Jamie Dimon's Complete Senate Testimony

Tyler Durden's picture

Presenting JPMorgan's CEO Jamie Dimon's prepared remarks for tomorrow's debacle: The truth, the whole truth, and nothing but the totally unvarnished version of the truth that will fulfill Jamie Dimon's obligations to sit through a few hours of snide remarks, condescension, and bating. It does seem however that our initial perspective on this being a systemic risk hedge (i.e. a 'delta-hedged' senior tranche position as opposed to some easily managed and understood pairs trade) that rapidly grew out of control due to risk control inadequacies, is absolutely correct - though we suspect that is as close to the real truth anyone will ever get.

The following is the testimony of JPMorgan Chase Chairman and CEO Jamie Dimon prepared for his appearance Wednesday before the Senate Banking Committee:

Chairman Johnson, Ranking Member Shelby, and Members of the Committee, I am appearing today to discuss recent losses in a portfolio held by JPMorgan Chase's Chief Investment Office (CIO). These losses have generated considerable attention, and while we are still reviewing the facts, I will explain everything I can to the extent possible.

JPMorgan Chase's six lines of business provide a broad array of financial products and services to individuals, small and large businesses, governments and non-profits. These include deposit accounts, loans, credit cards, mortgages, capital markets advice, mutual funds and other investments.

What does the Chief Investment Office do?

Like many banks, we have more deposits than loans -- at quarter end, we held approximately $1.1 trillion in deposits and $700 billion in loans. CIO, along with our Treasury unit, invests excess cash in a portfolio that includes Treasuries, agencies, mortgage-backed securities, high quality securities, corporate debt and other domestic and overseas assets. This portfolio serves as an important source of liquidity and maintains an average rating of AA+. It also serves as an important vehicle for managing the assets and liabilities of the consolidated company. In short, the bulk of CIO's responsibility is to manage an approximately $350 billion portfolio in a conservative manner.

While CIO's primary purpose is to invest excess liabilities and manage long-term interest rate and currency exposure, it also maintains a smaller synthetic credit portfolio whose original intent was to protect - or "hedge" the company against a systemic event, like the financial crisis or Euro-zone situation. Among the largest risks we have as a bank are the potential credit losses we could incur from the loans we make. The recent problems in CIO occurred in this separate area of CIO's responsibility: the synthetic credit portfolio. This portfolio was designed to generate modest returns in a benign credit environment and more substantial returns in a stressed environment. And as the financial crisis unfolded, the portfolio performed as expected, producing income and gains to offset some of the credit losses we were experiencing.

What Happened?

In December 2011, as part of a firmwide effort in anticipation of new Basel capital requirements, we instructed CIO to reduce risk-weighted assets and associated risk. To achieve this in the synthetic credit portfolio, the CIO could have simply reduced its existing positions; instead, starting in mid-January, it embarked on a complex strategy that entailed adding positions that it believed would offset the existing ones. This strategy, however, ended up creating a portfolio that was larger and ultimately resulted in even more complex and hard-to-manage risks.

This portfolio morphed into something that, rather than protect the Firm, created new and potentially larger risks. As a result, we have let a lot of people down, and we are sorry for it.

What Went Wrong?

We believe now that a series of events led to the difficulties in the synthetic credit portfolio. Among them:

  • CIO's strategy for reducing the synthetic credit portfolio was poorly conceived and vetted.
  • The strategy was not carefully analyzed or subjected to rigorous stress testing within CIO and was not reviewed outside CIO. In hindsight, CIO's traders did not have the requisite understanding of the risks they took.
  • When the positions began to experience losses in March and early April, they incorrectly concluded that those losses were the result of anomalous and temporary market movements, and therefore were likely to reverse themselves.
  • The risk limits for the synthetic credit portfolio should have been specific to the portfolio and much more granular, i.e., only allowing lower limits on each specific risk being taken.
  • Personnel in key control roles in CIO were in transition and risk control functions were generally ineffective in challenging the judgment of CIO's trading personnel.
  • Risk committee structures and processes in CIO were not as formal or robust as they should have been.
  • CIO, particularly the synthetic credit portfolio, should have gotten more scrutiny from both senior management and the firmwide risk control function.

Steps Taken

In response to this incident, we have taken a number of important actions to guard against any recurrence.

We have appointed new leadership for CIO, including Matt Zames, a world class risk manager, as the Head of CIO. We have also installed a new CIO Chief Risk Officer, Chief Financial Officer, Global Controller and head of Europe. This new team has already revamped CIO risk governance, instituted more granular limits across CIO and ensured that appropriate risk parameters are in place. Importantly, our team has made real progress in aggressively analyzing, managing and reducing our risk going forward. While this does not reduce the losses already incurred and does not preclude future losses, it does reduce the probability and magnitude of future losses. We also have established a new risk committee structure for CIO and our corporate sector. We are also conducting an extensive review of this incident, led by Mike Cavanagh, who served as the company's Chief Financial Officer during the financial crisis and is currently CEO of our Treasury & Securities Services business. The review, which is being assisted by our Legal Department and outside counsel, also includes the heads of our Risk, Finance, Human Resources and Audit groups. Our Board of Directors is independently overseeing and guiding these efforts, including any additional corrective actions. When we make mistakes, we take them seriously and often are our own toughest critic. In the normal course of business, we apply lessons learned to the entire Firm. 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.


We will not make light of these losses, but they should be put into perspective. We will lose some of our shareholders' money - and for that, we feel terrible - but no client, customer or taxpayer money was impacted by this incident.

Our fortress balance sheet remains intact: as of quarter end, we held $190 billion in equity and well over $30 billion in loan loss reserves. We maintain extremely strong capital ratios which remain far in excess of regulatory capital standards. As of March 31, 2012, our Basel I Tier 1 common ratio was 10.4%; our estimated Basel III Tier 1 common ratio is at 8.2% both among the highest levels in the banking sector.1 We expect both of these numbers to be higher by the end of the year.

All of our lines of business remain profitable and continue to serve consumers and businesses. While there are still two weeks left in our second quarter, we expect our quarter to be solidly profitable.

In short, our strong capital position and diversified business model did what they were supposed to do: cushion us against an unexpected loss in one area of our business.

While this incident is embarrassing, it should not and will not detract our employees from our main mission: to serve clients - consumers and companies - and communities around the globe.

In just the first quarter of this year, we provided $62 billion of credit to consumers. Over the same period we provided $116 billion of credit to mid-sized companies that are the engine of growth for our economy, up 16% year on year. For America's largest companies, we raised or lent $368 billion of capital in the first quarter to help them build and expand around the world. We are one of the largest small business lenders and the leading Small Business Administration lender in America, providing $17 billion in credit to small businesses in 2011, up 70% year on year. In the first quarter, we provided over $4 billion of credit to small businesses, up 35% year on year. Even in this difficult economy, we have hired thousands of new employees across the countryover 61,000 since January 2008. We also have hired nearly 4,000 veterans over the past two years, in addition to the thousands of veterans who already worked at our Firm. We founded the "100,000 Jobs Mission" a partnership with 45 other companies to hire 100,000 veterans by the year 2020. Recently, we launched a groundbreaking and consumer-friendly reloadable card - Chase Liquid - that offers customers financial control and flexibility. And over the past three years, in the face of significant economic headwinds, we made the decision not to retrench - but to step up - as we did with markets in turmoil when we were the only bank willing to commit to lend $4 billion to the state of California, $2 billion to the state of New Jersey and $1 billion to the state of Illinois.

All of these activities come with risk. And just as we have remained focused on serving our clients, we have also remained focused on managing the risks of our business, particularly given today's considerable global economic and financial volatility.

Last, I would like to say that in the face of these recent losses, we have come together as a Firm, acknowledged our mistakes, and committed ourselves to fixing them. We will learn from this incident and my conviction is that we will emerge from this moment a stronger, smarter, better company. Thank you, and I'd welcome any questions you might have.

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Dear Infinity's picture

Jolly Good Show. Dimon knows the end game is near for his office, soon he will be forced to do his lines of yay off of Colombian prostitutes only, as he will surely be extradited when the extent of his financial crimes against humanity are discovered. 


economics9698's picture

The communist are getting the rope ready, asshole.

flacon's picture

Three words jump out at me: "CREDIT RISK PORTFOLIO".... LOL! 

LetThemEatRand's picture

The government contractors are first.  They profit from the taxpayer.  Agreed economics9698?


Liars doing what liars do. 

Keyser Soze's picture

Questions for Mr Dimon.

Presumably the people you hired for the CIO are some of the most competent you have at recognising and mitigating risk.

  • If not, it means that your skill at recognising those skills is subpar, or you didn't consider the role of risk mitigation important enough to hire those most able to protect your shareholders money. Either way, Mr Dimon, fuck you and fuck off.
  • If so, then despite selecting your brightest and best, the CIO office was able to not only not protect the Firm against losses, but managed to create them out of thin air. Do we now create a CIOCIO that hedges against the hedges? How many turtles can your company buy?

Do you have any smarter people who would like to try their hand at hedging? Some Nobel prize winners, maybe? These is a precedent for that too.

If the act of hedging cannot be performed by your brightest and best and you therefore cannot manage risk internally, surely it is incumbent upon this government to help you to help yourself, by creating external rules that reduce the risks you create for yourself? Or possibly by breaking you up into tiny bits that may argue betwixt themselves in this fine market?

Alternatively, how many more attempts would you like before we shut you down and string you up?

BKbroiler's picture

Thank you. Well done.  Asshole.

Al Gorerhythm's picture

99.% perfect. He forgot: Trolololololo, 5th, Forget, Remember.

StrictlyNumbers's picture

how many of these poiticians will be kissing Dimon' ass in a few month to squeeze those extra few bucks out of him to buy a few more votes... 



Ned Zeppelin's picture

Screw you, JD and your fortress. May your walls come tumbling down.

Hearing will be a joke.  Proof only of the corruption of the system.

chump666's picture

"credit" and "(at)risk" how telling. 

Nice JP Morgan, but check this: Obama has attached the credit worthiness of ALL Americans to the China crash. 

Crazy bet huh?

peekcrackers's picture

liabilities" is one of the smallest words in the cloud ..with the biggest impact


flacon's picture

One man's asset is another man's liability. Yep, I agree with you. The assets are marked to fantasy, and the liabilities are marked to 1/fantasy.

Al Gorerhythm's picture

How many times has that liability been rehypothecated? That is the question.

insanelysane's picture

Everyday is just crazy hectic and money sometimes vaporizes with all the chaos.

smlbizman's picture

hey i hedged my futures bet on the ravens to win the superbowl with a futures bet on the red sox winning the world series and just in case for additional saftey i took okc in the nba finals....so i am totally  hedge....

flacon's picture

"WORLD" series.... as in GLOBAL series of economic failures? LOL!

Dr. Engali's picture

I don't care about the show trial. I care about the agenda behind it. What are the schemers up to over a 2 billion dollar loss?

piceridu's picture

Just a side show during an election year. Makes it look like the buffoons in office are concerned. The real show would be to follow Dimon with a camera as he strolls the halls of D.C. pressing palms and passing c-notes to every scumbag "law maker" and mouthing "Call me".

LetThemEatRand's picture

They held hearings.  That's it.

Bringin It's picture

- What are the schemers up to

TD says in the intro they were on systemic risk detail.  I'm happy to hear that the Ponzi is getting weighty, maybe tippy and expensive to manage.

Abraxas's picture

Something happened to us. We're just quietly watching this farce and what they are doing to us. With every single act, they are telling us that we are weak and stupid. And by quietly watching these grotesque monsters for entertainment, we are proving that they are right.

Bolweevil's picture

Even "weak and stupid" people have a breaking point.

hangemhigh's picture


Something happened to us. We're just quietly watching this farce and what they are doing to us. With every single act, they are telling us that we are weak and stupid. And by quietly watching these grotesque monsters for entertainment, we are proving that they are right.


Dude……….what’s you’re problem……this is Amerika……it’s reality tv.  MDB is the master of ceremonies doing the Ronnie Rayguns voice over, the comatose audience has over dosed on  tranquility meds …and the best part is about to happen when the big titted bitch goes down into the basement in her underwear to see what that strange noise is.

The monster is just doing his job…….making sure that the anxiety and tension levels remain at elevated DEFCON levels. 

It’s not about right or wrong……it’s about the popcorn and the high fructose corn syrup and the hot babe in the see-thru underwear……….  

Abraxas's picture

That's right. I don't know what I was thinking.

holdbuysell's picture

A waste of time event that CNBC will waste its time covering.

In other words, the perfect marriage of wastes.

Seasmoke's picture

as we did with markets in turmoil when we were the only bank willing to commit to lend $4 billion to the state of California, $2 billion to the state of New Jersey and $1 billion to the state of Illinois.


and he is proud of this ?????

LouisDega's picture

I hope he doesnt scale back on the free coffee and Panera pastries at my local chase. I must be fed or i stay at home

Lucky Guesst's picture

Gross. I'd rather haul all my money on my back in pennies than walk into chase bank.

Bringin It's picture

Lorreta - is that you?  Helmsly right!?

edit - Leona

Gloeschi's picture

Is this for real (or from the Onion, again)? 

JD: "Like many banks..." translation: "everybody does it"

JD: "...the purpose is to invest excess liabilities" translation: "I can't read balance sheets so sometimes I mix up excess liquidity and liabilities. Another honest mistake."

JD: "the CIO could have simply reduced position" translation: "We don't go the path of least resistance. We like a challenge". Comment: So you reduce risk by "un-hedging" a hedge?

JD" "Just in the first quarter of this year... yadayadayada... I helped an old lady over the street". Translation: See, if you hurt us (the banks), you will only hurt yourselves in the end"

Maybe he can lessen the embarrassment by mumbling through his answers so nobody understands anything and is too confused to call out "bullshit!".

Yamaha's picture

Congress? Yah - these guys will understand all this......

Cursive's picture


In short, the bulk of CIO's responsibility is to manage an approximately $350 billion portfolio in a conservative manner.

FAIL #1.  What about the leverage?

Cursive's picture

FAIL #2:

Our fortress balance sheet remains intact: as of quarter end, we held $190 billion in equity and well over $30 billion in loan loss reserves

There's that number again.

flacon's picture



Yep, sounds like they have conservative investments to me. Nothing to see here folks. Move along. Move along. 

The Real Fake Economy's picture

why does this douchebag repeatedly talk about his stupid "fortress" everytime he gets the opportunity?  this isn't game of thrones you idiot and the only time you should ever use the word "fortress" is when describing your douchebagey ego.  

flacon's picture

Leverage is conservative. Holding one's money in cash or other traditional assets is extrememly risky. /s

Timmay's picture


              jerk   idiot  pimp

       asshole FUCKED ankle biter lie

payoffs crime re-election look the other way

            bernanke fixes  people screwed

               sorry  not really


holdbuysell's picture

Is that the word cloud for a JPM BoD meeting?

Bringin It's picture

It's what goes on inside his mind.

Convolved Man's picture

Ahhh, yes.


See, we are self-regulating and just in case you may have forgotten...



Maos Dog's picture

Is he going to be under oath or not? That's important.

I have seen this guy talk, and he is a really arrogant fucking ass. So arrogant, if fact, he's the kind that will fuck himself if he goes "off-script" and is liable to say something that will come back and bite him in the ass.


francis_sawyer's picture

 "What does the Chief Investment Office do?"

Most days, I just sit around beating off to Midget Tranny Porn on the internet, but on days that Benny prints me up some free clownbux & stuffs it into an account, I lever it up 100x, bet 99% of it on "00" green on the wheel, & use the rest to score some blow & ladyboys in Manhattan...

"While CIO's primary purpose is to invest excess liabilities and manage long-term interest rate and currency exposure, it also maintains a smaller synthetic credit portfolio whose original intent was to protect - or "hedge" the company against a systemic event, like the financial crisis or Euro-zone situation."

What you fat ignorant fucks don't realize is that we're actually in the business of CREATING, 'systemic events' which are designed to get you all to agree to bailouts when it all goes tits up... That's why we contribute so generously to get you retards elected...

What Happened?

Same thing that is going to happen to you if you don't bail us out again (but worse because we have pictures of all of you cornholing choirboys)...

What Went Wrong?

Nothing... It was planned this way from the start... It's YOUR job to do a snow job on your constituents, not ours...

Steps Taken

We've contributed another $100K to each of your 2012 re-election campaigns, plus, there's some blow in the limo's outside... Let us know if you need anything else...


We're just going to sit here and be smarmy for a little while longer... We don't want muppets to love us, we want them to fear us...

Our fortress balance sheet remains intact

As long as the 'paper' illusion remains intact