The hearing is the first held by the House on the trading losses, which have drawn inquiries from the SEC, CFTC and Department of Justice.
The SEC’s review of JPMorgan’s trading loss is “ongoing” and may examine the accuracy of the bank’s financial reporting, Schapiro said.
Schapiro, who said the SEC doesn’t publicly discuss open investigations, laid out areas in which the agency could pursue claims against an institution “in circumstances of this nature.” They include quarterly disclosures about market risks, compensation policies and accounting issues, she said.
Dimon’s prepared statement was nearly identical to his remarks in front of the Senate Banking Committee last week. During that hearing, Dimon apologized for the losses and said he felt “terrible” that shareholders would lose money because of the chief investment office’s trading strategy.
During more than two hours of testimony, Dimon described the loss in the bank’s chief investment office as a hedge that “morphed into something I can’t justify,” and largely blamed subordinates for a trading strategy gone wrong. The bank is looking at clawing back some of the compensation earned by those responsible, he said.
Risk-monitoring systems and executives at the largest U.S. bank failed to adequately police threats concentrated in a derivatives portfolio at a London unit of the chief investment office, he said. The division wasn’t subjected to the same scrutiny as other businesses, and managers there deviated from control procedures, even after triggers on risk limits were breached, Dimon told the Senate panel.
Still, Dimon didn’t back away from his criticism of the Dodd-Frank Act and other regulations, including the so-called Volcker rule, which he called “unnecessary.”
Lawmakers on the House committee, much like those on its Senate counterpart, have benefited from JPMorgan’s campaign donations.
Representative Spencer Bachus of Alabama, the Republican chairman of the committee, received $11,000 from the bank’s political action committees and its employees during this campaign cycle, according to the Center for Responsive Politics. Representative Barney Frank, who was chairman of the committee from 2007 through 2010 and has decided to retire at the end of this term, received $11,000 from the bank and its employees during his first campaign cycle as chairman. Frank has received $4,500 this cycle.
Since the start of the current campaign cycle in 2011, lawmakers on the committee have received $168,055 from the bank’s employees and its political action committees, according to the Center for Responsive Politics. Republicans on the committee have received 73 percent of that money. Since 2005, lawmakers on the panel, which has been controlled by both parties during the period, have taken in $1.3 million.
FBR analyst Miller said it’s unlikely that House lawmakers will get any new information out of Dimon, saying that he’ll dodge the questions like he did in the Senate.
“There were some really good pointed questions last week, but there was no follow up,” Miller said. “All he has to do is answer the questions in a technical manner and it will be hard to land a tough follow up. This is esoteric and complicated material.”