JPMorgan Chase CEO James 'Jamie' Dimon went before the Senate Banking, Housing and Urban Affairs Committee Wednesday to provide a better understanding of the company’s recent massive trading loss.
On May 10, JPMorgan Chase announced approximately $2 billion in trading losses from a complex trading strategy. The FBI and other government agencies are investigating the matter.
This was the first time JPMorgan’s President and CEO appeared before Congress to answer questions concerning the bank’s trading loss. As Dimon walked to the witness table, he was heckled by protesters.
Mr. Dimon said the problem was within the Chief Investment Office (CIO) and its synthetic credit portfolio. In December 2011, the CIO was asked to update its risk models to comply with Basel rules. These models which were approved involved a strategy that called for adding positions to the synthetic credit portfolio in hopes of offsetting existing ones. He added that this strategy clearly didn’t work, was too risky, and resulted in the massive losses.
The witness admitted to Senate lawmakers that this portfolio should have been monitored more closely by senior management including him. He also stressed multiple times throughout the hearing that the losses was an “isolated incident” and immediate corrective action was taken to re-implement the old risk models which Mr. Dimon said worked well.
He has testified before Congress several times on a variety of economy-related issues. During questioning, several Committee members asked him about the use of taxpayer funds to boost lending rates and press him on JP Morgan Chase's commitment to cooperate with the government.
The Committee will take his testimony into account as lawmakers continue to conduct oversight over the full implementation of Wall Street reform.