JPMorgan Chase CEO Jamie Dimon testified on Capitol Hill Wednesday for the first time since his bank lost up to $3 billion in a risky speculative bet. Dimon apologized for the loss but failed to explain how the money was actually lost. He also continued his voice his opposition to new banking regulations. During the hearing, Dimon was repeatedly confronted by protesters.
Jamie Dimons warm welcome did not come as a surprise to many on Capitol Hill. JPMorgan spent $7.6 million on lobbying last year. According to the watchdog group Open Secrets, Dimon has a long record of contributing campaign donations to lawmakers on the Senate Banking Committee. Recipients have included committee chair Tim Johnson; Democrat Mark Warner; the top Republican on the committee, Richard Shelby; and Bob Corker. Meanwhile, at least one current staffer on the Senate Banking Committee is a former lobbyist for JPMorgan Chase, and at least five former committee staffers now work at JPMorgan.
While JPMorgan CEO Jamie Dimon apologized for the banks recent $3 billion loss, he failed to say how the money was lost.
Nomi Prins talking:
Why was Jamie Dimon called to speak before, testify before the Senate Banking Committee?
as we just heard, apparently, from one senator, he wasnt called to sit there and be judged for the loss, how it was created, how he felt sorry but unaccountable for its creation. So that didnt seem to be the purpose for a lot of the senators there. What did seem to be an overriding purpose for this hearing was a judgment on regulation of the industry, where Jamie Dimon was sort of used as the pin for the senators that were talking about the need to not further regulate or more harshly regulate the banking industry, to which he of course falls very neatly in line, and the ones that sort of were talking about regulating it, but not so much. You know, as you mentioned in the read-up, there really wasnt a lot of grilling in this particular hearing. I thought it was the tamestand there have been very tame oneshearing for any of the bank leaders since the crisis began in 2008.
Senator Sherrod Brown, Democrat of Ohio, asking Dimon how much regulators at the OCC, the Office of Comptroller of the Currency, knew about the risky investments that led to JPMorgan Chases loss.
Its this chicken-and-egg thing with regulators. And actually, throughout his testimony, he was very admissive of regulators doing anything. But he basically said, “Look, we misinformed them because we were misinformed.” And the use of the word “we” kind of indicates a general “we.” You know, on the one hand, hes sorry. You know, “I am sorry.” Jamie Dimon is sorry. On the other hand, “we sort of collectively didnt really know, and then we did know, and when we did know, we told the regulators,” and so forth. First of all, its the regulators job. This was 20 percent of the firms assets. Twenty percent of the largest bank in the worlds assets were tied up in these trades. Youre not allowed to, as a regulator, not know, not ask every single day, hour, whatever, what is going on in that trade. So that was definitely a fault of the regulators.
But on the side of Chase, yes, we dont knowand thats sort of what he admitted, without wanting to admit itwhat was really going on as that trade was going wrong. And again, the trade was a substantial portion of the assets of the firm. It was not a little trade that blew up. It was not something that, you know, he calls a mistake. It was a dedicated transaction, which he did not explain yesterday, for which, in a derivatives way, in something called a synthetic derivatives way, which is the most risky way of putting on the trade they were putting on, the position that they were taking, as we are seeing, they basically lost money by betting that North American corporate credits were going to improve over that period of time, and they did not. And the way that they bet that was a very expensive and risky way to do it. So, for Jamie Dimon to indicate that he kind of didnt know until he did know is notit cannot be true.
Seneters:
SEN. JEFF MERKLEY: In 2008, 2009, your company benefited from half-a-trillion dollars in low-cost federal loans, $25 billion in TARP loans, of TARP funds, untold billions indirectly through the bailout of AIG that helped address your massive exposure in repurchase agreements and derivatives. With all of that in mind, wouldnt JPMorgan have gone down without the massive federal intervention, both directly and indirectly, in 2008 or 2009?
first of all, it should be noted that Senator Merkley is not one of the recipients of JPMorgan Chases campaign contributions, so that gave him, I think, the latitude, which we need from our senators, in asking these kind of questions, number one.
Number two, this has been the myth that Jamie Dimon has perpetuated from the get-go, that JPMorgan Chase was the only bank that was somehow isolated from the interrelationship of all of the subprime assets that were basically toxically created and fraudulently distributed through the global investor community on the backs of subprime loans that were basically extracted from individuals throughout the country and that somehow they were the only bank that was clean on this. In other words, it would not have suffered any losses, any negativity, had there not been any form of bailout or guarantees from the United States government.
Thetwo points on that. First of all, he wasnt separate from the New York Fed. You know, Tim Geithner was not someone kind of separate from him. Jamie Dimon, then and now, was and is a Class A director of the New York Fed, so he is the New York Fed in a lot of instances.
But on a wider point, JPMorgan Chase benefited from two very big things that Senator Merkley didnt even mention, which was that they achieved an acquisition of Bear Stearns, for which the government is still backing to the tune of $29 billion of guarantees for the assets in that acquisition, and it received some very favorable terms, and in negotiations, to acquire Washington Mutual. So, the result of that entire period was for JPMorgan to have emerged, by the help of so many things that Merkley mentioned as well as the two things I have just mentioned, to become the largest bank in the United States. So for him to sit there and say, “You know what? No, this was all just because I was really good, and it wasI was taking one for the team on Wall Street; otherwiseyou know, they arm-twisted me. You know, they had a gun to my head. I couldnt help it; I had to take the money,” is absolutely ridiculous.
relationship between people connected to JPMorgan Chase and these Senate and House committees. For instance, Kate Childress, a JPMorgan lobbyist since 2008, was also a former aide to Chuck Schumer, who sits on the Banking Committee. Youve got Mel Martinez, who was a senator in the United States, is now the JPMorgan Chase executive in charge of Florida, Central America and the Caribbean. Youve got P. Michael Nielsen, a lobbyist with a firm run by former Senator Bob Bennett, who was also on the Banking Committee. Hes been retained by JPMorgan for help with federal probes. And it goes on and on.
What we saw yesterday was a glimpse of how that lobbying money, as well as additional campaign money, and in many meetings and phone calls throughout the entire process, which we dont even really quantify in those terms but have a tremendous impact on regulations and on how the industry is viewed and how particular members of it, certainly the larger ones like JPMorgan Chase, are viewed and the power that they have within the Senate and, therefore, with respect to regulation of their own industry. And the fact that there is a revolving door is very much intrinsic to the problem there. Youve got an industry wherebefore, JPMorgan was talking about effectively policing himself, you know, regulators not knowing until we told them, and when we did, you know, and all of that. You know, we have a Senate Banking Committee thats comprised, except for six members, actually, of people who have gotten contributions in some manner from JPMorgan Chase. You know, we have lobbyists who are going back and forth. Chuck Schumer is an example of someone who asked incredibly tepid questions yesterday. One of the things he said, I think, was, “Well, you know, shareholders lost some money, but taxpayers didnt.” And then he kind of proceeded to tag a question onto that, which was very, very light-handed. And so, these people really protect, on the side of Washington, the relationships with JPMorgan Chase. They go and work there within the Senate Banking Committee.
And they write their own rules. And thats partly why we have no real structural regulation of the industry. We have detailed regulation. We have reports that have to be filled out by the bank, when they want to fill out and with the information they choose to provide. You have regulators running around the offices of these banks. But in terms of real structural change and regulation to make these banks smaller, to make them more accountable, to separate, you know, the deposits and loans of individuals from these types of trades that can go on in a chief investment office and lose billions of dollars, or even make billions of dollars, but have that kind of risk swing, is all because of the relationships, the monetary relationships and revolving door between the banking industry and the banking regulations.
Michael Bennet, the Democrat from Colorado, received $2.5 million; Robert Menendez, Democrat from New Jersey, $2.3 million; Charles Schumer, Democrat of New York, who you were just talking about, $5.6 million; Richard Shelby, Republican of Alabama, $2.5 million; Bob Corker, Republican of Tennessee, $3.4 million; Roger Wicker, Republican in Mississippi, $1.5 million. And we could go on.
this is why theres no line between legislators and bankers. And beyond the millions of dollars that they are getting to run their campaigns and to stay in office or to get elected into office and so forth, theres also all the sort of additional value that is received by the fact that JPMorgan Chase actually is giving them money, because if one bank is giving them money, its not the only bank giving them money, its the entire industry. And were looking at a piece of it through, you know, the largest and most powerful commercial bank in the United States, but this is the way it works. And these people know that partially why they are sitting there in those seats is, unfortunately, not because they were simply voted in, but because they had the money to basically market themselves and stay in and connect to their real friends, which are the banking community theyre supposed to be legislating against.
Nomi Prins, former investment banker who worked on Wall Street as a managing director at Goldman Sachs and ran the international analytics group at Bear Stearns in London, author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street and Other Peoples Money: The Corporate Mugging of America. Her latest book is Black Tuesday, a novel about corruption and romance surrounding the 1929 stock market crash
– source democracynow.org