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| JP Morgan boss Jamie Dimon appears before Senate banking committee – live | JP Morgan boss Jamie Dimon appears before Senate banking committee – live |
| (40 minutes later) | |
| 10.51am: My Guardian colleague Dominic Rushe spots the big problem in these types of hearings – the politicians can ask tough questions but because they don't understand either their own questions or the answers, they can't respond. Hence a wily witness can get an easy ride: | |
| Senator Schumer is asking the big question: "What's to stop this happening again?" Were we just lucky to find out about this, what about non-banks that get in to trouble? Dimon dodges nicely with some stuff about how much better capitalised the banks are, a pat on the back for regulators "disseminating best practices" and examining the system and then he's off the hook. No follow up. | |
| 10.47am: Senator Mike Crapo of Idaho is asking about the Volker Rule and how it should be implemented. "The devil is in the detail," says Dimon, a blinding observation that has never been made in human history. | |
| What sort of hedges should be allowed, wonders Crapo. Ones that protect the bank, replies Dimon. See previous comment about the devil being in the detail. | |
| 10.45am: On the subject of clawbacks – taking pay back from employees – Dimon tells Schumer that he's a big fan: "We can clawback even for things like bad judgment." | |
| 10.42am: Senator Schumer wants to know why the bank's risk committee missed the London Whale. | |
| Dimon says it isn't fair for risk committee to be blamed for the losses. They couldn't have caught it, he maintains, and they were so awesome during the financial crisis that basically it wasn't humanly possible. (I paraphrase but only slightly.) | |
| 10.39am: Charles Schumer is now quizzing Dimon. He's a far sharper knife but he's also not nicknamed "the Senator for Wall Street" for nothing. | |
| 10.35am: Richard Shelby – sounding like a concerned family member – wonders if Jamie might be more comfortable talking to Uncle Richard behind closed doors. Dimon demurs but says he'll be more open to the bank's investors shortly. | |
| The bank's attempts to hedge "changed into something I cannot publicly defend," is Dimon's final word. Gently offered the chance to describe the lessons learned, Dimon says: "No matter how good you are, how good people are," things can go wrong. | |
| 10.32am: Richard Shelby gets to ask questions in his rich Alabama accent. "What really happened?" asks Shelby. This allows Dimon to discuss how long a piece of string may or may not be. | |
| JPM has around $150bn in cash today "invested in central banks around the world so we tend to be very conservative," says Dimon, although that tells us far more about the state of the international capital markets right now than an insight into JP Morgan investment strategy. | |
| 10.29am: Senator Johnson asks asks about the changes made to JP Morgan's vaunted risk model and oversight of the bank's chief investment office responsible for making the botched investments. | |
| "The CIO had done so well for so long that we got overconfident," says Dimon, which doesn't really answer the question except by saying "we were so awesome". | |
| The way people were paid didn't "make the problem worse," says Dimon. | |
| 10.26am: Tim Johnson is straight on to the London Whale "tempest in a teapot" remark of Dimon's. What was he thinking? | |
| "When I made that statement I was dead wrong," says Dimon, "I was travelling, I was on the road". Underlings told him it was a "small issue," says Dimon. So there we are. | |
| Dominic Rushe comments: | |
| Dimon must be wishing that he's never thrown out that "tempest in a teapot" comment. Johnson is asking some great questions about what he knew when and how he could be so blase about the risks being taken at the London office. He is pretty much sticking to the script, the bank was complacent, he didn't have the full picture. Nothing new yet. | |
| The new news is that he may clawback money from bankers after the bank works out exactly what went wrong. Ina Drew, who headed the unit that looked after London, was paid about $15m last year. | |
| 10.25am: The American Banker sums up the coverage of Dimon's prepared remarks: "Dimon to Apologize, Blame Underlings, Tell Senators to Stuff It," which sounds about right. | |
| Now it's question time. | |
| 10.20am: "Dimon under pressure" is the blazing headline on Bloomberg TV, which is running Dimon's testimony live, alongside a tasteful live chart of JP Morgan's share price. | |
| 10.18am: Richard Shelby, the ranking Republican member of the committee, uses his remarks to bash Freddie Mac and Fannie Mae, claiming that the government-sponsored enterprises lost $200bn, chicken feed compared to JPM's $2bn. The Republicans like to blame the two GSE's for somehow causing the housing market bubble and financial collapse, even though they didn't. | |
| Now Jamie Dimon takes centre-stage. | |
| 10.10am: Johnson's prepared remarks were as mentioned below. Meanwhile, here's my colleague Dominic Rushe's overview of today's testimony by Jamie Dimon, with some background of why Dimon is such a formidable figure on Wall Street: | 10.10am: Johnson's prepared remarks were as mentioned below. Meanwhile, here's my colleague Dominic Rushe's overview of today's testimony by Jamie Dimon, with some background of why Dimon is such a formidable figure on Wall Street: |
| JP Morgan's chief Jamie Dimon is probably the most remarkable banker of his generation. While rivals like Goldman Sach's Lloyd Blankfein became public enemy number one, Dimon deftly steered JP through a storm as political as it was financial. | JP Morgan's chief Jamie Dimon is probably the most remarkable banker of his generation. While rivals like Goldman Sach's Lloyd Blankfein became public enemy number one, Dimon deftly steered JP through a storm as political as it was financial. |
| Dimon emerged as the acceptable face of Wall Street and has used his kudos to argue – often heavy handedly – against tighter regulation of the financial industry. He called the new Basel III international banking rules "anti-American." He said Paul Volcker, former chairman of the Federal Reserve and author of a rule aimed at curbing bank risk, "doesn't understand capital markets." | Dimon emerged as the acceptable face of Wall Street and has used his kudos to argue – often heavy handedly – against tighter regulation of the financial industry. He called the new Basel III international banking rules "anti-American." He said Paul Volcker, former chairman of the Federal Reserve and author of a rule aimed at curbing bank risk, "doesn't understand capital markets." |
| Then his London office lost $2bn and counting on outsized risky bets on Europe and everything changed. Having successfully lobbied for the watering down of financial regulation, Dimon was now the prime example of why the rules needed to be beefed up. | Then his London office lost $2bn and counting on outsized risky bets on Europe and everything changed. Having successfully lobbied for the watering down of financial regulation, Dimon was now the prime example of why the rules needed to be beefed up. |
| In May President Obama told the hosts of The View that Dimon was "one of the smartest bankers we got." If JP Morgan could lose money like this, what about the rest of them? | In May President Obama told the hosts of The View that Dimon was "one of the smartest bankers we got." If JP Morgan could lose money like this, what about the rest of them? |
| This hearing may be about the London losses in principle but as Dimon will point out $2bn isn't a lot to JP Morgan. The bigger picture is about the regulation of Wall Street and what, if anything, has changed four years after the start of the worst financial crisis in living memory. | This hearing may be about the London losses in principle but as Dimon will point out $2bn isn't a lot to JP Morgan. The bigger picture is about the regulation of Wall Street and what, if anything, has changed four years after the start of the worst financial crisis in living memory. |
| 10.06am: Anyone wanting to follow Jamie Dimon's grilling from the comfort of their own computer can see the live stream here on the Senate committee's site. | 10.06am: Anyone wanting to follow Jamie Dimon's grilling from the comfort of their own computer can see the live stream here on the Senate committee's site. |
| 10.02am: A brief kerfuffle of protest as a few people wave small signs and chant "End foreclosures now" before they are shifted out of the room by Capitol Hill security. | 10.02am: A brief kerfuffle of protest as a few people wave small signs and chant "End foreclosures now" before they are shifted out of the room by Capitol Hill security. |
| The banking committee chairman Tim Johnson is now delivering his opening remarks. Those of you puzzled by Johnson's speech should know he suffered a massive stroke in 2006 and has since made a remarkable recovery. | The banking committee chairman Tim Johnson is now delivering his opening remarks. Those of you puzzled by Johnson's speech should know he suffered a massive stroke in 2006 and has since made a remarkable recovery. |
| Johnson points out that it was just two months ago today that Dimon, on JP Morgan's first-quarter conference call, referred to the "London Whale" derivatives trading position as a "tempest in a teapot," a comment Dimon is going to take a long time to live down. | |
| 10am ET: JP Morgan's chief executive Jamie Dimon faces congressional critics today when he appears before the Senate banking committee investigating the disastrous derivatives trading that led to billions of dollars of losses at the bank he has run since 2005. | 10am ET: JP Morgan's chief executive Jamie Dimon faces congressional critics today when he appears before the Senate banking committee investigating the disastrous derivatives trading that led to billions of dollars of losses at the bank he has run since 2005. |
| According to his already-released prepared testimony, Dimon will give an apology of sorts before the committee, saying: "We have let a lot of people down, and we are sorry for it. We will not make light of these losses, but they should be put into perspective. 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." | According to his already-released prepared testimony, Dimon will give an apology of sorts before the committee, saying: "We have let a lot of people down, and we are sorry for it. We will not make light of these losses, but they should be put into perspective. 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's appearance comes after JP Morgan last month revealed $2bn in losses from a string of high-risk trading in derivatives, the complex financial market. For a bank that has boasted of its stringent internal rules and safeguards, JP Morgan's trading losses reopened the controversy of Wall Street regulation that has swirled since the calamities of 2007 and 2008 that led to the financial market turmoil and recession. | Dimon's appearance comes after JP Morgan last month revealed $2bn in losses from a string of high-risk trading in derivatives, the complex financial market. For a bank that has boasted of its stringent internal rules and safeguards, JP Morgan's trading losses reopened the controversy of Wall Street regulation that has swirled since the calamities of 2007 and 2008 that led to the financial market turmoil and recession. |
| In particular, the bank's failure of risk management raises serious questions about the financial regulations proposed and implemented since 2008, including the Dodd-Frank regulations put in place in 2010 and the "Volcker Rule" to restrict banks trading with their own funds, as was the case with JP Morgan. | In particular, the bank's failure of risk management raises serious questions about the financial regulations proposed and implemented since 2008, including the Dodd-Frank regulations put in place in 2010 and the "Volcker Rule" to restrict banks trading with their own funds, as was the case with JP Morgan. |
| In his written testimony, Dimon argues that the bank's $350bn portfolio is managed appropriately managed by the bank's chief investment office but he will the derivatives trades that caused the losses were "poorly conceived and vetted." | In his written testimony, Dimon argues that the bank's $350bn portfolio is managed appropriately managed by the bank's chief investment office but he will the derivatives trades that caused the losses were "poorly conceived and vetted." |
| The senators on the banking committee are likely to sniff blood. Tim Johnson, the Democrat who chairs the committee, says in his released remarks that JP Morgan's losses show "an out-of-control trading strategy with little to no risk controls that cost the company billions of dollars." | The senators on the banking committee are likely to sniff blood. Tim Johnson, the Democrat who chairs the committee, says in his released remarks that JP Morgan's losses show "an out-of-control trading strategy with little to no risk controls that cost the company billions of dollars." |
| Johnson's remarks indicate the questioning the committee is likely to follow: | Johnson's remarks indicate the questioning the committee is likely to follow: |
| So what went wrong? For a bank renowned for its risk management, where were the risk controls? How can a bank take on 'far too much risk' if the point of the trades was to reduce risk in the first place? Or was the goal really to make money? Should any hedge result in billions of dollars of net gains or losses, or should it be focused solely on reducing a bank's risks? As the saying goes, you can't have your cake and eat it, too. | So what went wrong? For a bank renowned for its risk management, where were the risk controls? How can a bank take on 'far too much risk' if the point of the trades was to reduce risk in the first place? Or was the goal really to make money? Should any hedge result in billions of dollars of net gains or losses, or should it be focused solely on reducing a bank's risks? As the saying goes, you can't have your cake and eat it, too. |
| What we'll see is Dimon attempting to show contrition while defending his bank as reliable money managers and fending off calls for further regulation, especially the Volcker Rule. | What we'll see is Dimon attempting to show contrition while defending his bank as reliable money managers and fending off calls for further regulation, especially the Volcker Rule. |