April 1, 2023

DealBook: ‘Proud’ JPMorgan Chief Apologizes

Jamie Dimon, the chief executive of JPMorgan Chase, arrived to testify before a Senate committee.Daniel Rosenbaum for The New York TimesJamie Dimon, the chief executive of JPMorgan Chase, arrived to testify before a Senate committee.

WASHINGTON — Jamie Dimon, the outspoken chief executive of JPMorgan Chase under scrutiny for a multibillion-dollar trading loss at his firm, apologized for the mishap on Wednesday even as he mounted a fierce defense of his bank.

Testifying at a much-anticipated hearing before the Senate Banking Committee, Mr. Dimon said that he was “proud” of the bank, highlighting the firm’s “fortress” balance sheet and its performance during the financial crisis.

“We’re doing what a bank is supposed to do,” he told a panel of lawmakers, few of whom posed combative questions during the roughly two-hour hearing.

The hearing on Wednesday was the latest chapter of the trading debacle, which has stained the bank’s reputation and prompted wide-ranging inquiries from regulators and the Federal Bureau of Investigation. The concerns have centered on the bank’s chief investment office, which placed a big bet tied to credit derivatives that ultimately soured.

Despite the controversy plaguing the bank, Mr. Dimon on Wednesday seemed to solidify his status as Washington’s favorite banker. Clad in a dark suit and striped tie, he navigated the hearing with relative ease, deflecting tough questions and fielding softball inquiries.

He received a particularly warm welcome from Republican senators, who praised JPMorgan and allowed the chief executive to offer criticisms of forthcoming financial rules. Senator David Vitter, Republican of Louisiana, asked Mr. Dimon about the Volcker Rule, an element of the Dodd-Frank regulatory overhaul meant to clamp down on banks’ trading for their own account. Mr. Vitter asked if there was a version of the Volcker Rule that “makes sense.” Mr. Dimon, who is not a big fan of the extensive regulation, responded, “I thought it was unnecessary when it was added on top of other stuff.”

Some lawmakers used their five-minute question periods to compliment Mr. Dimon and ask his advice on fixing the economy. At one point, Senator Jim DeMint, Republican of South Carolina, said, “I think a lot of us are frustrated bank managers and want to manage your business for you,” before praising JPMorgan for being in better financial shape than the country as a whole.

The roughest greetings for Mr. Dimon came not from legislators but from a chorus of protesters in the chamber, who confronted the chief executive about JPMorgan’s foreclosure policies while having received taxpayer bailout money. The outburst, led by one man who yelled that Mr. Dimon was a “crook,” was quickly quelled.

The line of questioning speaks to Mr. Dimon’s still considerable sway among lawmakers.

In recent years, Mr. Dimon has been a frequent visitor to Washington, as he aims to influence the discussion, particularly around financial regulation. JPMorgan spent more than $7.41 million on lobbying in 2010, which topped the industry, according to the research firm OpenSecrets.org.

Several bank lobbyists also have close ties to the committee. Kate Childress, a lobbyist who joined the bank in 2008, was previously an aide to Charles E. Schumer, the Democratic senator from New York and a member of the banking committee. Steven Patterson, also a JPMorgan lobbyist, used to be a staff director for economic policy for the Senate Banking Committee.

Mr. Dimon “has always been well regarded and had considerable clout,” said Tom Block, a former head of government relations at JPMorgan who has prepped senior executives in the past for Congressional hearings.

On Wednesday, Mr. Dimon seemed to placate some lawmakers instantly with the disclosure that the bank would “likely” seek to recover compensation from executives responsible for the trading loss. Once the bank’s board completes an investigation into what went wrong in the chief investment office, he said, the bank will decide whose paychecks to pursue.

“When the board finishes the review, you can expect we’ll take proper corrective action,” Mr. Dimon said.

While he did not specify executives who could face clawbacks, one potential person is Ina R. Drew, the former head of the chief investment unit. Ms. Drew, who resigned from the bank last month, earned about $14 million last year, making her among the bank’s highest paid employees.

JPMorgan, Mr. Dimon said, has broad authority to recoup pay. The bank, he said, can claw back compensation for “bad judgment” and other missteps. He described the firm’s ability to reclaim such money as “pretty extensive.”

He also disclosed for the first time that the positions, which have since caused at least $3 billion in losses, set off the bank’s own internal risk alarms in March, weeks before Mr. Dimon publicly played down the threat on a conference call with analysts. The revelation raises new questions about Mr. Dimon’s now-infamous statements on the April 13 conference call, when he said that concerns about the trades were a “complete tempest in a teapot.”

“Why were you willing to be so definitive?” asked Senator Tim Johnson, the South Dakota Democrat who leads the banking committee.

Mr. Dimon, striking a brief note of contrition, conceded, “It was dead wrong.”

In his testimony, Mr. Dimon offered support for some elements of Dodd-Frank, saying that the wind-down process for failed firms should be called “bankruptcy for big dumb banks.” He added that the names of fallen institutions “should be buried in disgrace,” calling it “Old Testament justice.”

But the banking chief faced off with some Democratic lawmakers, who seized upon the trading losses to bolster calls for tougher regulation of Wall Street.

One of the sorest points for Mr. Dimon centered on the Volcker Rule. JPMorgan has said that the trades in question were initially meant to serve as a hedge against risk, rather than a source of profit that would arguably be banned by new regulations.

Senator Robert Menendez, Democrat of New Jersey, set off a testy exchange with the banking executive, beginning by asking whether the hedge changed into “Russian roulette.” He sought to use Mr. Dimon’s previous statements against him, saying, “Your bank has been lobbying against the very guarantees that will protect the taxpayer.”

Mr. Dimon responded that JPMorgan had supported some elements of the new regulations, including higher capital reserve requirements.

He challenged another Democratic lawmaker, Senator Jeff Merkley of Oregon, who argued that JPMorgan was saved by the government’s bailout programs in 2008. Mr. Dimon has long argued that his firm took taxpayer money only reluctantly and that the bank would have survived without it.

“I think you are misinformed,” Mr. Dimon told Mr. Merkley. “You’re factually wrong.”

The senator responded, “Let’s agree to disagree.”

Jessica Silver-Greenberg contributed reporting.

Article source: http://dealbook.nytimes.com/2012/06/13/proud-jpmorgan-chief-apologizes/?partner=rss&emc=rss