Written by Biloxi
I got a chance to watch the entire Senate hearing with JP Morgan Chase CEO Jamie Dimon’s testimony on the London Whale $2 billion trading loss. As predicted, many of the Senate Committee members fluffed Dimon’s pillow and provided softball questions. And I’m not going to get into the fact that some members on the committee’s financial ties to JP Morgan Chase. However, I wanted to point out the best moments I found from the Senate hearing:
1. London Whale: The Russian Roulette
Sen. Robert Menendez: “When you reduce a hedge, or hedge a hedge, isn’t that gambling?” Dimon: “No.” Sen. Robert Menendez: You said the hedge morphed. What did it morph into, Russian roulette?”
2. Examiners unaware of London Whale risk until April
Sen. Sherrod Brown: Asked OCC, they said that there are five examiners in London. Portfolio of assets in question $200B. They said trades “transparent to regulators.” But said examiners unaware of risk until April. Was OCC told before April 6?
Dimon: We try to be “open-kimono” with regulators. We were misinformed, we had them misinformed. The second we found out, we told the regulators.
Sen. Sherrod Brown: April 13 (2012), earnings call, was OCC told of trades?
Dimon: I don’t know. Probably continued to misinform. When we found out, we called board and regulators, probably not in that order.
Sen. Sherrod Brown: Did OCC inquire about trades?
Dimon: I don’t know. Brown: When did OCC challenge the trades? Dimon: When they understood significance, they challenged it every day.
Sen. Sherrod Brown: Five regulators in London enough?
Dimon: Don’t know, but physical location not that important.
And the zinger?
3. JPMorgan Chase would have failed if not for “massive federal bailouts” as Senator Jeff Merkley reminded Dimon:
Senator Merkley reminded Dimon that of TARP money and indirect aid to JP Morgan Chase including the Treasury’s bailout of AIG. Here was the Merkley-Dimon exchange:
“JPMorgan took TARP because we were asked to,” Mr. Dimon said, his voice rising. “We were asked that if the nine banks take this TARP we can keep the system from going down. “We were not bailed out by AIG. We would have had a loss of about $1 billion if AIG had gone under.”
“Sir, this is not your hearing,” Senator Merkley interrupted. And: “I think a lot of experts would say that without federal aid, JPMorgan would have gone down, and that you would have been out of a job.”
Lastly, Senator Merkley pressed Dimon on a Bloomberg article suggesting Dimon’s vision of his CIO firm as a profit center. From the Bloomberg article:
“We want to ramp up the ability to generate profit for the firm,” David Olson, a former head of credit trading for the CIO in North America, recalled being told by two executives when he was hired in 2006. “This is Jamie’s new vision for the company.”
And Dimon’s response to Merkley? “I don’t believe everything I read, and I hope you don’t either.”
4. Be careful what you say, Mr. Dimon.
Dimon has been called arrogant in the public eye. Well, here is Senator Jerry Moran’s question to Dimon. Moran asked Dimon to elaborate on comments earlier in the hearings in which he observed that large organizations have a tendency to become arrogant. And Dimon’s response? “I wasn’t talking about the Senate, definitely not. Not now.”
Dimon’s has another date on Capital Hill…with Congress: June 20, 2012