers that he won’t provide an update on the loss until the bank releases its second quarter earnings on July 13.


When Dimon appeared before the Senate Banking Committee on June 13, he was cordially received and fielded questions on the European debt crisis and how US lawmakers should resolve the so-called fiscal cliff at the end of the year. Today’s hearing was more contentious.

Representative Stephen Lynch, a Massachusetts Democrat, pressed House Financial Services Committee Chairman Spencer Bachus, an Alabama Republican, to require Dimon to testify under oath. Bachus declined, saying it wasn’t the committee’s tradition to require witnesses to deliver sworn testimony.

JPMorgan’s Lobbying

Representative Maxine Waters, a California Democrat, asked Dimon to explain why JPMorgan has lobbied against provisions of the 2010 Dodd-Frank Act which overhauled financial regulation. Dimon has been especially outspoken in his opposition to the so- called Volcker rule, which bans banks from engaging in most proprietary trading.

“Lobbying is a constitutional right and we have a right to have our voice heard,” Dimon said.

Dimon said it wasn’t necessary, however, for his voice to be heard in the boardroom of the Federal Reserve Bank of New York, where he is a director. Senator Bernie Sanders, a Vermont Independent, introduced legislation on May 22 that would ban employees of bank holding companies or other firms regulated by the Fed from serving on regional Fed bank boards.


Dimon reminded lawmakers that Congress is responsible for writing the laws that govern the central bank and said his role at the New York Fed is limited. He doesn’t vote on the New York Fed’s president or get involved in supervision, he said.

“It’s more of an informational advisory group,” he said.

Regulators Grilled

Earlier, the heads of the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and Commodity Futures Trading Commission and a senior Federal Reserve official were grilled over how they could have missed the trading debacle.

“Just as JPMorgan should be and is being held accountable for its risk management failures, accountability must also be demanded of the federal regulators who oversee the bank’s activities,” Bachus said.

In the wake of the loss, Comptroller of the Currency Thomas J. Curry said his agency is reviewing its staffing inside JPMorgan’s London operations, where the trades under scrutiny occurred.

“We will use our experience here, our review of JPMorgan Chase, to reevaluate the numbers and strength of the personnel in our London office,” he said.