JPMorgan CEO resolute before Congress
By LUKE VARGAS
Talk Radio News Service
WASHINGTON – When an estimated $2 billion in derivatives trading losses originating from JPMorgan’s London branch came to light last month, the company’s practices attracted widespread scrutiny, with CEO Jamie Dimon summoned to Capitol Hill for repeated rounds of congressional investigation. The latest meeting between regulators, Dimon, and lawmakers occurred Tuesday at a hearing of the House Financial Services Committee. Criticism of the trading incident has centered primarily on two issues, including how regulators overlooked the massive trade and whether corporations such as JPMorgan are regularly assuming excessive risk that taxpayers may be forced to underwrite in the event of future unexpected losses, and today’s questions followed in the same vein.
The bulk of concern expressed Tuesday focused on the increasing concentration of risky financial ventures at the London offices of American financial institutions. Dimon repeatedly downplayed the magnitude of his firm’s loss, emphasizing JPMorgan’s strong capitalization and the diversification of investments. “I personally feel that this will never be life-threatening to the company,” Dimon said.
Rep. Maxine Waters (D-Calif.) wasn’t satisfied with that long-running explanation from the company’s leaders, however, and she pressed regulators on the domestic risks posed by overseas investments. “When risk is taken in the London branch of a bank, does that risk stay in London?” Waters asked of Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission.
Gensler began by noting that AIG and Citigroup established special trading operations in London, and that “often [risk] comes right back here, crashing to our shores,” as evidenced in the recent financial crisis. “If the American taxpayer bails out JPMorgan, they’d be bailing out that London entity as well.”
Democrats were not the only ones searching for answers, and Wisconsin Republican Sean Duffy challenged Dimon’s belief that regulators could be expected to wade through the millions of financial transactions executed each day and identify improper behavior. “You didn’t know about these trades, you didn’t know about these losses. How do you come forward today and say that regulators should have known what one of the best CEO’s in the industry didn’t know and couldn’t have known?”
Amid these questions put to Dimon it seemed the day’s most intense scrutiny was directed at a panel of government regulators tasked with overseeing the dealings of major financial institutions, and concern over regulatory practices flowed freely from both sides of the aisle.
Rep. Mike Capuano (D-Mass.) chastised the regulators, saying their agencies do not provide the public or Congress with sufficient information on regulatory actions. “I try to read as much as I can,” Capuano explained. “The problem is on this particular hearing, all I could get was news reports, and the only news reports I could get were all based on assumptions and educated guesses. There’s just not enough transparency from your agencies to allow outside people to make a comment on what might have happened.”
When Missouri Republican Blaine Luetkemeyer sought clarification on recent estimates of JP Morgan’s estimated trade loss from Gary Gensler, committee chair Bachus buried the question, stating that “no one knows what the loss is gonna be.”
“That’s why we have the witnesses, so they can testify, and not so you can answer for them,” Luetkemeyer rebutted in a not uncommon outbreak of partisan squabbling. Bachus’ gavel ultimately won out, with Luetkemeyer’s allotted time expiring and Dimon avoiding a direct reply.
The public will have to wait until mid July for final word on the extent of JPMorgan’s losses, Dimon said, when quarterly earnings reports are made available.
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