throughout the country in the world who have additional offices all throughout the country in the world, and is the expectation that all the information -- i mean i suppose that is the system but i mean i think we see this exactly as it was happening here. .. do you regularly use the for the

communication what are your property calls that you've put in place since we know that's one of the major failures in 2008? i'll ask mr. al vees if he has a comment on that. >> sure we set up a variety ways. the f sock is one of the mechanisms. for large institutions we have supervised that include all the relevant supervisors we meet regularly to talk about issues of concern. the examers in the field also talk with each other, we talk with the occ examers at the national bank. we talk with the fdic and the fcc when there's a broker deal. we have a matrix of communication. >> you described a matrix of communication. it's come to light with the matrix of communication nobody was catching it or seeing it. we know the hedge funders were sought, eventually, that's what

i've read, that's the indicator. but, you know, that is the communication really working and are you communicating as information not as robust and grand lar as it needs to be? >> to keep it a little bit in context, a bunch of the, you know, there were significant changes in the portfolio of the cio portfolio in the first quarter of 2012, and those changes were very significant contributors to this loss. as the company itself has mentioned, the reports that the company generated, the kind of review and risk-management it had in place had serious flaw it is to it. we had access to that information, but to the extent activity flawed in the own management didn't have the a good handle on the information and understanding the risk that would make it more difficult for us as well. we have to rely on information that we get from the organization itself. if that's flawed, that's going to be a problem for us.

>> that's mira mr. against leer. >> thank you. let me say that. regular order when the second panel comes on to start over. in fairness to the member to the members who have been here the whole time, at least on the republican side, i have no control over the minority. we're going continue down the row. we're not going to come back up, in fairness to all of our members. we'll continue down the row. and -- i want to acknowledge the loss of your mother. members of the committee, express of our sympathy and recognize you for five minutes. >> thank you. thank you mr. , mr. chairman. chairman sai peer row, it has come to light that jpmorgan chase risk value a number of the times over the past six months which leads to the investment appearingless than they were.

are there penalties to failing to disclose changes to the investors and fcc? >> thank you. i think mr. dimon testified in the senate they chge the value-risk molds all the time. the area we're focused is the change with respect to the model they use on the iranings release on are april 13th, that the esktsd of understating the valued at risk. our rules do require that changes the value-risk model, the assumption parameters have to be disclosed. part of what we're investigating is the extend of that disclosure whether it was adequate among other things. >> if you conclude that basically the rules were broken. >> there could be, yes. >> let me ask you, this

penalties were not enough to prevent jpmorgan for such activities. i would like for you to explain to us how should this penalty be structured to deter such behavior going forward if that is the case -- if that is the case. >> first, we need to finish the investigation and see the full scope of conduct that potentially, if any, violates the federal security laws and the commission would make a determination about the appropriate sanction is to deter such conduct in the future and to remediate the violations. it's hard to say what that number would be if there was a penalty whether there would be a probablily a requirement they bring to bring the special consult about it to rework the financial reporting control and whether there could be other sanctions. we have a wide plan plea of

sanctions that are available us. it's completing an investigation to understand we're with have issues simply with a bar model change that's not disclosed or we have risk-management issues other disclosure, shortcomings or failure. it's hard for me to guess where u we might land. >> trading with one -- many factors that contributed to the financial crisis in 2008. an opponent of the proponented rule have argued that it will do more harm than good. in light of jp mother morgan's loss if it was delayed or otherwise scaled back with other measures such as increased capital requirements and new controls be sufficient themselves to mitigate the risk by trading?

>> in the first instance, congresswoman, it's not choice for us to make. a law is a law. we -- in regard to the viewl. rule. we agree the capital requirements are important. but the provisions of the rule are also the law of the land and we have an obligation to implement those as well. >> it could be the requirements and new controls on the -- be sufficient? >> i think property visions of the rule -- provisions of the rule particularly reporting the record recordkeeping with the governance relating to promanage the and the regulators on the activity. and i think that was the actual a valuable compliment to the capital and other requirements of dodd-frank.

>> thank you, mr. chairman. >> thank you. five minutes. >> thank you. mr. chairman, mr. curry, the bloomberg article came out on april 6th. when did you have knowledge that there was a problem with this portfolio? >> the size and complexity of the port portfolio jpmorgan chase became clear to us at that point in time. after that, we began to ramp up our discussions with bank management and our presidents . >> what day would that have been? >> i believe it's the -- around the 9th when i assumed office. >> you were having extensive conversations with management about this position? >> that's when we became aware of the potential significance of the situation.

>> happen peoria, do you have rex of when your agency had concern about the issue. >> it was around the same time when the article appeared. this was in the broke dealerrer. we wouldn't had people focused on that. >> again, when they articles about it started to run as mid stream standing up the reforms for credit derivatives. we see the clear credit and clear had some of these in there. even the ig9 one is in there. >> in that same time -- and mr. aler alverez. >> we we were informed by the firm at the same time they informed the fcc. >> i want to fast forward to

april 13th. when mr. dimon said that this has been blown way out of proportion. it's the teapot. did you find that comment a little interesting the fact that you are, you know, i guess all of the regulators were activating some action that was stimulated? did you think that was an interesting -- at that point in time we were still trying to determine the underlying strategy and the ramification the to the to the bank's financial position. >> would you call that the tippest of the teapot? >> i would not have had information at the time to make a conclusion one way or the other. >> ms. shapiro? >> it's part of the contest for the review. if you look at the fact the bar

number didn't change for the earnings released. it's not requiring to be disclosed. if you child abuse to -- child choose to it you must. if the fact it didn't change at year end to the year release. is parked the context whether it was a tim pest tempest in the tea teapot. when we saw the bar doubled because they revertedded back to the old bar model. as part of the context of how you view the statements. >> well, i think particularly in your area of oversight, the statements ceos make are relevant is that . >> they're always part of what we look at when we're looking at issues exactly like this, yes. >> and and so -- i mean, i can understand if you're a ceo of your company and you have bad news we're you're trying to tap it down. there's a fiduciary

responsibility to, i guess if we're going to talk about disclose sure and transparency of statements comes out would be accurate or a fair reflection. would you agree with that? >> if you choose tow speak. you must speak truthfully and completely. and not allow yourself to leave a misleading impression from the information you're putting out. >> is there a certain amount of duty whether it's mr. dimon or the cfo whoever speaks to make sure that the team thinks it's an accurate statement? >> will, i don't know about the internal processes for -- i'm asking you about -- if you're going to make a statement say on behalf of the fcc, don't you ask your people, is this a fair represent nation. >> yes, i do.

>> so there's a a certain amount of duty to do that. >> again, the duty under the federal security laws is to speak completely and truthfully. how they arrive to the truthful statement is a matter of their internal discussions. >> thank you. five minutes. >> thank you, mr. chairman. i'd like to point out that anybody who was interested in breaking up some of the large institutions should sign into h hl149 which i voted against repealing in the first place which was repealed by a bill which i recall three republicans response to that act to repeal the glass eagle that allow the beasts of wall street to come into the existence. anybody had other ideas on limit to the size. i agree the concern. to the panel, i'd like to say that the comments of transparency are appropriate. in prepare for the hearings,

it's difficult an complicated stuff. the problem is on the particular hearing all i could get was news report and the only ones i could get were based on assumption and educated guesses and the educational research had to piece together. there's not a enough transparency for your agencies to allow outside people make a comment on what might have happened. i would encourage you, if you can't come to conclusion. i'm not suggests you should do it rapidly. whatever facts you unveil yourself make them public as soon as you can to the greater public can engage in a discussion which will enlight us to what might have. mr. curry, there is only a $2 billion item. is there anything have you learned thus far that limited interest to $2 billion. could it not have been a $20 billion loss? >> part of our review process

now is look at the unwinding of the position. and our review process along with the other federal bank agencies . >> could it have been $20 billion? is there anything prevents? >> there's a concern from the supervisory standpoint. it's a result from the apparent lapse. >> it could have be been $20 billion. >> and it could have been $200 billion. >> in another institution and another other circumstances possibly. >> is there anything in the regulation anything you found thus far that would limit it only to jpmorgan. >> we have surveyed the other large banks do not believe that any of the banks . >> but they could have. >> they do -- we believe they do not gauge in similar . >> they could. it. >> i don't know you're being so resistant. i'm not asking. you'd know it if i really. >> we view that as being a

serious issue. that's why it's the focus . >> it could have been a $20 billion item. it could have been a $200 billion item it could have been every other major large bank and other counter parties. that is any concern. i read your testimony and you can say that thus far you found no one else engages in this activity. again, to me that's the biggest question is here not necessarily what happened in the instance other the way it might enlighten us or educate us in what could happen. i'm asking to be sure when everything is said and done sister not the focus and i intend to ask the rest of the panel. it's no focused on one instance or event. it's whether it could haveshaken the system again and you competent yet what you have what your reaction would be is that the system is now sound. >> we don't believe the system is at risk from this situation. and we are -- that's why, again,

we're focusing on making sure that the all of the institutions we supervisor have rigorous . >> thank you. mrs. share pee owe? >> i think the system was sounder than it was. we have to get the title 7 regular will story rein place. it will give us access to the kind of information we need and the public needs to parts . >> thank you. >> i think the american public isn't safe on the roads until we get the transparency and the rulers of the road in the place. that's why i made the analogy and my daughters and the keys to the star. i think the american public are bystanders to some taking on excessive risk in '08. >> what you found in this instance. indian in this instance is there any indication what happened here right expose not jpmorgan a risk to the system. >> i think it's exposes risk

broadly in a regulatory system that we're not covering london and also in credit derivative products that we have not finished the task. >> i want to jump to london. i think your testimony was important on page nine if i recall. i want to read back to you when you said i think it's good. i want to follow mrs. ma loan know. we've been chasing the -- it's all about london. you read the statement -- the statement was simply, that section 722 d. of the dodd-frank says if it has a directive significant connection with activities and effect on the american city in the united states you have oversight. would you agree that statement allows you to regulate? >> thank you for five minutes. >> thank you mr. chairman. the debate we are having the discussion this morning from the standpoint for the last four or

five years there, we have finally the american public found out what goes on in banking service institutions. the manage risk and that's how the whole system works. a lot of folks who didn't know what went on behind the doors. now they do. they manage risk. they take risks, sometimes they win. sometimes they lose, today we're discussing an entity that took a risk and lost. and i think that, you know, the things we're working on and ladies and gentlemen, have of the panel here have to find a way to walk the fine line to keep from talking all the risk -- the anltd to take risk from the institutions otherwise perhaps they won't do any investing and the whole system collapse and stops and find a way to pass the risk on to other entities and taxpayers which is the too bill to fail doctrine does.

it's not the way to go. the fine line you're trying to walk, i appreciate that. and thank you for the service. mr. curry, to follow up on gentleman from california's remarks early we are with the regards to the capital. you made comments in the testimony here that tier one common capital of the large banks go from 5.2% to 7%. in rough figures, i got from i think your testimony or it looks like tier one capital for in fact, it was your testimony for jpmorgan is 5.7%. is that accurate. >> yes. >> they are below average, is that what you're saying? >> no. i'm sorry, they need existing minimal capital requirements for . >> but you said that the tier one capital average is 7% for same size. >> it refers to bank's level of cap tail and bank holding

capital. it might be part of the confusion. >> okay. all right. are they cap losed in your judgment? >> yes, they are. >> okay. what were the capital account prior -- back in 2008? >> i can't recall offhand. it has increased since then. it's been the overall objectivity of heightened supervision program. by increasing our capital they made more money? they did that by taking risks or through the northerly normal management risks? >> we expect banks to be in the business of taking manageable risks and having effective internal controls over those material risks within the organization. then ultimately, we look to capital as being the cushy for those risks that occur.

>> okay. right now the investment banking portion is underneath the main bank which would be covered by fdic insurance, is that correct. >> jpmorgan is an fdic. >> is there a main bank. >> they're a separate affiliate. >> the bank is separate. there no fdic insurance dollars at risk with the activity that took place. >> i believe the activity in this case, congressman, was in a branch of the bank itself not in the investment company affiliate. >> a lot of banchs have a lot of branches and some of them are covered and some aren't based on activities. my question is, were the activities takes place in the situation were they part of the umbrella was underneath the main

bank and insurance exposed. >> yes. >> they were? >> yes, sir. >> the words deposit insurance covered a major problem insurance would have had to kick in and take care of it if. >> yes. >> what's your opinion of that? >> that's the issue, frankly that's raced here. >> is a grave concern to you? >> i think it's a serious concern that's raised it's why the inquiry is going guard. >> we have a situation with the banking structure that we have right now to me, t a real problem from the standpoint you have the big entities that have this enormous exposure and you feel they're paying their fair share base only the risk they're taking exposure compare to the rest of the banks who don't do this? >> well, the in terms of deposit insurance, premiums is that the issue? >> right. >> well, for the large institutions, we do have a

risk-based deposit insurance system specifically targeted for the large institutions. it is true that the kind of trading activity that occurred here is taken into consideration in setting of the deposit insurance premiums for large institutions. >> okay. thank you. >> thank you. mr. lynch for five minutes. let me say mr. pearse will conclude the panel. we will bring the first panel -- dismisthe first panel and excuse you and go to the second panel. mr. lynch for five minutes. >> thank you, mr. chairman. i want to thank the witnesses for attending and thanking the committee for the work. if not for the exposure of the taxpayers we wouldn't be here. i want to note that starting back on the fall of 2008, jpmorgan and a bunch of other wall street banks received about $7 billion from the american

taxpayer, jpmorgan chase itself received $25 billion and in those loans. all totalling the amount of federal reserve lending support to jpmorgan competed $45 6 billion. and i note in november of 2011, bloomberg article estimates that the bank made nearly $4 -- 45*8d million profit from the emergency loan from the fed. in addition, jpmorgan chase has access to the fed discount window and the deposit tear base which funded proprietary trades which is fdic and taxpayer ensured. there's a lot of exposure for the taxpayers. that's why it defies logic that we would allow an institution with that type of support from

the taxpayer to ability in this way. mr. against again leer, i enjoyed your opening remarks. i thought your testimony was great. i have two girls myself, i have em pa think for you and giving your car keys out. but i do know that mr. dimon's testimony earlier and the previous hearings on the senate side he basically confirmed news reports that these trades while they were managed, i guess in the new york office, they were actually executed in jpmorgan london office. i'm guessing your saying some of these were executed in the cayman islands as well. >> i don't know the cayman islands. in other circumstance, kay man islands, long. -term -- the jpmorgan chase

chief investment was executed in london and represented in the question. the deposit insurance fund we heard from was at risk. >> okay. we also heard prior testimony that -- actually this is? discussions of legislation that would limit derivatives trading that a substantial% age of jpmorgan chase derivative business has moved to london or in the process of moving to london. is that correct? >> well, they are very significant operation out of london and they operate as a branch in many countries and they'ved a rotated to -- advocate to the commission it not be covered by dodd-frank reforms. i have a different vote and i hope the commission will vote out to get public comment on this thursday we don't create another london hoop hole. >> that's i want to ask you

about. how does your oversight tool difference when trades are executed through london in as opposed no the u.s. what are the the london loopholes you describe? >> congress has given us discretion to interpret the act 722 d. if it has a direct and sufficient effect on the commerce on the activities here in the u.s. it's covered. that's the debate that's going on is as interpretation of a very critical part of dodd-frank, i believe that to answer the question, these would be under the direct significant effect on u.s. commerce on activities. >> thank you. one last question, i have about a minute left. >> may 18 i read the 2012 morgan stanley issue, the research note estimating that the jpmorgan chase losses could reach as high

as $5.2 billion along with the report contained some analysis of how trade and loss might have our can. it's assuming they were right and there is a limited amount of information on this, but this is assuming it was a -- ig89 that you mentioned before this is a more standardized derivative that is approved for clearing both in the united states and europe. there are estimates that the losses could reach as high as $5.2 billion. do you think that's somewhat accurate or not? >> i'm sorry? >> we're still reviewing that with the examingses at the bank. the scope of the potential losses. but our focus is to monitor the derisking of their position. >> thank you. >> i would like to . >> mr. pearce. >> i was trying to get an estimate of $5.2 million is

saying it's accurate. >> mr. lynch, let me say this. no one knows. i mean . >> that's why we have the witnesses so they can testify and not so you can is a sc to flaw them. >> your time is up. mr. pearce -- i mean, if you know how much the loss will be . >> that's a matter we're still reviewing under examination activity. >> thank you. mr. pearce? >> thank you mr. chairman. the if we were to kind -- if we're going look at derivative trading and we're going to priorize the risk that these major firms face. would that particular activity be on the middle or at the top? so is that a scary, risky thing or not very risky? >> what priority should we with looking at when we consider derivative trades? >> i'm not sure what priority

congress wants to . >> no. >> regulate. >> you're in charge. we simply have the you're in charge of risk. that's what you say. >> from our perspective, we're taking two high priority approaches. one, is we think it's important to firms have good risk-management. >> my question is not that. my question is derivative trading itself is it high risk. >> it can be. >> it can be a very high risk item. that's all. >> allow the witness to answer the question. >> mr. chairman, i have five minutes. it he's going to skew off to the side, . >> he's trying to answer your question. >> my question country what they were doing. it's risk relation. active the priority-based -- it's the difficulty of regulative de-- what i'm going to go to next. you are the supervisors in charge. that's the consolidated

supervisor in charge of all of the people who regulating l activities, i see mr. curry says that he's got people 65 people on location, these are not regular people, these are people with twenty more years of experience skills and key risk areas. teams of ph.d. economist from the occ department, he then identified in the next paragraph that the examination teams have three objectives. one of which is the key risks. so derive derivatives could be a key risk. they are problem maltic. so my question is with the 65 regulators onsight. would you know the name of the one who monitors trading derivatives. you're the guy in charge. federal reserve, you say so in your testimony. >> we are not the one in charge of the occ. we are consolidated supervisor. we supervisor the unregulated portion of the holding company at role of the consolidates activities. but the specific activities in

the nationalback, those 65 examers you're talking about, i'm . >> would you have the name of whoever is in charge of the derivatives? >> we operate supervision policy, we have residence examer in charge of the institution, that individual allocates responsibility for individuals to exam in the particular areas of the bank that can change over time. it can also be the result of someone being brought in. >> if you have a name who was in charge at the time you're ask discusses earlier? neede during thed time. >> not the .eoplge >>t the website?tmen >>fi ryan, would you let mr. anders find a place to maybe sit? so he can -- thank you.

thank you the chair wishes to remind all of our guest that the manifestation of approval ore the disapproval incoming the t singes is a violation of rules that com governor ther committee.disap the chair wishes to thank the guest in advance in maintaining order and deck rum. t our second panel is made up of one witness, ceo of jpmorgan chase, mr. dimon, and mr. dimon, you're recognized for five minutes, but maybe, if thed, mr. cameras will take a picture, and then sort of exit.meras all right.il mr. diamono, you're recognized for five minutes. we welcome you to the committee. >> thank you, mr. chairman.comu

chairman baa cuss, rankingommie. member frank, members of the committee. i'm discussing recent losses. >> mr. chairman could we get pull the microphone a little bit closer. >> these losses are generated considerable attention and whil we're reviewing the facts, i pul rll explain everything i can to the extentep possible. jpmorgan chase is six lines ofc. business provide a array of financial services toing individuals small and largei businesses, governments and bus nonnot for proof thes. pr theyov include deposit accountsy loans cds within mortgages, capital advice, mutual funds and other investments. let me start by explaining whats the chief investment office does. like many banks we have more deposits than loans. at quarter end, we helde approximately $1.1 trillion in

pochts anded 00 in -- treasuryposits unit cash and portfolio treasuries agencies, mortgage back securities corporate debt, other domestic and overseas akes set finance serve as important vehicle for imagine -- consolidated company. in shorting with the buflg of the responsibilities is to manage portfolio in af conservative manner. primary purpose is to invest excess liabilities and manage long-term interest rate and current exposure. ite maintains a smaller creditig portfolio who's original intend was to hedge the company against a event like the current eurozone situation. what happens? in december 2011, as part of the firm wide effort in anticipation of new capital requirements we

instructed ceo to associated .f ne to achieve the in the then itic credit portfolio they couldsetsa reduce existing positions instead, starting in mid january, it involved an complexr strait gyre they entailed any . this strategy ended up the portfolio that was larger and ia resulted inrk even more complexa and hard to manage risks.gy tt thisbe port portfolio is somethg that rather than protect the thrm could view a larger risk. as a result, we let a lot ofhed people down.toing rath we are sorryer for it it. we believe the series of eventss lead to the difficulties in the portfolio. these are detailed my written testimony highlight the follow.t strategying for theie reducingtc poorly conceived and poorlythey vetted inspect hindsight, the trade der not have the re understanding of the risk they

took.onc the risk for the synthetic portfolio should have been specific to the portfolio in much more granular, onlyhindsi allowing lowergh limits on each specific risk being taken. cio should have gotten more scrutiny from the firmken. management. in response this instance wec have taken a number of important actions to regard against a recurrence. we have appointed a entirely neo imadership for cio. importantly or team has made neogress in managing, analyzing imd significantly reducing the risk going forward.po it is not reducing with the losy is already incurred it does notg preclude future losses it reduci reduces the probability andes magnitudes of mutual losses. we also conducting an extensive review of the incident which are board of directors is independently overseeing. we when we make mistakes we tame them seriously.

we are oh our own toughest them critic. we can never say we component make mistakes the fact we knowy we believe it's to be an isolated event.ly lesso we will not make light of these loss but they should be put into perspective. lo will lose some of the shareholders money noss client,n customer, or tax taxpayer moneyn was effected by the accident. tl the balancee sheet remains in act. we old $190 billion in equity.em we maintain strong capital ratios standards.and as of march 31, tier one age was 10.4% and tier one common ratio is 8 % 2%. both among the highest. we respect the numbers to be higher by the%. end of the year. all of our lines of business remain propertible and continue to serve consumers and

businesses. there are two weeks left in the second quart. we expect it to be profitable. in short the strong capital position did it did what was itt was supposed to o do. this incident is embarrassing with it should not and will not theact the employees from main mission, to serve clientsd consumers, and communities a around the globe. during 2011, jpmorgan raised anpital and provided credit of over $1.8 trillion for consumera and commercial clientsis of 18% from the prior year. we provide more than $17 billioi tots credit in small business u. 52% over the prior year and ove the past three years in the face bu signant economic we made the decisionne not to entench bt step up we are the only bankf willing to commit to lend billions to the states of california, new jersey, and w illinois. all of these activities come con

with risk. and just the main focus is serving the clients we remainedt focus -- global economic and financial involvivity. last i would like to say in thes face of the recent losses we come together as firmnancial ceknowledge the is mistake and learn from fixing them. com t mm will merge from the moment stronger, betterit company.l le i'd like to speak directly for a moment to our employees many of i whom who are watching hearings a today. i want you know how proud i am of the company and how i proud g of what you do every day forroud your clients around the world. atwelcome any questions you have. thank you.ry >> thank you, mr. diamono. let me sayan that the panel we said there was jpmorgan was hadh sufficient capital and there were no liquidity problems and h

deposit money client money was not at risk. mr. chairman, point of order? >> are we going to ask the witness to take an oath and testify under oath or has that process been waived here? poin >> we've nevert done that.here? in my mind, i see no reason. d >> i object to that, sir. >> okay. i see noat reason to place this witness under -- this is not ato criminal proceedings or even a t sieve civil proceedings. he's voluntarily come beforepree us.di at this time, mr. man disiew will for five minutes. thank you, mr. chairman for calling the hearing.

mr. dimon, in the last paragraph of your written testimony,mr you've written all of these activities come with a risk and just as we are remained focus oh serving our clients we have also remained focus on manning the risk of our business, particularly given today'saine considerabled global economic ad financial volatility. i just returned from conference in cope hagueen with members ofr the e.u. parliament discussing i the tremendous crisis going onco with the jones eurozonendous countries.ri the imf estimated that the average debt of the 17 eurozonee companies is about 80% of gdpt inspect the united states the debt of this country which includes state, local, and federal is 107% of gdp., my question is to you what do

you think is going to be the problem two years from now inwht terms of the health department and the financial industry. or the eurozone? >> sorry i take up some peoples' time in this loss. it is not significant in the global scheme of things and the thing you have to worry about in the legislation or its. europe is a significant event. i'm far more worried about europe than eye am about the to trading position. i hope the legislatives overent. roere can overcome the complications and keep the yoapd alive. >> can you give us a reading int your opinion as to the impact, for example, on the u.s. economy should the greekss decide to get out of the eurozone, go book the d.a. ma, or should the entire eurozone itself collapse? >> unfortunately ab as bank we

have to prepare for all event tal is. e not guessing what happened. we come forward to the shareholders and say whatever a happens question survive and we thrive going forward. sre europe, greece, defaulting a loan is no the the pressure. greece leaving the year row and be a bank runght in italy or spain. we see they're trying to put firewalls in place from stop iee from happening. if had to guess at outcome, it might work. it's important they do that and hold back crisis and have to go about having a fiscal treatingwo among ther 17 nations of the to euro. short term solutions may stop a crisis, it won't stop -- theyscl have underlying problems.aty >> the italy has an economy that's two enough times ofing ireland, portugal, and greeceom combined.at

the italian banks don't have a liquidity problem. mbey have a problem with debt. could you address the pact of debt on nations as it related te the ability of -- as it rebilitied to liquidity more important the overall economy? >> the banking, italy is surprisely, a wealthy nation. they have the where with all to met the teat. debt. theyin have a cries -- they owne lot of the sovereign debt.r banking systems don't functionri very well if the sovereign issui is not functioning. they go hand and hand. stu need to fix both to make the whole financial system grow.verg >> the reason i asked is that as you know, the e.u. are the f largest trading partner. europe bank is obviously involved inyo international finance and it's always larges

important for members to be able to glean from people who are on the inside seeing it happen. can you get -- i'm not looking far forecast, but how do you se the eurozone issue as being resolved? >> in europe what we see is the politicians have the will. they want to fix it. they talk about no plan b. we there's only one plan to to keep the euro alive. what economists think and a lots of smart people i will listen to, there will beat a firewall f italy and spain.we, at you will growth and austerity plans for the southern nations. andsm that the 17 nations -- the fiscal treaty com has more strikes in it.ro that is believable by the world and they'll show long-term progress in getting down the debt of europe.as >> thank you. c >> fivets minutes.

>> you said that you want the particular to be smart regulation as opposed to more. the commodities tradings commission budget that was $200 million for the year it's been proposed to cut. the rate of 208d. do you think at the level of pro. do you think at the level of 180 million to get smart regulation. i have never looked at the budgets and i don't know what they need and it's almost impossible for me to comment on it. >> i'm disappointed and the appropriations committee is 27 to 19. i am surprised because it did seem to me you were well informed about what the federal

government does and doesn't do and to talk about smart regulation, but in effect, give them a pass on the substantial reduction and see if they made a mistake, the next question is the legislation that would remove any -- over and above the volker rule they would put out derivative trading which you spoke about favorably, but there is legislation that would have exempted the transactions in question and any other transactions conducted overseas and not in this country from the rules about clearing transparency. do you believe that we should enact that and exempt the kinds of activities here even when conducted by an american institution from these regulations? >> these trades are not exempt from regulations. >> no, i'm talking about the regulation, mr. dimon, you know what i mean. i'm talking about the specific rules enacted in the specific

reform bills that are about to be adopted and transparency, et cetera, there is a bill, as you know that would exempt derivative rules, whether in a bank or know, but there are two sets of rules here. do you support that bill that would exempt these trades from the rules on derivatives that we hope to have in place? >> yes. >> why do you think that they are adequately regulated elsewhere? why would you not want the american regulators to have an ability to, for instance, transparency and clearing where possible? i thought you were approving of those. why would we want to except those activities and these rules? >> these trades are visible by occ and the fed. 16% of the traced were, in fact, cleared and all of them were fully collateralized. >> mr. then they would have met the rule, but it does seem to me

there were problems with this in terms of knowing about when it happened and in terms of being underinformed and you are in favor of -- >> not any. >> the transparency is part of the thing that would be exempted from. and we have a time issue. you said -- because you have a fortress balance sheet, these are not a threat. what about institutions whose balance sheets are less impression national, a chain link or two. if we don't just legislate for j.p. morgan chase, is there a danger that the financial institution with less of a strong balance sheet might cause some problems? >> i don't know, but i think you

should all take comfort in the fact that all banks are better capitalized. the system is far stronger today. that was know the question i asked and we can't assume that will be the case forever and there are some resisting the capitalization. would that have had problems in it that we didn't have because of the balance sheet? >> that assumes that there's something special about the way you are, but we can't assume that will be the case for every financial institution. >> we also said there was going to be profitable -- >> please don't filibuster. let me ask you, finally, that there would be some callbacks for compensation. we both have taken some responsibility here. will the callbacks for compensation, is your compensation on the table for consideration of clubex? >> this whole with act should be reviewed by the board --

>> answer my question. >> my compensation is 100% up to my board. >> mr. dimon, you said there would be callbacks for people -- >> they will do as they see appropriate. i can't tell my board what to do. >> thank you, mr. chairman. mr. dimon -- >> over here. >> let me explain to the witness just -- because a little unusual procedure, the republican side elected to go in order and not to come back up to the top to allow all of the members to ask question and the democratic members are starting over. >> with modifications for people who are here or not here. >> that's right. thank you. >> miss biggert for give

minutes. >> thank you. >> the model which was used to estimate losses that occurred a particular trade or portfolio. the press has reported that j.p. morgan changed its model which allowed its london traders to take on more risk and then j.p. morgan changed its model again and then to top it off this change occurred in january which seemed to be material in nature, but was not included at value at risk model. the sec has said that when a public company changes its model those changes must be disclosed. so why, exactly, have the risk models changed? >> we have hundreds and thousands of models and they're periodically changed and updated and it usually makes them better and constantly trying to be improved and back in june of the prior year and an independent

model risk group, they're trying to improve a model. it was approved and implemented in january and as of april 13th, we had no reason to say -- clearly, when things started to go south several weeks later, we felt that the new model was not better and went back to the old model which we thought was better and we disclosed that in the 10q and we filed the 10q on may 10th. okay. so it was changed may 10th and there was an approval? >> there's an independent model approve board that approved it. and this is one of the things we'll go through in a lot of detail and make sure we know all of the facts exactly as they happened. we don't run trading on one model for a lot of other things that should determine your decisions. >> do you think that that was adequate disclosure?

>> we disclosed what we knew when we knew it. >> okay. so who was responsible for making the change? >> it was the -- it was approved by an independent model review board. i don't know, it was still part of the review. >> you don't know who made the change in the company or decided that there needed to be a change. there are constant changes, based on new facts and new history. do you think that regulators should have noticed whether there was adequacy in the reporting? regulators review periodically models and model changes and in this case i wouldn't blame that, if we failed to pick up inadequacy i don't think we should expect regulators to pick it up. so you don't think these changes had anything to do with what happened? >> i think it may have aggravated what happened.

i wouldn't say it was the cause of what happened. >> all right. i yield back. miss waters for five minutes. >> thank you very much. mr. dimon, i am trying to understand your position relative to dodd frank and a number of other issues. i'm want going to use this and i don't want you to use this as a way of a time that you can basically just give us a lot of information that we don't need. you said you support 75% of dodd frank, but after your testimony last weekend, after following your statements and the lobbying of some of the industry of the last two years i really don't know what you really support, when it comes to the most important element of dodd frank een when these reforms would benefit your firm, your

shareholders and america's taxpayers by preventing another financial crisis. of the volker rule you called it unnecessary and you asserted that some banks like j.p. morgan should be treated differently under the rule and a higher speed limit, but at the same time you also conceded that the voker rule may have prevented the recent trading losses in the cio of capital standards. you told the senate that you support higher standard, but the chief officer has testified against a capital surcharge in the largest u.s. banks and on title 7 derivatives and requirements in dodd frank, you say that you want to work with us to implement those reforms, but you work for loopholes through bills here in congress, so i want to ask a new question and this is just a yes or no answer. when we think of the losses coming out of the cio in london.

did those losses stay in london or did the 30 billion or more impact your shareholders here in the u.s.? ? >> yes, it did affect our share ho holders, yes. >> you have lobbied very strongly and you just answered mr. frank that you do believe that that the foreign markets should be except for the territorial regulations we're proposing here and if this impacted your shareholders here why do you continue to take that position? >> i think i said, the occ, these things went to clearing house and they collateralized. the reason we were careful about overseas competition, if j.p. morgan operates under a different rule than foreign

competitors, we can no longer provide the best products and services to the u.s. clients and the foreign kleins and that's why we're concerned about the extra territoriality. when we compete we give our clients which include major u.s. companies better deals. they will go elsewhere if we can't give them the best possible deal no matter how much they like us. >> so you take that position despite the fact that the losses do not stay in london? >> yes. >> and you continue to lobby against or fore exemptions for the lobby. >> i'm not questioning your right to lobby. i'm questioning what's in the best interest of the american public. while the public doesn't know the full details of this trade, it is clear that these trades were not subject to the full

panoply of rules we crafted under title 7, and i think we all need to be just very, very clear about that. and what he said about the risk that you take and having that kind of exemption and whether or not you agree with mr. gensler and what he testified here today in any way, shape, form or fashion. >> i don't agree with him. i heard part of it and i think the starting point should be that the united states is the best, widest, deepest, most transparent capital market in the world that had flaws. we should fix the flaws. we are concerned about some of these things making us not the best capital markets in the world and the best capital markets in the world would make this the best business machine ever, the united states of america. so we just want to get it right. it's not binary, it's not one

thing. these are complex rules and we want to get it right so it works for america. >> thank you. mr. duffy, five minutes. >> thank you, mr. chairman. mr. dimon, good morning. it is clear that we're here because many of the american taxpayers are concerned when big banks go bad, they're left holding the loss. it's one of these philosophies where we have capitalism on the way up where you and your firm make a lot of money when you do well and when you fail we have socialism on the way down and the taxpayers bear the brunt of that loss and that's why we sit here today to make sure that taxpayers in wisconsin don't bear the loss of big banks on wall street. and so when we look at what's going on. would you say that the regulators are capable of sufficiently regulating the bank the size of j.p. morgan.

>> i agree that taxpayers should never pay for big bank failing -- >> we agree we're nervous about it when we had t.a.r.p. and the taxpayers did it just a couple of years ago. we're a little gun shy with big bank losses and the regulators staged a bank like j.p. morgan. >> it's challenging them to get them done in time. >> can they regulate a bank the size of j.p. morgan? >> believe so, yes. >> for your testimony, i believe one of the best and brightest ceos in history held out in high esteem. you didn't know about these trades. you didn't know about these losses. how do you come forward today and say the regulators should have known that one of the best ceos in the industry didn't know and could have known? >> i didn't say that. remember we had higher quality standards and higher rules, most banks are stronger and boards

are more engaged and there's no off-balance sheet vehicles and no more subprime mortgagees. the system is far healthier and you have to look at regulation in it's whole and not the one thing they might have missed. >> if one of the ceos in the industry does not know about the trades how can we expect the regulators to know about the trades and protect the taxpayer? >> i believe they'll kacapture everything. however, they can make it a better system by disseminating the kind of information by getting to the companies and they're critizing some of the things they're doing. i just think we need realistic expectations for regular laters. >> i would agree. but is it fair to say that a $2.3 trillion bank is too big to manage? too big to regulate and too big to control and too big to fail?

>> no. we believe a bank should be bankruptable and that when the bank fails that the clawbacks should be invoked on management. the board should be fired. the company should be slowly dismantled. >> and who pays the losses. >> in a way that it doesn't cost the -- >> that's what i believe. >> if j.p. morgan fails who picks up the tab? >> if j.p. morgan fails i don't think anyone will pick up the tab because we have $290 billion of unsecured debt and i don't think there's any chance that we'll fail, but if we did, any losses the government should bear should go back and be charged to the bank just like fdic is charged backed to banks and j.p. morgan is going to spend $5 billion of fees to pay for the failure of other banks. i don't like the 5 billion, but it's appropriate that the american taxpayer should have to

pay for that. >> i thought you were done, sorry. they should step in and bear the brunt of j.p. morgan's loss should you fail, right? >> the loss would mostly be borne by equity and unsecured debt. they might provide temporary funs to keep them in the short run. >> is it fair to say that j.p. morgan could be a loss of half a trillion or a trillion? & not unless the earth is hit by a moon. >> i want to go to the trades that brought you the 2 trillion. the $2 bill scombron 5 $5 billion loss? ? those were backed up by the fdic, is that right? >> i'm sorry, say it again? >> the $2 billion to $5 billion loss you incurred, the dollars that were used to make those trades. those were dollars that were backed up by the fdic? >> yes. >> okay. >> and why then weren't you

taking this excess deposit and invest in those dollars here with american businesses, american consumers? instead, taking those excess dollars back up by the american taxpayers or the fdic and sending them over to london to make it complex. >> it's not either/or. we have $700 billion of loans. we've got $200 billion of short-term investments in the central banks around the world to handle bank folds. >> any loan that comes in the door that we can make. small business, middle market, we try to make those loans. >> thank you. . let me say somewhere in dodd frank there is a prohibition against them striking the earth. mr. maloney? >> thank you. i would like to welcome mr.

dimon who resides in the district i am privileged to represent, and i would like to note that he has been a major employer in a number of different financial institutions before joining j.p. morgan chase. i would like to ask you, mr. dimon, i thought you loved new york, so why are all these jobs and all this activity taking place in london? and i specifically would like to know where were the losses incurred in the london unit? they didn't take place in the northern unit and could they have incurred in new york just as easily? we learned in the prior regulatory panel that a substantial portion of the bank's chief investment offices, activities including its credit derivatives are conducted and

that other financial institutions and i certainly understand that we're in a global market and we have to be in global markets and around the world, but what is it about the regulatory regime and the united kingdom that encourages such a large portion of these activities to take place in london as opposed to the united states? and i would also say that a large portion of the credit disasters have taken place in london, aig, we bailed out at $184 billion. lehman, ubs, there's a whole seary, and i want to understand why all of this is taking place. why london? >> the predominant part of cio is done in new york. we operate in 100 countries and we're on the ground in 60 countries and we take deposits in a lot of these countries and they have the laws, rules and

requirements and that operation could have been london or somewhere else and sometimes the operation where we have the people, so -- >> is the regulatory regime lightner london? why is all of the activity overwhelmingly and all of the problems appear to be in london? >> i don't think this activity was in london because regulatory activity was less in london and most of what we do in london was european companies. >> well, what are the lessons you have learned from large financial institutions going forward? is there any way to ensure against this type of loss where a trader is forced to hedge the hedge and cover losses that led to more losses? is it possible to ensure that legitimate hedges never morph into something else? >>. >> it's not possible to ensure we won't make a mistake. hopefully they're small and few and far between and hopefully

not life-threatening. we in this one area we failed to have the gran all limits and the review that we should have. we believe it's not true, and we fixed the problem. >> and where the risk limit rules raised while the loss-making position was in the books? no, sometimes, they're triggered and they ask for further focus and we heard about when the limits were hit. so do they raise them? they do get raised, yes. >> and why were they raised again? >> i think sometimes they do get raised so you don't know why they were raised? >> i don't recall. >> was the loss-making position increased in size after they began generating losses? >> what i recall is that -- is

that they weren't increased in size after early april and at that point they stopped making decisions. >> what was the start of the losses and senior management action? >> so prior to april 13th, there had been some losses and people looked to stress testing. a lot of folks thought it was an aberrational thing that would come back that happens sometimes. the real losses started later in april like late april, like the last week of april. at that point they brought in some top experts again and they dug deep and we realized they had a much more severe problem and it was late april that we started to -- and what was the delay between the start of the losses and disclosure of the losses to the office of the

controller of the currency on si site@ at j.p. morgan chase. >> we run the company, the what we know and when we know it. i don't know exactly what older reports oui they're looking at. we don't hide reports from them. they do see p & l, so they know the losses. at one point they explained when it happened right prior to april 13th. we did not understand the seriousness of it until later in april. on april 3rd -- >> my time has expired. >> five minutes. >> thank you, mr. chairman. and forgive me, as i've been bouncing around. just so i can get put it on the ridiculous, we are the estimate of losses? we have not disclosed that. we disclosed the quarter on july

13th, and the full and flair explanation of what went on. i personally, you feel this will never be life-threatening to the party, and probably the second -- and i'll reserve your time if you read the articles on this, the more disclosure they just made the more those betting against position of j.p. morgan can use that to the disadvantage of j.p. morgan. i think it's pretty well established and that this open disclosure and discussion has precipitated some of those losses. so, it's not necessary for him to disclose proprietary information, but i think if you read any of these articles you

see that they're managing these. they said the loss could be 6 billion, but it's just an estimate. it could be 2 billion and some have estimated that, and you'll be doing your quarterlies shortly. the second questiones of going to ask is profit for the quarter and we'll just wait on that one, too. >> but there will be profits in the quarter and that was the point i was trying to head toward is that at least as an institution this is not happy. it's shareholders' money, but not devastating. >> not fun, either. >> and this is actually more of an offshoot having read some of the senate testimony. i want to get my head around something that's looking down the financial and the fixed income and the banking community. we're all operating in an environment that's operating in

zero interest rates. you plug in interest rates today and plug in what with real inflation. so slight movements, whether because by cascading europe or argentina or fed policy or fiscal policy here. my understanding is just little bit of movement would be devastating to your book of business, if you have not hedged that. what scale are you hedged for the fear of movements in interest rates a couple of ticks up? >> our biggest exposures are credits and interest rate asks we try to manage the portfolio in all interest rates such that rising rates don't hurt us because our biggest risk with rapidly rising rates, in fact, we're positioned today that if rates went up we mack moke morey and it does cost us to do that. >> you're heading to the ultimate question here.

i'm trying to get a sense of the cost to prevent to do that type of risk management and that's one of the frustrations. i hear lots of discussion talking about are you doing risk management here and here, but folks don't understand it's expensive. >> i'm guessing it causes probably over $1 billion a year to be positioned where we are to benefit from rising rates as opposed to neutral to rising rates and it protects our company and again, we may be wrong. >> do you have to do excessive amounts of hedging in that fashion or buying and we'll call it interest rate insurance and it might be an easier way to understand it because of your imbalance in both deposits to loan portfolio? >> the investment portfolio is invested to help matters of exposure to make sure it's what i call shorter than most. the duration is three years and if you invest that longer, it's the ability to reinvest $40

billion a year and whatever the current rates are. that portfolio is what we use to manage interest rate exposure. your universal lam is you're saying -- >> the $350 billion portfolio. >> and that costs you almost $1 billion to insure? >> just to keep it positioned to benefit from rising rates. >> in this type of environment and your understanding, and i know we're all still working on what the ultimate neck anecs, the volker rule. what would have happened in these tradessome if the volker rule was fully implemented as you understand it? >> the volker rule specifically allows portfolio hedging and the original intent it would have been allowed because it was a hedge that would benefit the company in a terrible stress like eurozone. i think it would have morphed into i cannot defend and it

violated the volker rule and if it did it wouldn't bother me and the far more important thing about the volker rule is the ability to make active markets here keep down spreads for everybody and for all investors and that makes it easier for companies to raise money and cheaper for investors to raise money and those investors are veterans, retirees, mothers and they're not just people like me. so that's why we think the volkers have been written carefully to maintain the best capital markets in the world and not stifle them. >> in six seconds, how do you as an international organization hedge against political sxrifk what's happening in

any one trade i think it is unrealic expectations. put in place whether something is a trade or is not is a unrealistic goal. i want to ask you a question if we focus things on the capital requirements rev ranch ratios, making sure there's not too much concentration, it's something regular or its can get their hands around. >> now, if i can get into the weeds a little bit to understand a little bit about your risk models without divulging propry tear information. can i ask, what was it daily, weekly, monthly? >> i believe to be daily.

>>down was a 95% concentration? >> i think we look at both ate and 95. i forget what the public disclosures are. >> a 95% level is a approximately two standard deviation. if you go three, four, sigma, you're talking 98, 99, would that have helped your scenario? i'm curious, would have it happened? >> it is a statistical thing to there's nothing mystical about far. the other things which normally help is having limited or very granule level and doing stress tested. what happens if race blowout. what happens if creditors blow out. what happens if eurozone has a crisis. what happens if you have a credit crisis in the united states. it is one measure. in my opinion, the best. >> okay. i wanted to also go back to a

point. at any point, any point even now knowing having the benefit of the trades. were the taxpayers at risk? >> no i believe one saying eu8d are 0eu8d billion might not ask republican be. >> lastly -- i'm trying to get my hands around this to look at some areas of concentration risk, because we hear a lot about what i think we're doing is trying to turn banks into you utilities and look at concentration risk when the financial meltdown in 2008 much of the concentration was in loans, we know it was in sub prime, based on jpmorgan's size, just size alone, other market positions were able to claysly notice the london related to

credit indexes. do you think, reevaluating your concentration especially in things that are liquid is something that makes sense for the banking institutions as a overable besides jpmorgan. >> that was one of the flaws. i we should have had more began yule limits. it might be a liquid specific credits on limits. we had some but not all. they all should have been in place. >> thank you. i yield back. >> mr. ackerman for five minutes. >> thank you. if i might, i'd like goat back tow -- get back to some very basic concepts. in your opinion, is gambling investing? >> nope. no, it is not. >> what is the difference between gambling -- briefly, if you could. >> when you gamble on average,

you lose. the house wins. >> that's been my experience with investing. but that's -- [laughter] >> i'd be happy to get you a better investment advisers to see if we can improve upon your experience. >> you have a excellent track record, except for recent. i agree with you, but we seem to be treating them quite the same. i used to think that all of wall street was on the level that it facilitated investing that allowed people in the institutions and po topack put their money into something that they believed in and believed would be helpful and beneficial and grow and make money, enespecially help the economy and on the side create a lot of jobs and be good for our country and good for america. now, a lot of what we're doing with the hedging, and you could

call it protecting your investment or whatever, but it's basically gambling. you're just betting that you might have been wrong. it doesn't help anything, succeed anymore. doesn't encourage anything anymore. it creates the possibility that people think these guys know what they're doing, if they're outbetting the initial bet. if you go and hedge against your hedge, which means you're betting against your bet against your first bet, it seems to be you're throwing darts at the dart board and putting a lot of money at risk just in case you were wrong the first time. i don't see how it creates one job, i don't see how it helps the american economy, i don't see how to helps the housing or the building market on the steel market. one tenth of a zillionth percent. if you were a right a majority

of the time, it makes a bunch of money for the guys who did it, and doesn't help the economy, the industry, the economy, or the countried at all -- country at all. and if you're wrong, it puts systematically everything at risk. when i say everything, i mean the confidence the investing community, the public and everybody else in the system. that's a loss you can't hedge against. the more you hedge, the more questions you raise and the confidence of what you're doing with your initial investment. and the fact you've chosen to do this overseas, raises a lot of fussiness and maybe the businesses there -- d.a., d.a., d.a. and it's a not legal to do over here. just as good to do it here. when you come back from the overseas trip at customs, there's a question on the form,

did you have any exposure to form animals. i'm sure the nice people in europe, africa, asia, they have safety codes and enforce them. they still answer question because they're worried about the infiltration into the problem into the system. and putting us at risk. somehow the hedging and wedging thing any different than protecting yourself by taking the odds to las vegas? >> we don't gamble. we do make mistakes. the main mission of this company is to serve clients around the world with did $40 billion in mortgages. assume you want to do that. one of the biggest small business lenders in the united states. we raise 4 will be $500 million for the corporation. we bank them in twenty countries around the world. our main mission is serving compliants, small businesses, and consumers. that's what away do.

i assume you want us to continue on chrysler. >> i want all good things to happen. wouldn't you be po serving the clients better, you have done an adequate job. wouldn't you be serving them if spending more time and energy on the $1 billion. won't do you a better job if you were evaluating the investment a lot clearer with another billion dollars into that? >> in this case, yes. >> but why shouldn't we apply that to the whole program? what i'm doing, i'm raising a question on what is the purpose of hedging? if you're right, you win. if you are wrong, the system loses. we all lose. and there's nothing more importance than that confidence. >> thank you. mr. fetes patrick.

>> thank you mr. chairman. the discussion on jpmorgan trading losses can had whether the activity in question would have been prohibited in the so-called vocal rule would have been in effect. what's your view on that? >> to be honest. i don't know. it completely vettedover written yet. i don't know. >> the vocal rule has specifically portfolio hedging properly done. it became, it wasn't really that. if it didn't prohibit. that wouldn't bother me. >> putting aside the question whether it would have been prohibited. since they can't answer that question either, the ones that wrote it. what's your view on what should be prohibited? >> i believe that portfolio hedging should be allowed if done correctly. it protects the company in certain crisises. i believe it should be allowed. fort follow owe hedging. >> mr. diamond, some have suggested that your position as

a board member on the federal reserve board is a significant conflict of interest. and has suggested that you and ore bankers should resign your positions. how do you respond to that? >> the federal reserve writtens are by you all. i should tell you, i don't vote for the president, i don't get involved in supervisory. i can't serve in the audit committee. the board sits around and talking about the economy, what's going on. there are tbel of federal reserve boards. it's puts together and sent to washington. it's a informational and advisory group. whatever the lawmakers write would be fine. i'd want to hear from a lot of different time types of people. it doesn't have to be me. >> nothing further.

>> mr. shareman for five minutes. >> thank you. mr. lynch wanted to swear in you. you've already said something that is false, that we all know is false -- >> excuse me. >> let me . >> sir. . >> i want to clarify something about swearing people in. >> we had a hearing in accept of 2009. where mr. frank was charge. and mr. frank made a decision not swear in any of the ceos of the banks about what had gone on in september of 2009. i am following the protocol of the committee. . >> if you want to -- if you want to continue to say he ought to be sworn in, that's fine. >> i'm saying that -- mr. chairman. i was not criticizing you. if i can't get to the . >> i'm saying the ranking member had said i'm doing something unusual here. what i'm doing is following the

standard policy . >> mr. chairman, i didn't say you were doing anything. >> i took it as saying. >> i may -- i made no comment. >> i think it was mr. lynch. >> not everybody from boston talks the same. >> that's right. >> mr. chairman, there is normal standard operating procedure. >> i made not comment on the swearing in. >> if i could, another 30 seconds. i'm gratified you follow my request, i will have by tomorrow another list of precedents you can follows and we'd all benefit. >> well, don't get any rush to get it to me. >> mr. diamond, had you been sworn in you would face no legal liability that i think you made is erroneous, i think. we hear are here because we're in touch with main street in our district. and you put forward the idea that there were $350 billion that you had given to the chief

investment office because there weren't small and medium size businesses in the united states that were credit worthy that wanted the money. and assure you, there isn't a member of this panel that couldn't bring you a hobbed -- hundred small and medium business credit worthy in need of business loans from you. instead why you took the $350 million to london. that's why we're here. if you made the small and medium sized business loans. you wouldn't be here. some of that money in london, went to the gambling tables in london. where was it was $2 billion lost or something multiple of that. i would hope you would leave here dedicated to taking the money away from the london operations and lending it to small and medium sized businesses. if you can't hundred in each one

of our districts, we'll do did for you. now, i wouldn't like to put in the record an editorial by the wild socialist at the bloomberg. i assume there's no objection. >> without objection. >> they point to a study published by the imf that says that your bank ebb joys a $14 billion subsidize that it's cost of funds is some -- a.8 percent lower because of the implies the federal guarantee. but we saw in stwaight a belief around the world that if a bank your size was going to go under, there would be a bailout not just of insured deposits but of all creditors. and that belief reduces your cosby.8 percent of your total funds is responsible for $14

billion. you are in a position where you simply too bill to fail. -- too boying fail. and -- too big to fail. and i think the gentleman from wisconsin made this point. you only -- you lost $2 billion or some multiple of that. you happen to be very well financed. you're fortunately and wise you didn't lose more. can you hear -- say on match of behalf of all of the banks with over $100 billion in assets that automatic of them could have survived the mistake this size? i'll ask you to answer that that for the record. why should we allow you to be so big if you go under, we are going to have to bail out your creditors. >> banks should risks relative

to their size and capability. you can't compare all the banks. i'm not going to change what you belief. a lot of banks were important to the storm. i know, it's convenient to blame them all. jpmorgan's size, ability, in 2008, 2011 allow us to do the things you continue to do. through of the government we helped the fdic fund. we lent money to california, new jersey, it allowed us to do it. we try to be a conservative company. every now and then make mistakes. >> how can medium sized banks compete against you when your cost of capital is reduced by 80 basis points? .8% because of a belief they go we'll let them go under. if you go under, we'll bail out

your creditors. >> i don't believe that's true. fact number one, we borrow in the marketplace with the smat ever smartest people in the world it cost us 200 basis points over treasury. it cost the average industrial 100 points over treasury. if everyone was smart, we'd be trading 10 basis points. >> after you lost that money in london, i would expect the creditors would be reluctant to loan that money. >> most 77 is here. the fdic reports looks at average funding cost. we study the report way back. almost all of it was related to mix. money center bank we have a tremendous of money which we keep in short term and overnight which costs us little. but we have to put out what were the checking account for some corporation we invest the money

show and make no money. it shows -- but the actual cost of funds for the retail deposits, market deposits is pretty much like everybody else. >> there isn't a small or medium sized bank that agrees with you. i yield back. >> for five minutes. >> thank you, mr. chairman. i've spent a number of years in banking sector. and i'm approaching this hearing keeping in mind a primary truth about banking industry and that is that the business of banking is inheritly risky. lending money is a risky proposition. this was evident back in february when your firm disclosed in an investor presentation it set aside $28 billion more than ten times that night recent trading losses. in loss reserves against it's loan portfolio. providing that lending and

exposure to credit was an is the largest risk facing america's banks at that today. we must keep this in mind as today's hearing has focused on whether it's appropriate or not. a vocal rule and the attempt to make banks from making risky investments. in the years leading up to the financial crisis, there was hardly a riskier proposition than extending mortgage loans in the midst an artificially inflated housing bubble. it you want further proof look no further than fannie and freddie who didn't need to make propry tear funds in order to lose $2 billion of taxpayer$ money. if it had been in effect, it's likely banks would have had moru exposure to thers housing bubblt and the crisis would have been far deeper and worst. like energy, risk is not created

or destroyed, it is simply transferred. passed on. and i felt the push for the ever more regulation in the economyde represents a continued misunderstanding of our banking system and the roots of the financial crisis and this misunderstanding is by itself, e fieat risk to our financial system andna economy as we movet forward. so, with that said, mr. diamond, during your testimony in the sonate last week you stated we don't w know who has juries diss over in any issue that we deal with anymore. did congress miss an opportunity with dodd-frank to simple if iat our regulatory structure and put an end to passing it to one another? >> it would been my preference we simplify it and we made itpa more complicated, yes. >> how do you spons to those wht site a jpmorgan's recent tradin.

loss of evidence and that jpmorgan and other banks are simply too large and complex to tnage? because of the size and diversity. the benefit of size has got to e recruit clients not us. that is the capital system. an they do things better, faster,as at client benefits. there is know negative to size. the lack of attention to detail and et. cetera. of those lack of sizelients happen in small firm to.ativ you have to weigh them down. on balance, the company has done a good job for the clients and shareholders. we continue to grow and expand from the problem with businesse. are healthy, strong and servingb more people in the united states and in the around the world. we're happening a lot of american corporations travel around them world. helping do a better job where

they want to do business and more exports. of >> mr. dimon, at the activities of the chief investment officere were severely restricted under the rule, and especially to the rgint where portfolio hedging was disallowed, what would thatr do to the risk profile of the cio portfolio? we would modify a little bit of the portfolio and make surei.o. we're not taking undue risks. as i mentioned before, thee portfolio has $8 profit. it's invested rather shorter term, interest rates.ge i call it a conservative portfolio that would have changed the nature a little bit. >> as i s understand the port fs owte is around $400 billion of have not asits that been lent out, is that correct?n >> $250 million.

it seems to me if activities were restricted, jpmorgan wouldt be left with the unappealing option of lowering under writing standards or increasing risk somehow in the port portfolio. m is that a fair assumption. >> it's possible, yes. >> all right. l would you sayow that the vocal rule were imprelimmed. likely overall risk, thesumpon financial system would actually be increased? >> i would love to answer the question. i don't know the answer to that. >> there are hundreds been donea together. i can't tell you. >> thank you.one mr. minks for five minutes. th >> thank you, mr.e chairman. th. dimon, i've been listening nuthin and i think there's another reasonte why you're her some of it has to deal with the

fact that, you know, there were politics to be honest with you some feel that dodd-frank has a role and others feel that dodd-frank doesn't have afa roll some think that regulations, others think no regulation. and i think was that a point we were talking about a lot of deregulation at one point when s first came to congress, anyway. and we got into the problem we're in. a we were about, you know, -- remember the secretary of theand treasury coming and saying with disasters was about to happen. and so dodd-frank came intoetar existence because they t wantedt fix theer problem, we would not where we were. when we have the terribletenc catastrophe that was facing our country. and during that debate, and i want to pick up some placerophe around there, i think representative ma maloney was talked about, there was concern

about lot of individuals doing business in london, and that's been some of the questions thatg have been taking place.t a i understand you have to get thi best deal if your investors, ett cetera, i kept hearing about the london loophole. and from i heard you answering to representative ma lone knee l there is no london loophole that isn't due to any regulation or s lack ofen regulation in london,s yet when i talked to to you buts a number of other financials institutions, i'm from new york, t,so, i talked to them, and they tell me that if we put in certain regulations in place we they'll leave new york and go t london.ti because theyon have less regulations in london. i don't understand, isn't there

some kind of loophole in london, other institutions maybe not jpmorgan chase, they say if we put the regulation in place, nd they will leave new york and take those jobs with that's whas they tell me to london. why is that if there is no te loophole. >>ll our problem -- as far as i know any loopholes in london it could happen in new york. that's separate issue. new if a u.s. company calls up jpmorgan and make and interest rateom stwap, and we can't give them the best deal and they get a best deal in europe, that's where we're thing go.theye the rules at the traction level at margin reporting allat's requirementings may enable the -- two things will happen. cat pitter or whoever the big al company is will get less bidsscn and won't be good for americantw company. and the business will move to

another bank overseas.he you would see some, i don't knot the head count numbers, some firms if they can, put some thele overseas to do business in foreign subsidiariee with the same company they were doing it with in u.s.n put if the u.s. bank can't do the os business ats all, at all becaur the rules areei written so broadly, then we will lose a los of business, you'll lose a lota, of jobs.ause they will not move to london. iwr assure you, they will be ins singapore, china and over parts of the world.n. >> time is so short. last week you referred to big te banks.last in your opinion, could a big dunk be successfully resolved on the title ii of the dodd-frankd act without harming the american economy? >> yes, we have work to do tof harmonize that globallingly. rules in be exact place.

but yes, i believe it can be done. more work needs to be done to make it real. people have to bereave it'sye i real. we need the regulators and the people, the countries to sayieve it's do able. it was do able in the united states for use. suf thcie fdic took down illinois, e american savings banks veryed se successfully all without damaging the american economy. there's a bigger complex world, su can be done. >> it can be better thane ar dodd-frank. >> i think it can beex done. it's going to take foreignt cod jurisdictions particularly london working out common setsrk of rules and taking place. >>it now, and, you know, we also are concerned with reference tol the a american taxpayers being stuck. in 2009, we wanted to the fund to resolve big banks, you know, and i think that a number of individuals, i think maybe jpmorgan chase was against it.

>> gentleman's time is up. five minutes. >> thank you. so before you came here the previous panel, i know you when you were watching. one of the analogies was about before giving the keys to the daughter, he wanted to make sure that rules and regular littleses out there. he if not regulators a cop on the beat.wa the only problem with that to try to compare that analogy was there was n sitting right where you were. there was one, two, three, four five, or cops or the beat and each one gave the same answer. they got to the accident scene a afterwards. they were going to tell us what they were going to do next time. it doesn't hold true. we're trying to do better than that. i know, you gave testimony hear and back at the snape.. the exact quote -- i think you

have to get the on something from happening it was truly a management mistake and it'shaveo we're misinformed a little bit. we're not purposely misinforming them too. ty yet 100 regulators embeddedform, working full time getting up every day to go to your firm to work. are we in a case where there's a little bit offer is raid here with the american public twroort what it is the regulators even after 2300 of dodd-frank are able to do in the circumstance that they're really not able to get into the details into the granular nature of things withst or without modification to thehe rules.et >> i think int mentioned to the before.ure the it helps realistic goal. they disseminate information they can make the system better

inet to. the mistakes are few aerofar between. i would never blame them for the mistake we made. maybe they could stop otherses from makes a similar mistake. >> i know that the ranking member of the committee were somewhat taken aback by some of the responses to dodd-frank andr the legislation and how it was being implemented.hat that's fine.ky i con concur.he your part is to lobby for it, if you will, what the position for your firm on positions of the issues, and also, something more than that as far as what's best in the interest of the investors too, i would people too. >> my highest, most important thing to me is united states of america. >> actually.s, . iou >> look back and the interest oe the united states of united states of america and not in the amterest of jpmorgan chase. i feel we will rules all the i regulations will continue tounis serve ourta clients and that's what we're going to try to do.fa >> i was go to lead with the

answer to the first question. parking lot ofin theue reform tt we may need in the area, is what extraterritorial effect we've had. we've done it in a bipartisan e manner.xt we mr. heinz with connecticut has legislative with this us. you see at the same time what the previous panel coming without their proposed regulations.er. actually not rules but guidance in certain areas. in the areas of coming up with e various standards. but coming up with security and based swap dealers. is that the appropriate manner we should have? purely guy damages ruling coming out where you don't a cost-benefit analysis.a,s could there be a close working relationship between the cficbet and the fdic. >> the prier mare example we should have one set of rules.

they haven't been defined yet. i think through is the right way to do it.rulear it's hardou to imagine to do something brt than that. >> if -- and just to close, paed then. i thought your answer was going to bw.e something different with regard to the vocal rule when you said things may not have been different with the had theg rule fully implemented here.ule i thought the answer would bedir the rule would be law at the time there would not be tradesge going on because of the uncertainty not only theeir regulators and the institutionld how is it going to behaveee implemented and what trade is per admissible and which is not. >> we focused on port portfolio

hedging i think is the market making that allows the greatble. porkets in america to remain healthy to finance companies at the cheap cost to investors and issuers, that to me is a more important part.healy. i remember correctly 170 thingso written around that.d and we're concerned it will stifle the capital markets more here.ant if it's not done right.ar it may be done right.itte the regulators want to get to the right place. cap it's hard to do.f >> hard to do. thank you. do i yield back. >> thank you, mr. chairman. i want to tell you that i agree with a lot of the statements he it may surprise some people, it thatldn't. i, you policing the d iiscussiof about what is appropriate regulation. i ere's noou golden answer. i don't come to the table thinking i know the answers. you think, you try, you talk to people like you. no discuss it work, not work?at i welcome your voice whether we agree or not. i welcome your comments on

dodd-frank. you have stated you are not tooe big toin fail. is it a misinterpretation? >> no. on >> i agree with you but i wish some of my colleagues on thet to other side would finally hear that.inrp i think we handled that and dodd-frank, you stated it we agree with you. se we agree on the simplification of regulators. i think we have a too many as well. some of the large institutions, we in general the larger institutions and thek we h organizationav nowhere to be foa when we were having the debate f during dodd-frank. i was on the side of te durin ..g dodd frank. i was on the side of simplifying the number of regulators not because of what they're going to regulate. it is too many people doing the same thing. i totally agree i want to try to reduce the number of voices at the table to make your job easier. that doesn't say i would reduce the regulation. i do want to ta