The questions asked of JP Morgan CEO Jamie Dimon at the Senate Banking Committee last week were almost all very weak. The notable exceptions were from Senators Reed, Menendez, Merkley and Brown.
The House Financial Services Committee gets its turn tomorrow, June 19, 2012. However, the Chairman and others have been tweeting and otherwise commenting that their focus is going to be on the first panel of regulators rather than the CEO who’s company took the big bets and lost billions.
Here’s a few questions the House members should ask Jamie Dimon regarding JP Morgan’s high risk trading by the CIO and the multi-billion loss that has resulted so far:
- On April 6, 2012, the Wall Street Journal on page A1 had an article titled “’London Whale’ Rattles Debt Markets” and on April 10, 2012 Bloomberg had an article on its homepage titled “Making Waves Against the ‘Whale.’” These articles provided specific details about the London CIO’s high risk trading, how it was being done, who was doing it and that billions in losses were possible. On April 13, 2012, JP Morgan’s CEO and CFO held an earnings call for the bank’s first quarter results and emphatically dismissed these reports as inaccurate and provided comprehensive comfort to the public, regulators and investors. In fact, CEO Jamie Dimon said the reports were nothing but a “tempest in a teapot.” Almost thirty days later, on May 10, 2012, Jamie Dimon disclosed that the Wall Street Journal and Bloomberg reports from a month prior were in fact accurate. How could it take the CEO of JP Morgan more than a month to learn what was going on inside his own bank when the Wall Street Journal knew a month before?
- On April 4, 2012, Jamie Dimon mailed proxy materials to JP Morgan’s shareholders that included asking for votes on two controversial resolutions: one related to CEO pay and one to take the position of the Chairman of the Board away from the CEO. The annual meeting at which those votes would be counted was held on May 15, 2012. By announcing the truth and the losses after the market closed on Thursday, May 10th, just two business days before the annual meeting, CEO Jamie Dimon ensured that almost all those votes had been cast by shareholders who did not know of the loss or of JP Morgan’s conduct.
- Shouldn’t shareholders have been given the opportunity to make an informed vote and have known what you disclosed on May 10 at least 10 or more days before casting their votes? Given that your shareholders suffered market cap losses of $20 to $30 billion dollars, don’t you think those votes would have been different if you had told the truth on April 13th and those losses happened when the shareholders were receiving their proxy materials? Shouldn’t the shareholders get to revote those resolutions now that they know about the losses?
- You said that the trading at issue “morphed” into something you can’t defend. Trades don’t morph like some living organism that changes by itself. Trades are made by people, changed by people, approved by people and monitored by people. Exactly who made, approved and reviewed the decisions that resulted in what you called “morphing”?
- Is it true that the CIO contributed approximately 25% of JP Morgan’s net income in 2010? How much did the CIO office contribute to the revenue and income of JP Morgan from 2007 to date?
- It has been widely reported that the Chief Investment Office, including its London operations, were a low risk hedging operation for many years, but that it was transformed into a high risk, profit seeking proprietary trading desk by YOU over the last several years. It has also been reported that JP Morgan proprietary traders were moved into the CIO office. Lastly, it has been reported that you often spoke directly with the CIO traders and supervisors.
- Did you personally change the CIO operations to be profit seeking? If not, how did you change the operations? Did JP Morgan’s prop traders move from other parts of the bank to the CIO office? How many formerly prop traders were or are working for the CIO? Have you tracked where your prop traders have gone within your bank? Did you speak with the CIO traders and supervisors and how often on a quarterly and monthly basis?
- 850 million JPM shares were traded between April 13th (when you dismissed the public reports about the massive derivatives trades by your London office that were losing billions of dollars as nothing but a “tempest in teapot”) and May 10 when you finally disclosed those reports were true. Given that your stock has lost between $20-$30 billion in market cap since your disclosure on May 10th, didn’t you owe it to your shareholders to do more to find out what was happening at your own bank before commenting on April 13th? Why did you wait until May 10th to make accurate disclosure?
To read about the background of these events, see this blog post.