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What was supposed to be an old-fashioned Congressional grilling of JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon over approximately $2 billion in losses on risky trades today quickly developed into a chance for Banking panel Senators to project their own interests in lieu of tough questions.
Republicans reiterated their dislike for the Wall Street reform law, enacted in 2010 largely without their assistance. Tea party champion Sen. Jim DeMint (S.C.) shrugged off the failed London-based credit derivative bets because, well, “We lose twice that every day here in Washington.” And almost every lawmaker, regardless of party, seemed to lob more praise at Dimon than sharp criticism.
Of course, Dimon has given $19,000 to Senate Banking Committee members in recent cycles. He also gave more than $55,000 to the Democratic Senatorial Campaign Committee in 2008 and $50,000 to President Barack Obama’s first inaugural committee, according to OpenSecrets.org.
In the two-hour hearing, Dimon reiterated that the actions that led to the massive losses were “isolated,” that he was sorry that they occurred and that the trading strategy implemented was neither “vetted” nor understood by the traders who implemented 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 told the panel. “This portfolio morphed into something that, rather than protect the firm, created new and potentially larger risks. As a result, we have let a lot of people down, and we are sorry for it.”
At the center of the policy debate was the so-called Volcker Rule — named after former Federal Reserve Chairman Paul Volcker — which is intended to prohibit banks or institutions that own banks from engaging in proprietary trading that is not on behalf of clients. Republicans, who believe less regulation is better for the financial industry, have long been critical of the policy. Democrats who support it currently are in a bind because the Dodd-Frank law left the specifics of its rules to be written by agencies that have seen their budgets slashed and operations debilitated by the loss in resources.
Because the rule has not yet been written, it is unclear whether it would have prevented the massive losses at JPMorgan from occurring. Regardless, Dimon himself does not believe in the rule’s merits.
“I think we’re really going to struggle to get it right,” Dimon said of the Volker Rule before adding, “I think it’s unnecessary.”