JPMorgan Chase CEO, Jamie Dimon, has agreed to testify in June before the Senate. He’s expected to explain the massive $2 billion loss. Other investigations continue.
Tighten Rules by Lenders
As Dimon agrees to testify, many lawmakers are now considering whether tightening regulations is in order. Still, others insist had the laws been in place that have already been written, the entire episode wouldn’t have happened in the first place. The controversy has to do with certain areas of the 2009 CARD Act that would have alerted officials ahead of time and therefore, would have prevented it. Dimon and others in his camp say these regulations are too restrictive.
Open and Transparent
A spokeswoman for JPMorgan, Jennifer Zuccarelli, said
As always, we will continue to be open and transparent with our regulators and Congress.
She is the one who confirmed Dimon’s plan to testify.The New York-based lender is the largest in the U.S. by assets.
Both JPMorgan and federal regulators are facing growing pressure to explain how the $2 billion loss happened, even as lawmakers continue to bicker over that area of the CARD Act, the Dodd-Frank regulatory overhaul. It was supposed to be in place more than a year ago but was held up by Dimon and others. There is one specific area, the Volcker Rule, that must be completed – again, it’s important to keep in mind it’s been held up in the past by not only JPMorgan, but Bank of America, Morgan Stanely, US Bancorp and several other fat banks.
If this isn’t enough to inspire change, consumers are going to be more than slightly bothered since it’s definitive proof that change is long overdue. Dimon’s already stated that even if the Volcker Rule had been in place, it wouldn’t have prevented this loss. He also explains that the bank was simply trying to hedge risky assets, but that it evolved into something else. That “something else” doubled the risk. Ideally, these clarifications will be made by the time he parks it in front of Congress.
The JPMorgan loss was announced on May 10 by Dimon. He called his bank’s handling of the problem “flawed, complex, poorly reviewed, poorly executed and poorly monitored.” He goes on to explain that even as regulators continue to brief the government, “our due diligence has made it clear that the Banking Committee should hear directly from JPMorgan Chase.” That falls to CEO Jamie Dimon to appear.
The decision to invite Dimon came after joint briefings with federal regulators and JPMorgan and comes as Congress increases scrutiny, with at least one Republican senator calling for Dimon to claw back pay from employees responsible for the losses. Senate Democrats are using the disclosure to bolster their case for tighter restrictions on proprietary trading.
Some are calling on Dimon to resign. That’s likely not going to happen; however, if history is true to form, there are bound to be the proverbial heads that will roll.
Dimon serves on several national banking boards and to date, they are supporting Dimon and the bank, even as the scandal widens.
So what will Dimon’s appearance and the overall picture look like? “Expect to be entertained”, said one analyst. Others predict he will be coddled while still others insist the days of babysitting overpaid and entitled bank executives are over. The only thing anyone’s sure of it that we’ll find out next month.
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