JPMorgan Chase & Co Chief Executive Jamie Dimon told lawmakers that he could not defend how a hedging strategy in a London office morphed into a multibillion-dollar trading loss,but he still took swipes at regulatory reforms that he said fail to make sense.
This particular synthetic credit portfolio was intended to earn a lot of revenue if there was a crisis. I consider that a hedge, Dimon said. What it morphed into,I will not try to defend.
Dimon also said regulators were not to blame for not detecting that the failed hedging strategy,that started in January,was blowing up. He said the banks senior management missed it as well. But he did say that the 2010 Dodd-Frank financial oversight law,put in place to rein in banks risk-taking after the 2007-2009 financial crisis,created a bewildering new regulatory system.
Senators did not immediately demand an update on the losses in the portfolio,which JPMorgan is still unwinding. The bank is expected to give an update to shareholders in its mid-July second-quarter results . Dimon did say that the banks fortress balance sheet remains intact and that he expects the second quarter to be solidly profitable.
Senators Robert Menendez and Jeff Merkley seized upon Dimons comments reminding him that JPMorgan received $25 billion in federal support and assistance from the Troubled Asset Relief Program during the financial crisis. Dimon said the risk model put in place in January allowed the CIO unit to take more risk,and it contributed to the trading debacle,but went back to the old model as the new model did not work.
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