WASHINGTON – Two former high-ranking executives at JPMorgan Chase faced tough questions from senators Friday about why the bank played down risks and hid losses from regulators when it was losing billions of dollars.
The hearing was held a day after the Senate Permanent Subcommittee on Investigations issued a scathing report that ascribed widespread blame for $6.2 billion in trading losses to key executives at the nation’s biggest bank.
Douglas Braunstein, the former chief financial officer, and Ina Drew, the former chief investment officer overseeing trading strategy, were pressed to explain why bank executives gave federal examiners in April information that significantly understated losses for the first quarter of 2012.
“The number I reported (to the regulators) was the number that was given to me,” said Drew, who resigned last spring after the losses became public.
Drew blamed the losses on executives under her watch who failed to control risks out of the London office. She said that undermined her oversight and kept her from preventing the losses.
The report also suggested that CEO Jamie Dimon was aware of the losses in April, even while he played them down publicly. And Sen. Carl Levin, the chairman of the panel, implied that Dimon set a precedent at the bank for withholding information.
Dimon acknowledged in May 2012 that the firm had lost $2 billion on risky trades out of its London office. The losses have since been revised to more than $6 billion.
After reading the report and hearing executives testify that they didn’t know who was responsible for informing regulators, members of the panel questioned whether the nation’s biggest bank had become too large to manage.
The “trading culture at JPMorgan piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight and misinformed the public,” Levin said Friday at the hearing.
New York-based JPMorgan acknowledges that it made mistakes but rejects any assertions that it concealed losses or risks.
The subcommittee report was also critical of the Office of the Comptroller of the Currency, JPMorgan’s primary regulator. It said the Treasury agency failed to investigate the trading even when the London operation repeatedly blew through pre-set risk limits and it failed to notice when the unit didn’t submit required reports for months.