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JP Morgan crisis: Obama backs tougher Wall Street regulation JP Morgan crisis: Obama backs tougher Wall Street regulation
(about 4 hours later)
President Obama has said JP Morgan Chase $2bn (£1.2bn) trading loss demonstrates the need for tighter financial services regulation, amid reports that Ina Drew, the bank's departing chief investment officer, is walking away with a $32m payout. President Obama has said JP Morgan Chase's $2bn (£1.2bn) trading loss demonstrates the need for tighter financial services regulation, amid reports that Ina Drew, the bank's departing chief investment officer, is walking away with a $32m payout.
Obama said the losses at JP Morgan were so big that the US government might have had to step in if the trading blunders had happened at a smaller institution, where they could have prompted a bank run.Obama said the losses at JP Morgan were so big that the US government might have had to step in if the trading blunders had happened at a smaller institution, where they could have prompted a bank run.
News of the losses wiped more than $19bn off JP Morgan's market value in just two days, renewing concerns about whether Wall Street's giants really are "too big to fail".News of the losses wiped more than $19bn off JP Morgan's market value in just two days, renewing concerns about whether Wall Street's giants really are "too big to fail".
"This is the best, or one of the best managed banks. You could have a bank that isn't as strong, isn't as profitable making those same bets and we might have had to step in. That's exactly why Wall Street reform's so important," Obama said in an interview that will be broadcast on US TV later on Tuesday. "Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2 billion and counting, precisely because they were making bets in these derivative markets." "This is the best, or one of the best managed, banks. You could have a bank that isn't as strong, isn't as profitable making those same bets and we might have had to step in. That's exactly why Wall Street reform's so important," Obama said in an interview for ABC's The View that will be broadcast on US TV later on Tuesday. "Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2bn and counting, precisely because they were making bets in these derivative markets.
Obama said the crisis at JP Morgan clearly showed "why Wall Street reform is so important". "Keep in mind if we get all the rules that we proposed and were passed by Congress implemented into law, it should prevent this kind of stuff from happening. But this, again, is going to be part of what the election is about. We've got real differences here, because Governor Romney, members – some of the Republican members of Congress and the financial industry have been arguing that this is unnecessary, that this is impeding capital formation."
"Keep in mind if we get all the rules that we proposed and were passed by Congress implemented into law, it should prevent this kind of stuff from happening," he said in a recorded interview with ABC's The View. "But this, again, is going to be part of what the election is about. We've got real differences here, because Governor Romney, members - some of the Republican members of Congress and the financial industry have been arguing that this is unnecessary, that this is impeding capital formation."
Obama comments come after Ina Drew, a 30-year veteran of JP Morgan and one of Wall Street's most senior female bankers, quit as the bank fought to contain the massive losses at its London operation. According to reports overnight, Drew holds a share award worth more than $16m. In addition, Drew also holds unexercised options valued at $3.44m, retirement benefits worth around $2.63m and a $9.87m deferred compensation pot.Obama comments come after Ina Drew, a 30-year veteran of JP Morgan and one of Wall Street's most senior female bankers, quit as the bank fought to contain the massive losses at its London operation. According to reports overnight, Drew holds a share award worth more than $16m. In addition, Drew also holds unexercised options valued at $3.44m, retirement benefits worth around $2.63m and a $9.87m deferred compensation pot.
Jamie Dimon, JP Morgan's chairman and chief executive, said on Sunday there was "no excuse" for the disastrous series of bets it made under the guidance of Drew. Later on Tuesday Dimon will face angry shareholders who want him to step down as chairman. Dimon, JP Morgan's chairman and chief executive, said on Sunday there was "no excuse" for the disastrous series of bets it made under the guidance of Drew. Later on Tuesday Dimon will face angry shareholders who want him to step down as chairman.
A White House spokesman said the losses reinforced the importance of Wall Street reform and lambasted Republican presidential candidate Mitt Romney for demanding the repeal of the 2010 Dodd-Frank financial reform legislation.A White House spokesman said the losses reinforced the importance of Wall Street reform and lambasted Republican presidential candidate Mitt Romney for demanding the repeal of the 2010 Dodd-Frank financial reform legislation.
Barney Frank, co-author of the act, said the fiasco showed how important it is. "It shows how wrong he is in arguing that the legislation is not needed," he told the Guardian. "This isn't a stupid mistake at some poorly run company. It's not some outlier like Countrywide [the fallen subprime mortgage giant]. Dimon is a very able guy. But even in a well-run institution things like this can happen." Barney Frank, co-author of the act, said the fiasco showed how important it is. "It shows how wrong he is in arguing that the legislation is not needed," he told the Guardian. "This isn't a stupid mistake at some poorly run company. It's not some outlier like Countrywide [the fallen sub-prime mortgage giant]. Dimon is a very able guy. But even in a well-run institution things like this can happen."
Drew was one of the bank's highest-paid staff, earning more than $31m in the past two years. Among her responsibilities as chief investment officer (CIO), she oversaw the bank's London offices and the strategy that led to trader Bruno Iksil becoming known as the London Whale for the huge positions he was taking.Drew was one of the bank's highest-paid staff, earning more than $31m in the past two years. Among her responsibilities as chief investment officer (CIO), she oversaw the bank's London offices and the strategy that led to trader Bruno Iksil becoming known as the London Whale for the huge positions he was taking.
Obama's interview was recorded on Monday as the president raised cash for his reelection campaign at the New York apartment of Tony James, the president of private equity firm Blackstone Group. Obama's interview was recorded on Monday as the president raised cash for his reelection campaign at the New York apartment of Tony James, head of private equity firm Blackstone Group.
At the fundraising event, which 60 donors had paid $35,800 each to attend, Obama warned that Congress would not provide another bailout if banks faced another credit crisis, according to a Bloomberg source at the swanky gathering.At the fundraising event, which 60 donors had paid $35,800 each to attend, Obama warned that Congress would not provide another bailout if banks faced another credit crisis, according to a Bloomberg source at the swanky gathering.