Dimon testifies at Senate committee
Jamie Dimon, chairman of the board, president and CEO of JPMorgan Chase & Co. arrives to testify before a U.S. Senate Banking Committee full committee hearingto explain a recent $2 billion trading loss. (Karen Bleier / June 13, 2012)
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Reuters
2:17 p.m. CDT, June 13, 2012

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.

The Senate Banking Committee was mostly gentle with the polished and relaxed banker at Wednesday's hearing, and did not force him to reveal whether the estimated $2 billion loss has significantly swelled.

Dimon apologized for the self-inflicted loss that he said started as a genuine hedge that would make the firm a lot of money if a credit crisis hit.

Lawmakers have questioned whether the trades were truly a hedge or a speculative bet that was hidden from shareholders and regulators.

"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."

But Dimon was not so chastened that he backed off of his long-standing criticism of Washington reforms.

The 2010 Dodd-Frank financial oversight law, he said, has produced a swarm of uncoordinated regulators, and he warned policymakers that they must smartly craft the Volcker rule that will ban banks from making speculative bets with their own money.

Dimon said Washington must not overreact to JPMorgan's trading loss and create such narrow exemptions that it hurts financial markets.

"We have the widest, deepest, and best capital markets in the world. It would be a shame to shed that out of anger."

Michael Robinson, executive vice president at Levick Strategic Communications in Washington, said that Dimon was wisely apologetic about the trading loss and also held his ground during a few moments of tough questioning.

"Jamie Dimon tip-toed through the minefield and came out the other side. That's a victory." Robinson said.

Shares of JPMorgan, the largest U.S. bank by assets, appeared to get a boost from Dimon's appearance. In afternoon trading the stock was up 2 percent, outperforming the 0.3 percent rise in the KBW Bank Index.

The hearing got off to a rocky start, however, when a handful of protesters yelled out "Jamie Dimon is a crook" and "stop foreclosures now" before being escorted out of the cavernous hearing room.

'DEAD WRONG'

Dimon revealed during a surprise conference call last month that a hedging strategy in its London office had gone awry, producing at least $2 billion, and possibly $3 billion, in trading losses.

That was after Dimon in April dismissed as a "tempest in a teapot" news reports that Bruno Iksil, a trader dubbed the "London whale", had amassed an outsized position that prompted hedge funds to bet against it.

Dimon said he made that statement after senior executives and risk managers told him they thought any problems in the London Chief Investment Office were an isolated, small issue.

"When I made that statement, I was dead wrong," Dimon said.

The trading loss has renewed focus after the 2007-2009 financial crisis on whether big banks are too big to manage and has made some nostalgic for the repealed Glass-Steagall Act that separated commercial banking from more risky activities.