WASHINGTON (Reuters) - JPMorgan Chase (JPM.N) Chief Executive Jamie Dimon has been invited to testify before the Senate Banking Committee on June 7 to give lawmakers insight into the bank’s trading loss of at least $2 billion, Senator Tim Johnson said on Friday.
Johnson, the Democratic chairman of that Senate panel, said the botched trading strategy at the nation’s largest bank shows that Wall Street needs better risk management and stronger policing.
“I expect Mr. Dimon to come prepared to provide the Committee a better understanding of this massive trading loss so we can take the implications into account as we continue to conduct our robust oversight over the full implementation of Wall Street reform,” Johnson said in a statement.
A spokeswoman for Dimon said the CEO would be available to testify next month, but did not confirm the date.
“We are working with the House and Senate to determine a timeframe that will work for both Chambers in June and allow us to provide the most thorough testimony,” JPMorgan spokeswoman Jennifer Zuccarelli said in an email.
Dimon revealed in a conference call on May 10 that the bank suffered a trading loss of at least $2 billion on a failed hedging strategy. Since then, Dimon has also said the bank could lose another $1 billion or more.
The trades, which came from the bank’s Chief Investment Office in London, involved a portfolio of credit default swaps, built on layers of supposedly offsetting bets with credit derivatives tied to corporate bonds.
Dimon has talked repeatedly about the trading loss, calling the bank’s handling of the portfolio “stupid” and saying “egregious mistakes” were made with the trades.
WHO KNEW WHAT - AND WHEN?
The loss came at a particularly inopportune time for Dimon, who has been critical of Washington’s attempts to reform Wall Street. The trading blunder is expected to diminish banks’ ability to push back against the forthcoming Volcker rule, which will ban banks from making speculative bets with their own funds.
Lawmakers are lining up a series of hearings to get more details on how both JPMorgan and regulators handled the trades, and whether reforms currently being finalized need to change to address any underlying threat revealed by the trades.
At a hearing earlier this week, the Senate Banking Committee questioned the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission on what they knew about the now infamous trades, and what their probes will focus on.
Both agencies, as well as the FBI, are investigating the losses. SEC Chairman Mary Schapiro said her agency is looking at the appropriateness and completeness of JPMorgan’s financial reporting.
CFTC Chairman Gary Gensler said his agency has the authority to look into the trades “under our anti-fraud and anti-manipulation regime.”
Both regulators noted they are not the primary regulators of the bank.
What regulators knew, and when, promises to be a subject of more intense scrutiny on June 6 when the Federal Reserve and the Office of the Comptroller of the Currency appear before the Senate Banking Committee.
Editing by Gerald E. McCormick and Jan Paschal