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<span class="timestamp published" title="2012-06-19T21:13:58+00:00">June 19, 2012, <span>9:13 pm</span></span>
<h3 class="entry-title">Dimon, Testifying Before House, Stays on Message</h3>
<address class="byline author vcard">By <a href="http://dealbook.nytimes.com/author/jessica-silver-greenberg/" class="url fn" title="See all posts by JESSICA SILVER-GREENBERG">JESSICA SILVER-GREENBERG</a>, <a href="http://dealbook.nytimes.com/author/ben-protess/" class="url fn" title="See all posts by BEN PROTESS">BEN PROTESS</a> <span>and</span> <a href="http://dealbook.nytimes.com/author/michael-de-la-merced/" class="url fn" title="See all posts by MICHAEL J. DE LA MERCED">MICHAEL J. DE LA MERCED</a></address>
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<p>WASHINGTON - Jamie Dimon, the chief executive of <a href="http://dealbook.on.nytimes.com/public/overview?symbol=JPM&inline=nyt-org">JPMorgan Chase</a>,
tussled with lawmakers on Tuesday in his second showdown in Washington
since JPMorgan, the nation's largest bank, disclosed a
multibillion-dollar trading loss.</p><p>At a hearing of the House
Financial Services Committee, members peppered Mr. Dimon, once
considered Washington's favorite banker, with pointed questions about
the bank's aggressive lobbying, its failures in risk management and its
focus on complex bets in the credit markets instead of lending.</p><p>Unlike
their Senate counterparts, who accorded Mr. Dimon more deferential
treatment last week, House lawmakers demanded answers. At one point,
Representative <a href="http://topics.nytimes.com/top/reference/timestopics/people/f/barney_frank/index.html?inline=nyt-per">Barney Frank</a>,
the Massachusetts Democrat who helped write the Dodd-Frank financial
regulatory overhaul, told Mr. Dimon to "stop filibustering" and said
that he was frankly "disappointed" with some of the banker's answers.</p><p>The
hearing was the latest chapter of the trading debacle, which has drawn
new cries from lawmakers for tougher oversight of the nation's banks and
spurred wide-ranging inquiries by regulators and the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_bureau_of_investigation/index.html?inline=nyt-org">Federal Bureau of Investigation</a>.</p>
<p>Revealing the most among her counterparts about those investigations, <a href="http://topics.nytimes.com/top/reference/timestopics/people/s/mary_l_schapiro/index.html?inline=nyt-per">Mary L. Schapiro</a>, the chairwoman of the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org">Securities and Exchange Commission</a>,
told the panel in a session ahead of Mr. Dimon's testimony that the
agency was focused on whether the bank was forthcoming with investors.</p><p>Mr. Dimon said, "We disclosed what we knew when we knew it."</p><p>He
sought Tuesday to fend off implications that he misled investors on a
now-infamous April 13 conference call, when he dismissed reports of
potentially risky trading in the credit markets as a "tempest in a
teapot."</p><p>Mr. Dimon offered scant new details about the size of the trading losses. At one point during the hearing, Representative <a href="http://topics.nytimes.com/top/reference/timestopics/people/m/carolyn_b_maloney/index.html?inline=nyt-per">Carolyn B. Maloney</a>,
Democrat of New York, seemed to snare Mr. Dimon with questions about
when he understood the full extent of the losses. After briefly speaking
with his general counsel, seated behind him, Mr. Dimon said that he had
no idea about the full extent of the losses until late April.</p><p>But
in a later exchange with Representative Randy Neugebauer, Republican of
Texas, Mr. Dimon admitted knowing that on April 10 the bank had a $300
million loss from the position, raising questions about his disclosures
at the time.</p><p>"That's a pretty big pop, even in your organization," the congressman said.</p><p>Democratic
House members grilled Mr. Dimon about the bank's aggressive lobbying in
Washington, which was specifically aimed at watering down the <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/v/volcker_rule/index.html?inline=nyt-classifier">Volcker Rule</a> that would ban banks from making bets with their own money.</p>
<p>A
frequent visitor to Washington, Mr. Dimon defended the bank's right to
influence lawmakers. "Lobbying is a constitutional right and we have a
right to have our voice heard," Mr. Dimon said.</p><p>Even as he
apologized for the trading blunder, which was made in the bank's chief
investment office and has grown to at least $3 billion, Mr. Dimon
emphasized that the loss was an "isolated incident." As in the Senate
hearing, he said the unit's London office "embarked on a complex
strategy" that became an indefensible position that created greater
risks. He reiterated that the bank "let a lot of people down, and we are
sorry for it."</p><p>Many of the committee members were not appeased.</p><p>Mr.
Frank, for instance, asked Mr. Dimon twice whether his own
compensation, which stood at $23 million last year, would be clawed back
by the board.</p><p>Mr. Dimon said that was up to the directors.</p><p>Several
House members focused on why the bank put billions of dollars into
risky trading rather than use that cash to make more loans to small- and
medium-size businesses. If the bank made more loans, several lawmakers
argued, the chief investment office that housed more than $300 billion -
the difference between the bank's broad deposit base and the loans
extended - could have dodged losses.</p><p>In his prepared statement,
Mr. Dimon said the bank was focused on serving clients and had made $116
billion in loans to midsize companies, up 16 percent from the same
period a year ago. Both Mr. Frank and Representative <a href="http://topics.nytimes.com/top/reference/timestopics/people/w/maxine_waters/index.html?inline=nyt-per">Maxine Waters</a>,
Democrat of California, highlighted the soured trades made by the
London office as further evidence that all trading should be subject to
rules being determined in Washington. Along with industry rivals, Mr.
Dimon has long countered that trades booked offshore should be exempt,
arguing that such demands would hamper the nation's banks in competing
abroad.</p><p>Throughout the hearing, a bipartisan chorus pressed Mr.
Dimon about the size of JPMorgan, demanding to know if it was too big to
fail. Representative Sean Duffy, Republican of Wisconsin, focused on
Mr. Dimon's own failure to spot the troubled bet as evidence that the
bank's risk-taking was too unwieldy.</p><p>"No, we're not too big to
fail," Mr. Dimon said. But if the bank did fail, he said, any losses
should be charged back to the financial system, not shouldered by
taxpayers.</p><p>Asked by Mr. Duffy whether it was possible for JPMorgan
to suffer a trillion-dollar loss, Mr. Dimon responded, not "unless the
Earth is hit by the moon."</p><p>Mr. Dimon said that there should be
specific limits on the types of trades that failed. In this case,
however, he said, not enough limits were erected.</p><p>Earlier Tuesday, lawmakers pushed a panel of the bank's five regulators on how they missed the increasingly risky trades.</p><p>"Even
with the matrix of communication, no one was catching it,"
Representative Shelley Moore Capito, Republican of West Virginia, said.
"Is the communication really working?"</p><p>The officials acknowledged that their agencies were unaware of the losses until news media reports in early April.</p><p>Thomas
J. Curry, comptroller of the currency, said his office was "initially
relying on the information available to the bank." Scott Alvarez, the
general counsel of the Federal Reserve, concurred, noting that, "We have
to rely on information we get from the organization itself." If that is
flawed, he added, then regulators will have a problem.</p><p><a href="http://topics.nytimes.com/top/reference/timestopics/people/g/gary_g_gensler/index.html?inline=nyt-per">Gary Gensler</a>, chairman of the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/c/commodity_futures_trading_commission/index.html?inline=nyt-org">Commodity Futures Trading Commission</a>,
underscored how the trading loss had broader implications for potential
rules that would apply to the global financial system. He said that by
placing the risky trades in London, JPMorgan's bets escaped the view of
American regulators. Mr. Gensler said he hoped to close that gap soon,
so that Wall Street would have "rules of the road."</p><p>Mr. Frank and
Republicans traded barbs over Dodd-Frank throughout the hearing, with
some blaming it for allowing trading losses like that at JPMorgan.</p><p>"You
can see we're not ready to break into a kumbaya," Representative
Spencer Bachus, an Alabama Republican and the committee's chairman, told
the regulators in a moment of levity. "Welcome to the serenity of the
Financial Services Committee."<br clear="all"></p></div></div></div><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br><img src="http://users.moscow.com/waf/WP%20Fox%2001.jpg"><br>
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