Courtesy of Pam Martens.
Jamie Dimon Testifying at Senate Banking Hearing June 13, 2012
Much of the investing public, and I would venture many members of the research team at the Senate’s Permanent Subcommittee on Investigations that compiled the 307 page report on JPMorgan’s $6.2 billion in losses from the London Whale trade, are unaware that the company’s Chairman and CEO, Jamie Dimon, learned at the knee of the mastermind of too-big-to-fail – former Citigroup Chairman and CEO, Sandy Weill. From 1982 to 1998, Dimon was Weill’s first lieutenant, rising to the rank of President of Citigroup.
Carl Levin, Chairman of the Subcommittee, released the stunning investigative report yesterday and, throughout, the level of arrogance toward regulators, the dishonesty and dissembling on earnings calls, the hiding of losses, and the specter of the imperial CEO conjured up images of the downfall of Citigroup and Weill’s role in creating the culture than burned down the house. It felt, alarmingly, like Dimon had exported the culture of Citigroup to JPMorgan Chase.
Pretty much everything that Dimon led us to believe about this year-long saga has been debunked by the Senate’s investigation. Far from being some rogue-traders in London, the report informs us that “…the whale trades were not the acts of rogue traders, but involved some of the bank’s most senior managers. Previously undisclosed emails and memoranda showed that the CIO [Chief Investment Office] traders kept their superiors informed of their trading strategies.”
When Dimon testified before the Senate Banking Committee on June 13, 2012, he portrayed the portfolio of the Chief Investment Office (CIO) as a conservative one, telling members it consisted of “Treasuries, agencies, mortgage-backed securities, high quality securities, corporate debt and other domestic and overseas assets.” From the Senate’s report, we now learn that it also included $22 billion in a credit index of junk bonds.
In the same appearance before the Senate on June 13, Dimon characterized the massive trading of the Chief Investment Office and its inexplicable foray into the world of synthetic credit derivatives as a means of hedging the bank’s overall risks. Dimon stated: “While CIO’s primary purpose is to invest excess liabilities and manage long-term interest rate and currency exposure, it also maintains a smaller synthetic credit portfolio whose original intent was to protect – or ‘hedge’ – the company against a systemic event, like the financial crisis or Eurozone situation.”
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