NEW YORK CITY (dpa-AFX) - JPMorgan Chase & Co. (JPM) Chairman and CEO Jamie Dimon appeared before Congress on Wednesday, apologizing for multi-billion dollar trading losses.
While Dimon maintained that taxpayers were at no risk of having to foot the bill, he acknowledged that JPMorgan leadership has 'let a lot of people down, and we are sorry for it.'
Dimon is appearing before the committee to discuss the recent losses in a portfolio held by JPMorgan's Chief Investment Office.
The bank revealed in early May that since March 31, 2012, its Chief Investment Office or CIO had hefty mark-to-market losses in its synthetic credit portfolio that has proved to be more riskier than expected. The group's bad bets cost the bank trading losses of more than $2 billion.
Though Dimon believes this to be an 'isolated event', he said in the statement, '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 also noted that he will explain everything he can to the extend possible, despite the ongoing review being conducted by JPMorgan to ascertain the facts.
Dimon revealed that the CIO was instructed in December 2011 as part of a firmwide effort to reduce risk-weighted assets and associated risk in anticipation of the new Basel capital requirements.
He noted that the CIO then embarked on a strategy to add positions that it believed would offset the existing ones, rather than simply reducing its existing positions. This strategy, he noted, 'ended up creating a portfolio that was larger and ultimately resulted in even more complex and hard-to-manage risks.' That he said 'created new and potentially larger risks.'
Dimon took personal responsibility for failures in the bank's Chief Investment office, admitting some complacency in overseeing a unit that had performed well in the past.
Sen. Chuck Shumer, a Democrat from New York, asked Dimon whether other firms would have been able to withstand such a huge loss without sparking a Lehman-like event in the credit markets.
Dimon said the banking system was healthy enough to prevent a similar meltdown.
'Banks are better capitalized, they have more liquidity, there is more transparency, their boards are more engaged, risk committees are more engaged. A lot of strengthening has happened, at companies across America,' he answered.
JPMorgan, through the CIO, makes broad bets to hedge portfolios of individual holdings. Dimon had accepted the losses as 'egregious' and 'self inflicted'. He also said that the synthetic hedge, using contracts known as credit default swaps, was shoddily executed.
The mistakes include trading-risk limits that were too broad, a new trading model adopted in January 2012 that masked mounting dangers, and the failure of top executives to sufficiently probe the huge positions at the CIO.
The financial services giant's stunning trading loss has already claimed it Chief Investment Officer Ina Drew, who announced her retirement, with Co-Head of Global Fixed Income Matt Zames named to replace her.
Protesters attempted to interrupt the start of the hearing. 'Jamie Dimon is a crook,' shouted one woman, while others chanted 'Stop foreclosures now!' in reference to the housing crisis that many blame on banks.
In Wednesday's regular trading session, JPM is currently trading at $34.51, up $0.74 or 2.19% on a volume of 20.40 million shares. In the past 52-week period, the stock has been trading in a range of $27.85 to $46.49.
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© 2012 AFX News
