Dimon Says Execs May Have Pay Taken Back

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By MARCY GORDON, Associated Press

WASHINGTON (AP) — JPMorgan Chase CEO Jamie Dimon told Congress on Wednesday that senior bank executives responsible for a $2 billion trading loss will probably have some of their pay taken back by the company.

"It's likely that there will be clawbacks," Dimon told the Senate Banking Committee.

Under bank policy, Dimon said, stock and bonuses can be recovered from executives, even for exercising bad judgment. The policy has never been invoked, he said.

Dimon, under close questioning about his role in setting up the investment division of the bank responsible for the loss, declared: "We made a mistake. I'm absolutely responsible. The buck stops with me."

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The start of the hearing was delayed by demonstrators in the room who shouted about stopping foreclosures. Another demonstrator shouted, "Jamie Dimon's a crook." At least a dozen people were escorted from the hearing room.

Dimon appeared serene during the outbursts, which lasted several minutes. At another point before the questioning began, he gave a broad smile.

Dimon contended that the trading loss, disclosed May 10 in a surprise conference call with reporters and banking analysts, were meant to hedge risk to the company and to protect in case "things got really bad."

The trading loss has heightened concerns that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis in the fall of 2008.

Two Democrats on the committee, Sens. Charles Schumer of New York and Robert Menendez of New Jersey, expressed concern about what would have happened if the trading loss had occurred at a weaker bank.

JPMorgan Chase is the largest bank in the United States by assets and is considered among the strongest. Dimon often makes note of the bank's "fortress balance sheet."

But Menendez hypothesized about a larger loss, perhaps $50 billion, that creates a run on the bank "and that ultimately becomes the collective responsibility of each and every American."

Menendez also challenged Dimon on his strenuous opposition to stricter financial regulation and noted that JPMorgan received a $20 billion taxpayer bailout loan at the depths of the 2008 crisis.

Dimon last September called new international standards for banks to hold larger capital cushions, which U.S. regulators also have proposed for U.S. banks, "anti-American."

"You railed against us when we were in fact trying to pursue great capitalization of these banks," Menendez said. And he reminded Dimon scoldingly: "It seems to me that the American people are a big part of helping to make your bank healthy."

Dimon insisted that "We did not fight everything" and that there are elements of tougher financial regulation that he does support.

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His treatment by several Republican senators was far milder. They compared JPMorgan's finances favorably to those of Congress.

Dimon skated a fine line in talking about his specific role in relation to the bank's trading operation. Asked whether he personally approved the investment office's trading strategy, Dimon said, "I was aware of it, but I didn't approve it."

JPMorgan Chase's stock price was flat at the start of trading, at 9:30 a.m., but began climbing steadily when the hearing began at 10. It was up 2.6 percent later, the best performer among the 30 stocks in the Dow Jones industrial average.

The so-called Volcker rule, which goes into effect in July, will prevent banks from making certain trades for their own profit. Banks won an exemption to trade to protect their broad portfolios, as Dimon has said JPMorgan was doing in this case.

Dimon told the committee, however, that "I have a hard time distinguishing it." He allowed that "it's possible" that the Volcker rule would have prevented the debacle at JPMorgan but said he didn't know.

The CEO said that JPMorgan 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.