Jamie Dimon Smug In The Face of Senate “Grilling”
The Chief Executive was supposed to face an interrogation of sorts from senators comprised of both sides of the political spectrum looking for an explanation behind the two billion dollar trading loss by JP Morgan. Instead we were left with a man at the peak of his powers in the financial world walking away with his reputation unblemished and feckless politicians illustrating the art of obsequies buffoonery.
Jamie Dimon was “summoned” to elaborate on the substantial losses that JP Morgan suffered and in my personal opinion did an awful job of it. Many of the senators remained so passive in their questioning it left onlookers to query the whole point of this charade. Despite having been well informed of the Dodd-Frank act and the Volker rule he still managed to cock up a trade that has left many shareholders penniless. The parallels of this story to familiar with the scandal that occurred at MF Global that left many current accounts emptied, though nobody was held accountable.
On the issue of the catastrophic losses incurred upon JP Morgan, Dimon simply stated “I was misinformed about the scale of losses at the time”. That doesn’t seem a plausible explanation considering the imperative role he plays at the investment bank. Transactions involving billions of dollars have to receive the go ahead from top figureheads at any company and the fact he denied even acknowledging it pretty much set the tone for the majority of the senate hearing.
What Dimon did offer was his “heartfelt” and unreserved apologies. If he displayed any more sentiment than he did, one could actually accuse him of showing signs that he cared. His conciliatory approach included offering “claw-backs” that would see banking executives involved in this disaster having there banking bonuses and share options deducted. This would hardly hit the bankers in their wallets when faced with the fact that they are already swimming around in billions of dollars from tax bailouts.
Two senators that managed to show some tenacity during the senate hearing was Jeff Merkley and to a lesser degree Robert Menendez of the Democratic Party. They queried his opposition to more financial regulations that would have prevented such trades as this one from taking place. At one point under duress, Dimon was asked whether or not the Volker rule would have derailed any attempts JP Morgan from pursuing loss-making trades to which he meagrely replied “perhaps it is ’possible‘ it would have helped”.
The significance of this case could have indeed set a precedent for Wall Street with the senators being given the chance to make an example of a pertinent figure within the Wall Street conglomerate. For decades an abuse of privilege and financial power has allowed figures such as Jamie Dimon to help influence policy that is conducive to his interests at investment banks and power players in financial markets.
Had the Volker rule been made binary, there would be less room for Wall Street traders and bankers to manoeuvre and illicit scandalous trades such as the one we witnessed at the behest of JP Morgan. Rules and regulations are in place to promote transparency and accountability, something Jamie Dimon is still at loggerheads with. Even during the hearing he had the sheer audacity to suggest the Dodd-Frank act would drive business away from American shores and impede traders. The contrary view is actually true because of the use of derivatives making transactions pretty untraceable thus helping to seduce traders and investors from around the world.
With tighter regulations, there is far less risk from banking firms that are in the business of lending credit turning into hedge funds. Much as is the case with Jamie Dimon and his head honcho Ira Drew, the woman he armed with executive muscle to undertake such a risky trade. Many believe she was the one who ultimately decided to speculate on high yielding assets such as credit derivatives using government backed security bonds. Obviously the move backfired and the two billion dollar losses were made public.
Senator Sherrod Brown of Ohio did release a strongly worded statement addressing the situation. The senator stated “The way for Jamie Dimon to demonstrate his seriousness about the mistakes that led to JP Morgan's two billion dollar trading loss is to take back the bonuses and incentive compensation from those who were involved in the failed London trades, including himself as CEO. The only way to change the culture on Wall Street is to hit people where it hurts, in the wallet”. Again pundits and experts alike felt as though the senator was just paying lip service.
What should happen is Jamie Dimon should be coerced out of his position along with the many other executives that can be implicated in this whole ordeal. Their bonuses should be used to compensate the shareholders who have suffered so perilously at the hands of incompetent bankers. The repetitiveness of such scandals has become far too frequent causing imbalance in markets and something has to be done to address the issue. This was that golden chance, however this seems to have passed us by with Jamie Dimon smiling in front of camera lenses as if stealing candy from a baby was considered legal.