JPMorgan CEO Dimon: Execs may have pay taken back

JPMorgan Chase CEO Jamie Dimon prepares to testify on Capitol Hill in Washington on June 13, 2012. AP Photo/Haraz N. Ghanbari






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Sen. Charles Schumer, D-N.Y., told Dimon that "the question that bothers most people" is whether the trading loss could happen at a weaker bank with less of a cash cushion to protect itself.




The CEO said that JPMorgan (JPM) adopted a strategy late last year to reduce risk, but it backfired in its investment operation by heightening risk instead. The bank has named a new leader for the investment operation that was responsible for the loss.




The banking committee's chairman, Sen. Tim Johnson, D-S.D., cited "an out-of-control trading strategy with little to no risk controls" at JPMorgan, according to portions of his opening statement for the hearing released Tuesday.

"So what went wrong?" Johnson was to ask.


In April, in a conference call with analysts, Dimon had dismissed concerns about the bank's trading, calling them a "tempest in a teapot." Later, adopting a more conciliatory stance, he conceded that he'd been "dead wrong" to minimize those concerns.


Senators will want to know what Dimon knew at the time he dismissed the issue in April.


This time, Dimon will be under a harsher spotlight.


In particular, Dimon has criticized the so-called Volcker rule, which would bar banks from making certain trades for their own profit.

Thanks to lobbying by Dimon and other Wall Street bankers, the banks won an exemption in the rule: It would let them make such trades to hedge not only the risks of individual investments but also the risks of a broader investment portfolio.

Dimon has said the rule would not have prevented the trading that led to JPMorgan's losses. He says the trading in credit derivatives was designed to hedge against financial risks, not to make a profit for the bank.

The Volcker rule goes into effect next month, but banks don't have to fully meet its requirements for two more years.