JPMorgan Chase ignored internal controls and manipulated documents, while its influential chief executive, Jamie Dimon, withheld some information from regulators as the nation’s biggest bank racked up trading losses last year, a new Senate report says.
The findings by Senate investigators shed new light on the multibillion-dollar trading blunder, which has claimed the jobs of some top executives and prompted investigations by authorities. The 300-page report, released a day before a Senate subcommittee plans to question bank executives and regulators in a hearing, will escalate the debate in Washington over regulating Wall Street.
Dimon, whose reputation as an astute manger of risk has so far been only dented by the trading losses, comes under much harsher criticism from the Senate investigators. The chief executive blessed changes to an internal alarm system that underestimated losses, seemingly contradicting his earlier statements to lawmakers, according to the report.
Dimon is also accused of withholding from regulators details about the bank’s daily losses – and then raising “his voice in anger” at a deputy who later turned over the information.
While some people briefed on the matter question whether the outburst actually happened, the alleged incident illustrates a broader problem at JPMorgan: After emerging from the financial crisis in far better shape than rivals, the bank saw itself as being above its regulators.
The report, citing some of the same private documents that FBI agents are now poring over, highlighted how JPMorgan managers “pressured” traders to lowball losses by $660 million, a previously undisclosed figure, and then played down the problems to authorities.
The breakdowns – at both the bank and at its regulators like the Office of the Comptroller of the Currency – could galvanize support for new curbs on Wall Street trading.
Using its investigation to take a broad swipe at financial risk-taking, the subcommittee depicted JPMorgan’s losses as emblematic of a dark market desperate for sunlight.
“Our investigation opens a window into the hidden world of high stakes derivatives trading by a major bank,” said Sen. Carl Levin, D-Mich., who runs the subcommittee. Calling the bank’s trading strategy a “runaway train that barreled through every risk warning,” he argued that the bank “exposed daunting vulnerabilities” in the financial system.
A spokeswoman for the bank said on Thursday: “While we have repeatedly acknowledged significant mistakes, our senior management acted in good faith and never had any intent to mislead anyone.”