JPMorgan Chase’s President and CEO Jamie Dimon was back on Capitol Hill to answer lawmakers' questions concerning the bank’s May announcement of more than $2 billion in trading losses.
The hearings examined the public policy implications of the losses with two rounds of panelists. Testimony began with representatives from five top government financial agencies followed by Mr. Dimon.
Tuesday's witnesses included Securities and Exchange Commission Chairman Mary Schapiro; Chairman of the Commodity Futures Trading Commission Gary Gensler; Acting Chairman for Federal Deposit Insurance Corporation Martin Gruenberg; Comptroller of the Currency Thomas Curry; and Federal Reserve Board of Governors General Counsel Scott Alvarez.
During Mr. Dimon's appearance last week before the Senate finance Committee, he said the losses stemmed from 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 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.
Mr. Dimon later 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 were an “isolated incident” and immediate corrective action was taken to re-implement the old risk models which Mr. Dimon said worked well.
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