Dimon to apologize in testimony before Congress

June 12, 2012 - 6:46 PM

NEW YORK (AP) — JPMorgan Chase CEO Jamie Dimon plans to apologize before members of Congress on Wednesday for a trading loss that has cost the bank more than $2 billion.

He is also saying that the bank has taken steps to make sure it does not happen again.

"We have let a lot of people down, and we are sorry for it," Dimon says in testimony prepared for his appearance before the Senate Banking Committee on Wednesday. The testimony was released Tuesday by the bank.

JPMorgan Chase mounted a companywide strategy to reduce risk in December 2011, but that backfired when one of the bank's divisions added risk instead, Dimon says in the prepared remarks.

The bank has named a new leader for the division responsible for the loss, has established a risk committee and is conducting a review of what went wrong, he says.

"While we can never say we won't make mistakes — in fact, we know we will — we do believe this to be an isolated event," Dimon says in the prepared testimony.

The Banking Committee's chairman, Sen. Tim Johnson, D-S.D., says in his opening statement for Wednesday's hearing that the bank had "an out-of-control trading strategy with little to no risk controls" that cost it billions.

"So what went wrong? For a bank renowned for its risk management, where were the risk controls?" Johnson says. "How can a bank take on 'far too much risk' if the point of the trades was to reduce risk in the first place? Or was the goal really to make money? "

The trading loss has revived Democrats' push for stricter oversight of Wall Street banks. The Securities and Exchange Commission is also reviewing the matter.

Some Democrats contend that the trades in question would have violated the so-called Volcker rule, which will bar large banks from making bets for their own profit.

The rule takes effect in July, and banks will have two years to comply. Dimon has been among the most outspoken critics of the rule.

He and other bank executives successfully pushed for an exemption for banks to make trades for their own profit if they are hedging against risk, as Dimon has contended the bank was doing in this case. Some lawmakers are asking top federal regulators to strip the exemption.