Dimon apologizes in Senate testimonyUnited Press International
JPMorgan Chase chief James Dimon Wednesday apologized for the U.S. bank's $2 billion investment blunder but said no clients lost any money.
JPMorgan Chase earlier this year lost more than $2 billion in 15 days in a series of bets on credit default swaps in a bid to hedge risks. The company's chief investment officer retired in the wake of the losses.
In testimony Wednesday before the U.S. Senate Banking Committee, Dimon said the company's synthetic credit portfolio, intended to protect or hedge the company against a systemic financial crisis, "morphed into something that rather than protect the firm, created new and potentially larger risks. As a result we've let a lot people down and we are very sorry for it."
Dimon said the Chief Investment Office's strategy for reducing the credit portfolio was "poorly conceived and vetted."
"In hindsight, the CIO trader did not have the requisite understanding of the new risk they took," Dimon said.
He said the synthetic credit portfolio should have gotten more scrutiny from both senior management and the firm's risk control function. In response to this incident, Dimon said JPMorgan Chase has appointed entirely new leadership for the office of chief investor and is aggressively analyzing, managing and reducing risks going forward.
"While this does not reduce the losses already incurred and does not preclude future losses, it does reduce the probability and magnitude of potential future losses," he said. "While we can never say we won't make mistakes -- in fact, we know we will make mistakes -- we do believe that this was an isolated event."
Dimon tried to put the losses into perspective.
"We will lose some of our shareholders' money -- and for that, we feel terrible -- but no client, customer or taxpayer money was impacted by this incident," he said. "Our fortress balance sheet remains intact. As of quarter end, we held $190 billion in equity and well over $30 billion in loan loss reserves. We maintain extremely strong capital ratios which remain far in excess of regulatory capital standards."