Dimon Can't Defend Risky Trades; Dimon's Once-Sparkling Reputation
WHITFIELD: All right. When your company loses billions of dollars on risky trades, you've got some explaining to do. It is JPMorgan Chase, CEO Jamie Dimon, try to do some explaining before lawmakers on Capitol Hill. Dimon told them he can't defend what happened.</s>JAMIE DIMON, CEO, JPMORGAN CHASE: I think I've been clear which is the original intent, I think, was good but what it morphed into, I am not going to try to defend.</s>UNIDENTIFIED MALE: So?</s>DIMON: Under any name, whatever you call it, I will not defend it. It violates -- it violated common sense in my opinion. I do believe that the people doing it thought that they were maintaining a shore against high-yield credit to benefit the company in a crisis. I think -- and we now know they were wrong.</s>WHITFIELD: Dimon was considered one of the most credible voices on Wall Street following the financial collapse. Alison Kosik looks at how that changed.</s>ALISON KOSIK, CNN BUSINESS CORRESPONDENT (voice-over): At the height of the financial crisis while his colleagues were under fire, J.P. Chase CEO, Jamie Dimon, drew praise for steering his bank through the and coming to the aid of others.</s>DIMON: In March of 2008, at the request of the U.S. government, we worked regularly to prevent a collapse of Bear Stearns. In September of 2008, we are the only bank prepared to acquire the assets of Washington Mutual. Taken together, these two transactions prevented nearly 40,000 jobs and prevented further market instability.</s>KOSIK: JPMorgan became one of the biggest banks in the world, and Dimon became the most credible voice in a battered industry. At the same time, Dimon led the fight against new reforms in Congress, including the Volcker rule which forbids banks from engaging in risky trading with their own money. JPMorgan had been using that tactic known as proprietary trading with great success at the chief investment office in London. The unit quadrupled the profits from 2007 to 2011, but it ran into trouble earlier in this year. A complex tangle of risky trades came undone. Dimon announced losses of at least $2 billion, probably much more.</s>DIMON: The new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored.</s>KOSIK: JPMorgan has lost almost $30 billion in market shares since then. Chief investment officer, Ina Drew, announced her retirement, and Dimon's reputation for strong risk management was tarnished. Additionally, the timing of the lawsuit is coinciding with the latest round of financial turmoil in Europe brought back bad memories, a warning that not a lot has changed since 2008.</s>TIMOTHY GEITHER, TREASURY SECRETARY: Our system is much stronger than it was before the crisis, but still, this points out how important it is that these reforms are strong enough and effective enough, and they can meet the key test.</s>KOSIK: It called into question the cozy relationship of the bankers and the Federal Reserve. Dimon had served on the board of the New York fed since 2007.</s>SEN. BERNIE SANDERS (I), VERMONT: Here you have the fed which is supposed to regulate Wall Street, and then you have the CEO of the largest Wall Street company on the board which is supposed to be regulating. This is the fox guarding the henhouse.</s>WHITFIELD: Alison joining us now from the New York Stock Exchange. So, Alison, do we expect anything to come out of the hearing in terms of more Wall Street reforms?</s>ALISON KOSIK, CNN CORRESPONDENT: And that's really the money question here. One thing that you may have heard Jamie Dimon say today, as he was testifying before the Senate Banking Committee, was that he's not necessarily against all regulation. He wants better and stronger regulation of what's in place now. He doesn't necessarily want more regulation kind of tacked onto it. Now, with what's happened with JP Morgan and this $2 billion loss at the very least, is that it's created this sort of renewed focus on the so-called Volcker Rule. And what the Volcker Rule does is it prohibits banks from trading on their own accounts. It's part of the Dodd/Frank legislation that was passed in 2010. Now, regulars, right now, are still crafting how this will work. A final rule is expected to come out soon. So the big question with it, Fredricka, ultimately is, how tough will this law be? You know, the law was written for allow for exceptions. For example, banks can trade with their own money if the goal is hedging against risk. But lots of critics say what happened at JP Morgan shows that stricter rules are needed. Fredricka.</s>WHITFIELD: And so, Alison, if I'm not a Chase shareholder, do I care about these losses?</s>KOSIK: You should because if more regulations are sort of piled on because of these -- because of these trading losses, that could also affect how a bank does business in the long run. Tougher regulations probably means that banks are going to have less of a chance to make more money and let's say, maybe, they'll have less of an opportunity to maybe give out -- be more -- you know, they'll be more resonant to give out loans, let's say, for example. But that is certainly down the road. You know how things work on Capitol Hill. It takes forever to get anything passed.</s>WHITFIELD: All right, Alison Kosik, thanks so much, at the New York Stock Exchange. 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