JPMorgan chief executive Jamie Dimon was grilled by the Senate Banking Committee on Wednesday over his firm’s massive May trading loss. Zachary A. Goldfarb reports:
JPMorgan Chase chief executive Jamie Dimon apologized for the bank’s $2 billion or more in trading losses as he faced a congressional lashing Wednesday morning, but he also defended the bank against accusations that it is wildly irresponsible.
In prepared testimony, Dimon was contrite about the bank’s errors but provided only a general overview of what went wrong and did not take personal responsibility for the losses, which occurred in a JPMorgan unit that was supposed to protect the bank from risk.
“We have let a lot of people down, and we are sorry for it,” Dimon said in remarks prepared for the Senate Banking Committee. “We will not make light of these losses, but they should be put into perspective. We will lose some of our shareholders’ money – and for that, we feel terrible – but no client, customer or taxpayer money was impacted by this incident.”
Dimon’s appearance before the committee was his first before a hostile crowd since the bank disclosed the losses last month. Until recently, Dimon had been generally regarded in Washington as an effective bank chief who successfully navigated the 2008 financial crisis.
But the trading losses have been such a setback for Dimon personally because he had been a leading Wall Street critic of new financial regulations and had earlier dismissed reports about risky trading at JPMorgan as a “tempest in a teapot.”
Suzy Khimm explains how Dimon was treated by legislators during his testimony:
But rather than castigate Dimon for his firm’s egregious mistakes, Senate Republicans treated him like a wise sage. They pointed to JPMorgan’s ability to withstand mismanagement and billions in losses as evidence of the bank’s health — and solicited Dimon’s own advice on how Washington should treat Wall Street.
“What would you do to make our system safer?” Sen. Bob Corker (R-Tenn.) asked Dimon.
“What should the function of regulators be?” asked Sen. Mike Crapo (R-Ida.).
“How much have regulation costs increased?” asked Sen. Mike Johanns (R-Neb.).
“We’re honestly looking for some ideas as we look over [Dodd-Frank] in the next year,” Sen. Jim DeMint (R-S.C.) told him.
Even some of the Democrats sought out Dimon’s advice: Sen. Michael Bennet (D-Colo.), for instance, asked for his thoughts on solving the country’s long-term deficit crisis.
Dimon was more than happy to oblige. “I believe in strong regulation but smart regulations — not necessarily more regulations,” he said. Dimon did admit he was “dead wrong” when he dismissed early concerns about massive trading losses. But he assured the Senate committee that banks were always going to be able to foresee problems before any government watchdog. “Our risk committee took our company through the most difficult financial crisis of all time with flying colors,” Dimon said. “If it would be hard for us to capture it, it would be hard for [regulators] for capture.”
Jena McGregor gives her take on the importance of executive’s performance on Capitol Hill:
My own opinion is that Dimon’s performance Wednesday matters far less than how he leads the company going forward. When the review comes out, how aggressively will he make systematic changes to limit the chances of something like this ever happening again? How will he change the way he manages on a day-to-day basis so that he’s not the victim of what Harvard Business School professor Max Bazerman calls “bounded awareness,” or the “human tendency to fail to perceive and process important information that is easily available to us?” And how well will the board follow through with Dimon’s expectations for clawbacks in executive compensation, and will Dimon’s pay also get docked for the sizable losses?
Of course, if you really want to know what people thought of Dimon’s performance on the Hill, there is one pretty incontrovertible way of measuring it: the market. At midday, JPMorgan’s shares were among the top gainers on Wall Street Wednesday, rising more than 3 percent shortly after the testimony ended.
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