Knocking Europe out of the spotlight for a few hours, JPMorgan (JPM) CEO Jamie Dimon testified before the Senate Banking Committee Wednesday.
The two-plus hours of testimony and Q&A generated plenty of headlines but left a lot of questions unanswered. The hearing also exposed many of our elected officials as timid. With the notable exceptions of Democrats Jeff Merkley (Oregon), Bob Menendez (NJ) and Jon Tester (MT), Senators were unwilling to really "grill" an executive whose firm has donated to all but to all but six of the committee's members, according to the Center for Responsive Politics.
Rather than holding Dimon's feet to the fire -- including when he incredulously claimed ignorance about the Volcker Rule -- several Senators stooped to asking the bank executive the best way to regulate banks.
"There was still a solicitous tone to a lot of the questioning which is pretty maddening considering all we've been through," says Jesse Eisinger, senior reporter at ProPublica.
In the headlines department, Dimon once again apologized -- "we have left a lot of people down and we are sorry for it" -- and took personal responsibility for the now infamous "London Whale" trades. Dimon also suggested there may be "clawbacks" of payments made to executives who worked in the Chief Investment Office (CIO) where the trade went awry.
"That shows JPMorgan is taking the consequences pretty seriously," Eisinger says. "Executives paid with their jobs, now they may pay with actual money."
Clawbacks would be a welcome development, especially if the CIO misled JPMorgan's senior managers and risk committee, as Dimon hinted may have been the case. That would likely include Ina Drew, the former head of the unit who Dimon said assured him that "this was an isolated small issue and that it wasn't a big problem."
The Kimono Stays Closed
But the hearing left many questions unanswered (and unasked), including the current size of losses JPMorgan has suffered. Dimon declined to answer specific questions about the size of the trade or how, in his own words, "this portfolio morphed into something that, rather than protect the firm, created new and potentially larger risks."
Questions also remain about when Dimon and other senior JPMorgan executives new about the size of the losses. The Wall Street Journal reports there were internal concerns at JPMorgan about the CIO office as far back as 2010. Nevertheless, "risk committee structures and processes in CIO were not as formal or robust as they should have been," as Dimon testified.
In separate but related news, it's still unclear why JPMorgan implemented a new measurement of value at risk (VAR) in January, which Dimon testified "did effectively increase the amount of risk this unit was able to take."
But most of the testimony veered away from the "what did you know and when did you know it" issues and focused more on the fate of banking regulation.
"We didn't learn much that was new," says Eisinger, who describes the hearing as alternatively "frustrating, maddening and comical."
While he does believe these losses at JPMorgan will ultimately lead to a strengthening of the so-called Volcker Rule, "frustrating, maddening and comical" pretty much sums up today's hearing.
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