DIMON: I WAS DEAD WRONG
In an extraordinary mea culpa, JP Morgan chief executive Jamie Dimon said yesterday that he had been “dead wrong” to deny rumours that the bank could lose billions on a botched hedging strategy, a scandal that is likely to force several of the bank’s senior executives to quit.
“I was dead wrong,” said Dimon in an interview with NBC when asked why he had previously called reports of the bank’s bets “a tempest in a teapot”. “I obviously didn’t know because I would never have said that. One of the reasons it became public was because we wanted to say we told you something completely wrong four weeks ago.”
But Dimon is not sure whether the bank broke any laws or US regulations. When asked, he said: “So we’ve had audit, legal, risk, compliance, some of our best people looking over that. We know we were sloppy. We know we were stupid. We know there was bad judgment. We don’t know if any of that’s true yet.”
Dimon is under fire for having presided over a strategy that some say turned JP Morgan’s treasury, where it hedges risk, into a proprietary trading (prop trading) desk, where a bank bets with its own money and surplus client deposits for profit.
The bank was forced to “come clean” over a $2bn (or $800m post-tax) loss on the division’s portfolio last week, as Dimon put it.
Reports last night suggested that two senior executives – Ina Drew and Achilles Macris – as well as a trader in the bank’s chief investment office were preparing to leave their jobs over the loss.
It is not clear if Bruno Iksil, the trader known as the “London Whale” who placed the massive bets, is among the casualties.
In his TV interview, Dimon also admitted that he had ignored warnings that something could be going seriously wrong in the bank’s chief investment office, saying the problem had been “brewing for a while”.
Regarding press reports that JP Morgan was suffering large losses in its CIO portfolio, he said: “That particular red flag, we made a mistake, people got very defensive and started justifying everything we did. And you know, the better thing in life is to say maybe we made a mistake, let’s dig deep.”
The losses come at a disastrous time for US banks lobbying against a harsh implementation of the Dodd-Frank Act, a new financial framework that is currently being translated into technical regulations by several agencies.
Dimon has been one of the most outspoken critics of parts of the legislation, in particular the Volcker rule, which places strict limits on prop trading – the bets banks can make with surplus liquidity.
Dimon admitted the bank’s loss had “absolutely” given critics new ammunition, but added: “We have supported 70 per cent or so of Dodd-Frank.”