We’ve seen Congressional Banking Committee meetings before, and to put it gently — while they have their moments — they’re not always the most hard-hitting, productive affairs in Washington.
That said, we’re certain JP Morgan CEO Jamie Dimon is not looking forward to his time in the hot seat. He will testify before the House and Senate Banking Committees on Capitol Hill next week to answer for the complicated and stunning trading loss his bank’s London Chief Investment Office revealed last month.
The operative word here is complicated, so to help our nation’s leaders along (and to provide some suggestions for avoiding what he calls ‘Washington Gotcha theatre”) New York Times columnist Andrew Ross Sorkin has published his list of questions for JP Morgan CEO Jamie Dimon.
Sorkin’s questions touch on everything from Dimon’s opposition to the Volcker rule, to potential clawbacks for Ina Drew (the CIO’s chief investment officer), and to how much Dimon knew about why the CIO had changed its risk models before its losses became impossible to ignore.
Here are a few of our favourites from Sorkin’s list:
- “…about a month before you disclosed the $2 billion trading loss, you called speculation about outsize risks in your chief investment office “a tempest in a teapot.” What, if any, analysis had you personally conducted before making that statement? Do you believe you had all of the appropriate information at the time? If not, why not? Do you believe that you were provided with misinformation or were otherwise purposely misled?
- “…you now point out that under the Volcker Rule, some of those trades would not have been permitted because “(1) the actions taken were forward looking and anticipatory; (2) the firm’s purchases of the credit derivatives may not have been deemed ‘reasonably correlated’ with the underlying risk, as different instruments were used to effect the hedging strategy than the assets giving rise to the risk; and (3) the gains realised upon the unwind of the hedges could have been determined to be larger than the countervailing risks.” …why should the trades referred to in your letter (to the SEC on Volcker) be considered hedges and not speculative bets?
- Your chief investment office has put money in corporate bonds as opposed to less risky Treasury bonds, then used derivatives to bet on directions of the market. That indicates that the purpose of the unit, unlike at some of your competitors, is to generate profit rather than protect the bank from losses. Should the investment office be a profit centre? What was your role in the unit taking on more risk?
We wish Dimon and all the members of Congress involved in this hearing luck and a ton of patience. They’re going to need it.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.