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US senators grill JPMorgan over hidden losses

Scathing congressional report widely blames key former executives for $6.2bn in trading losses at biggest US bank.
Last Modified: 16 Mar 2013 01:44

Two former high-ranking executives at JPMorgan Chase have faced tough questions from US senators about why the bank played down risks and hid losses from regulators when it was losing billions of dollars.

The hearing on Friday came a day after the Senate Permanent Subcommittee on Investigations issued a scathing report that placed widespread blame for $6.2bn in trading losses on key executives at the nation's biggest bank.

The losses came less than four years after the 2008 financial crisis and hurt the reputation of a bank that had come through the crisis known for taking fewer risks than its competitors.

Three employees in the London office were fired and it led to the resignation of Ina Drew, the former chief investment officer overseeing trading strategy.

Douglas Braunstein, the former chief financial officer, and Drew were pressed to explain why bank executives gave federal examiners in April information that significantly understated losses for the first quarter of 2012.

"The number I reported [to the regulators] was the number that was given to me,'' said Drew, who resigned last spring after the losses became public.

Drew blamed the losses on executives under her watch who failed to control risks out of the London office. She said that undermined her oversight and kept her from preventing the losses.

'Hid losses'

The report also suggested that CEO Jamie Dimon was aware of the losses in April, even while he played them down publicly.

Senator Carl Levin, the chairman of the panel, implied that Dimon set a precedent at the bank for withholding information.

Dimon acknowledged in May 2012 that the firm had lost $2bn on risky trades out of its London office. The losses have since been revised to more than $6bn.

After reading the report and hearing executives testify that they did not know who was responsible for informing regulators, members of the panel questioned whether the nation's biggest bank had become too large to manage.

The "trading culture at JPMorgan ... piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight and misinformed the public'', Levin said Friday at the hearing.

New York-based JPMorgan acknowledges that it made mistakes but rejects any assertions that it concealed losses or risks.

The bank said in a statement Friday, "We have made regrettable errors and overhauled our risk policies to correct these mistakes, but senior executives always provided information to regulators and the public that they believed to be accurate.''

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