Dimon: JPMorgan trusted risk models before loss

Jamie Dimon, CEO of JPMor­gan Chase, tes­ti­fies before the House Finan­cial Ser­vices Com­mit­tee on Capi­tol Hill in Wash­ing­ton Tues­day. (Asso­ci­ated Press | Jacque­lyn Martin)

MARCY GORDON

AP Busi­ness Writer

WASHINGTON — JPMor­gan Chase CEO Jamie Dimon says the bank did its best to fully inform investors about its risk strat­egy sev­eral weeks before it suf­fered a $2 billion-plus trad­ing loss.

Dimon told the House Finan­cial Ser­vices Com­mit­tee Tues­day that the bank trusted its meth­ods for assess­ing risk and that the mod­els used pro­vided the best infor­ma­tion at the time. The risk mod­els are fre­quently updated, he said.

“We dis­closed what we knew when we knew it,” Dimon told the panel.

The Secu­ri­ties and Exchange Com­mis­sion is exam­in­ing whether JPMorgan’s earn­ings report on April 13 gave ade­quate infor­ma­tion on the risk model the bank was using.

Ear­lier at the hear­ing, SEC Chair­man Mary Schapiro told the panel “there could be” vio­la­tions that would merit legal sanc­tions against the bank.

Dimon apol­o­gized again for the trad­ing loss and the dam­age it caused to share­hold­ers. The com­pany has lost about $23 bil­lion in mar­ket value since it came to light on May 10.

But Dimon stressed that tax­pay­ers and cus­tomers of the bank were not affected by the loss.

The tone of the hear­ing was more com­bat­ive than when Dimon appeared last week before the Sen­ate Bank­ing Committee.

Dimon was pressed by four Democ­rats about the bank’s trad­ing oper­a­tion in Lon­don, where the loss occurred. Rep. Brad Sher­man, D-Calif, asked why the bank devoted hun­dreds of bil­lions of dol­lars to that oper­a­tion when that money could go have gone to small busi­ness loans in the U.S.

“We never stopped mak­ing loans,” Dimon insisted.

He also defended an exemp­tion that allows looser over­sight of the sort of deriv­a­tives trad­ing over­seas that the Lon­don oper­a­tion engages in.

Cus­tomers “will go else­where if we can’t give them the best pos­si­ble deal,” Dimon said. “The main mis­sion of this com­pany is to serve clients around the world.”

Rep. Shel­ley Moore Capito, R-W.Va., used the hear­ing to crit­i­cize reg­u­la­tors for fail­ing to detect the risks the bank was tak­ing before suf­fer­ing the loss.

“We need more infor­ma­tion about the level of information-sharing among the agen­cies and how five agen­cies with a com­bined 100 or more per­son­nel super­vis­ing JPMor­gan at the time did not know about the sub­stan­tial size and risk of these trades,” said Capito.

Dimon defended the reg­u­la­tors. He said that if bank couldn’t detect the risks, it’s unrea­son­able to expect that the reg­u­la­tors could.

Posted by AP News on Jun 19 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.