JP Morgan CEO Dimon Apologizes For $2bn Loss
Created: 2012-06-13 17:10 EST
JP Morgan Chase chief executive Jamie Dimon
JP Morgan Chase chief executive Jamie Dimon, testifying in-front of the US Senate Banking Committee, apologized for his bank’s $2 billion loss due to high-risk trades.
“As a result [of the trades], we’ve let a lot of people down, and we’re very sorry,” said Dimon.
The bank reported a $2.3 billion trading loss from its Chief Investment Office in early May. The London-based division had lost the money in a risky derivatives trading strategy, meant to hedge other potential risks.
“The way it was contrived between January to March, it changed into something I cannot publicly defend,” Dimon said.
The chairman did not divulge details about trading or further losses. Analysts expect JP Morgan’s losses from the strategy to increase, as the bank tries to move its assets against a market now aware of the bank’s position.
However, Dimon did stress that the trades were a result of “purely management mistakes,” and that regulators may not have caught them.
The loss has further energized calls for tighter bank regulations. Dimon, having successfully maneuvered JP Morgan through the recession, has been a vocal opponent against the Dodd-Frank Act, a regulation response enacted in 2010.
Asked if the Volcker Rule, a specific section of the Dodd-Frank Act scheduled to be implemented this summer, would have prevented the loss, the chief executive replied: "I don't know what the Volcker rule is. It hasn't been written yet."
“It’s possible. I just don’t know.”
The Volcker Rule aims to restrict speculative trades made for the bank’s profit. It is unsure whether the CIO trades in question would fall under such a rule, as they were generally made to hedge riskier investments, or revenue in the event of a crisis.
“This doesn’t violate the Volcker Rule, but it violates the Dimon principle,” the CEO said in a conference call with analysts and investors in May, after the loss was disclosed.
Though defending the size of his bank, Dimon also urged Congress to allow big banks to fail, allowing for bankruptcy for “big dumb banks.”
He also warned that a fiscal cliff may be reached early if the US Representatives do not act. Tax cuts enacted under Bush are set to expire and over $1 trillion in spending cuts would begin at year’s end.
"We have to get our fiscal act in order. I mean, it's either going to be done to us or we're going to do it ourselves."