Congress asking Dimon the wrong questions

JP Morgan Chairman and CEO Jamie Dimon faced a little more hostility at Tuesday’s hearings of the House Financial Services Committee than last week’s hearings before the Senate Banking Committee, but one subject broached last week was not mentioned today, MF Global.

I would have liked to see questions regarding MF Global directed at both Dimon and Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler. Especially when Gensler gave such a spirited defense of having more regulatory power overseas, it would have been interesting if he were asked about his failures here at home regarding MF Global.

I don’t think it is just the myopic view of someone covering the futures industry to be bewildered with so much attention on a trading loss that neither violated rules nor was systemically important, while the MF Global saga is nearing its eighth-month anniversary. And earlier this month a report was released by the MF Global Inc. trustee that indicated that JP Morgan may still be holding on to money belonging to former MF Global customers that by law should have been segregated from other assets of the failed firm.

Many of these same members of Congress railed over the money their farmer and rancher constituents are out in past hearings and know or should know that much of this money may still be locked away at JP Morgan yet failed to press Dimon on this matter. Two weeks ago on CNBC Commodity Customer Coalition co-founder James Koutoulas claimed that someone inside JP Morgan indicated to him the bank is still holding approximately $600 million is former MF Global customer money. We also know that CCC member Stanley Haar has been reminding them where this money likely is and about efforts by JP Morgan as the largest creditor of MF Global to gain priority over customers.

Remember this is not a so called hedge gone wrong. This allegedly is money that was required to be segregated from firm assets. The law required this money be protected 24-hours but on Oct. 31 MF Global went into bankruptcy with a hole in its segregated accounts. A hole that still has not been filled nearly eight month later. Two Congressional committees have had Mr. Dimon before them answering its questions and no one asked:  What about this $600 million? There are 38,000 former MF Global futures account holders who have not received all of their money back, what have you done to ensure that none of that money is stuck at your bank?   The trustee for the MFGI estate has indicated that he believes JP Morgan is holding some of the remaining missing money. Are you? How diligently have you worked to locate funds that may be former MF Global customer money? Senator Jon Tester (D-Mont.) last week asked why it took nearly seven months for JP Morgan to return $168 million in MF Global margin held at the bank but seemed to apoligize afterwards and didn't follow-up.

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