going down the direction, and this isn't -- you are forced to implement a law that has been passed, but dodd/frank to the chairman's point about micromanaging, there are 398 rule-making requirements and 110 of them have been met with finalized rules and 144 rules have been propose d and yet another 144 have yet to be proposed and as we all know and yet all of the constituents may not be fully aware, and when we are talking about the rules and not admonition not the play in traffic, but talking about many, many pages of very dense and complex matters that are associated with each individual rule. the volcker rule, alone, it is staggering in the length and the complexity and i think it is an impossibility. take one little aspect of the volcker rule, the exception that is applied to the market making activities just in formulating that exception we have all kinds of metrics we're going to impose, that regulators are going to decide.

limits on limits of how much can be made from the offered bid from a subsequent rule, and how much business they must do with the inner bank dealers and what asset classes are permitted to trade, and what kind of risks and under what circumstances that we have to decide whether these limits have to apply to a specific trade or aggregate trades, and it is staggering and i'm concerned that it is going to limit the ability of the banks to manage the risks, and it is going to the reduce costs and reduce liquidity in the markets, and we are going to do this while no banks have failed because of proprietary trading, and also, we have exceptions, because it is okay if you do all of the risk-taking that you like, as long as it's in treasuries. and as one who traded fixed insurance, you can lose your shirt with traded treasuries

just as you can lose your shirt trading corporates for example, so i don't have a specific question about this, but i am very, very concerned that we have created a monster that my last count between the controller of the currency and the fed, we have over 100 examiners on the ground full time at jpmorgan alone, and that is before we implement all of these rules. mr. chairman, i have to say that we have very much taken the wrong direction here, and i hope that we will reconsider when we are in a political environment where it's possible and consider capital as the essential is tool to reduce systemic risk. >> senator menendez? >> thank you, mr. chairman. mr. curry, i want to ask you about jpmorgan losing $2 billion and possibly more since the occ is a primary regulator of

jp more dwan jpmorgan and the oc can c has a well-deserved represe reputation for being cozy with the banks that it regulates. and i know you just got in the new position, so you have an opportunity here to decide what the occ does in the future. and i find it interesting, you know, what i don't want to see is a repeat of 2008. i know that, you know, a free market is essential to our very economic vitality, but there is a difference of a free market and a free for all market. and in 2008, what we obviously came to the conclusion of is the consequences of a free for all market where the decisions of large financial institutions became the collective risk of an entire country even though they were in part of making those investment and other decisions and then all of us had to pay. and so, you know, i wish we had insisted on capitalization then,

and i wish we had insisted on a whole host of things that had avoided in 2008 because i won't forget that meeting with chairman bernanke and paulson where they described the financial institutions on the verge of collapse and if they collapsed not only cause system issic risk for an entire industry, but for the rest of the country. i don't want to revisit it. i don't know if the people can forget such recent history, but i don't. i know that you just got this position, and i'm certainly not blaming you personally for this, but i have a yes or no question. did the occ screw up in allowing these jpmorgan trades to happen? >> senator, we are going to critically look at that question as part of my goal in reviewing what happened at jpmorgan chase is not just to see what the bank, itself, did or did wrong,

but also how we can improve our supervisory processes at the occ. so, it will be a, you know a critical self-review as part of the process, and -- >> how long is that self-review going to take you to come to a conclusion? >> i hope to have it done as quickly as possible, senator. >> what does that mean? >> i hope within the next several weeks, and no more than a few months. >> i do want to reiterate that my goal was as comptroller to have a effective and fair supervision at the comptroller's office, and it is imperative in the lessons learned from the 2008 crisis that are clear to me and my colleagues at the occ that we need stronger capital, which we are getting through the possible three and other rule makings, and we also need heightened expectations, and we are requiring that of the largest institutions that we supervised in terms of the banks, management, and its aware

ness of the risks, and raising the expectations with what we require for the minimum reserves and the liquidity and the risk management, and also corporate governance which is critical. >> shouldn't that -- i know you are going to say that you will review it, but shouldn't the sheer size of the trades have been a huge red flag for the occ? >> that is an issue that the concentrated nature of the are red flags that are clearly apparent now. >> well, i just think that for those of us who supported wall street reform and don't want to relive 2008 that i think that every regulator here responsible for implementing the law should know if huge trading losses like this happen to banks like this after we have established the volcker rule and capital rules have been written and implemented then the blood is on all of your hands if the london

whale ultimately goes belly up next time, because in this case, the comment is, well, they can absorb the $2 billion or $4 billion or whatever it ends up being, but what if you had through these trades, what's to stop them from losing multiples of that, billions more the next time? or, even more significantly, a less well capitalized bank from losses that could bring it down. i just don't see where the circuit breakers here are, and where the ability to ensure that in fact that type of decision-making doesn't become the collective risk of all of us again in this country. i don't think that the american people, and certainly this senator are willing to go down that road again. i don't know what it takes to get everybody to understand that we are serious of purpose here to ensure that the law is fully implemented. there are those who agree with

the law, but as said, the americans are free to disagree with the law, but not free to disobey it. not free to disobey it, and this senator for one is going to continually pursue that we don't relive 2008, and i hope that all of the regulators and certainly the occ understands that. thank you, mr. chair. >> senator moran. >> mr. chairman, thank you very much. this is one of many hearings that i participated in and this committee has held in regards to the implementation of dodd/frank and when i asked for the committee assignments a year and a half ago, i asked for the banking committee, was told by some, you don't want to be on the banking committee, because the bank is done, and they have passed dodd/frank and the heyday has come and gone, and in my view, oversight, implementation, and modification and alteration

of dodd/frank is a very important task for this congress. one that i wanted to fully engage in, because the consequences of dodd/frank are tremendous, and certainly to directly to financial institutions, but more importantly to the customers and the borrowers and the depositors that we care a lot about. it is concerning to me that while we continue to have these hearings, i am -- my concern is that there is no legislation that then follows the series of ideas that are presented and certainly i would guess that every member of the committee has expressed either here in a committee hearing or in a letter to the regulators a desire for a different outcome than what has occurred with dodd/frank. so i think that there is a

general belief among most everyone on the committee that there needs to be some alterations in the dodd/frank and my hope, mr. chairman, is that we will take the opportunity to modify through the legislative process, provisions of dodd/frank that we think that are objectionable or improperly worded or need an alteration based upon the hearings that we've had over a long period of time on this topic. i have always been concerned that any time legislation is proposed that alters the provisions of dodd/frank the allegation is that the person, the senator, the legislator who wants to make changes is defending big bank, doesn't care about the consumer, but i cannot imagine a circumstance in which the, there is not legitimate needs that need to be addressed that are concerns for everyone on this committee in different areas, different issues, but i think that just, we need to make certain that the oversight hearings become more than

oversight hearing, and that there is a legislative response in which we treat each other with great respect and not with the political allegations that were carrying water over some particular financial institution or segment of the financial industry. i would encourage for example us to mark up the menendez legislation, and let's go to work and pursue some of the things that we think need to be done in regard to improving the financial regulation even though we have passed dodd/frank, and to prove me right that the glory days of the banking committee are not over, but ahead of us, and we have lots of work to do. i wanted to ask, i guess a series of you have indicated that as a result of the loss announced at jpmorgan that your position in regard to the volcker rule has been, quote, informed. i'm interested in knowing how that the loss is reported how it

has, quote, informed your view in regard to the volcker rule, and in particular what do you think needs to occur in regard to dodd/frank and now that you have become informed? >> since i believe i used that term, i will be the first to go. i think that by "informed" i mean that our experience with the level of risk management that was present at the cio's office that was engaged in activity that arguably may fall under dodd/frank's volcker rule provision in the proprietary trading and possibly the risk mitigation hedging exception. it really is i think illustrating in terms of the types and kinds of oversight structures and mechanisms that would be needed under that particular provision.

>> anyone else become informed? >> so i didn't use the term, senator, but i will answer you anyway. it seems to me that what someone will do or that we need people to run through this, and to say, hey, you have a situation in which the firm has publicly said that they didn't think it was a well-managed risk, it was supposed to be a hedge, and somebody should align the rule with the practice and say, if the rule had been in effect, would it have precipitated the kinds of risk management, identification of strategy and documentation that would have been adequate to bring the attention to the firm and the supervisors to a potentially risky strategy. i think that as i sit here today, that is the case. but i would certainly want someone to go through it more carefully. >> mr. chairman, thank you. i would like to associate at least compliment my colleague from pennsylvania, mr. toomey in

what is a logical presentation and enlightening in my view. thank you, mr. chairman. >> senator bennett. >> thank you, mr. chairman, and for holding this hearing. this is not something i wanted to talk about, but i appreciate senator moran's comments, and all of us want to have as efficient capital market as possible, and profitable capital market and secure capital market in this country. but i just want to be clear, because i sat here three years ago and heard the testimony on the credit default swaps that brought down these large financial institutions and put my family and your families through enormous economic turmoil and very clear to me that the testimony we were hearing is that no one was watching that. no one had a view of the systemic risk that was produced by the transactions, and to

think of those as merely bad loans rather than securitized instruments that nobody was watching is not, is not an accurate -- it is not anything that you said, senator, but it is not an accurate reflection of the history of what we heard. i'm not for any more regulation than is needed and i share the skepticism on the other side of the ability of the regulators to keep up with what is going on in the capital markets which raises the importance of capital as you described earlier, but i want people to remember why we were here to begin with, and the gaps that we saw in the regulation that had a profound effect on the economy and the people that i rep. i represent. so having said that for the record, i want to go back to the ranking member's very first question or one of them and that is what was the nature of the transaction was a proprietary or was it a hedge?

we know through the testimony today, we don't have any answer to that yet, but here is how i would like to ask that question. to mr. curry and mr. tarullo which is this, explain to us what that examination is going to look like. what will you consider as you think about defining that, because you are quite right that you can learn something from that. those of us who are cautious about those definitions would like to know what you're actually going to be looking at. >> at the occ, basically, we have a two-pronged approach to this particular issue. number one, we want to fully understand the nature of the hedge or the trading activity at issue. we also want to get an assessment and the full understanding of how the bank

intends to reduce the exposure or de-risk from that position. part of that process, and part of the secondary prong which is to -- >> can i be -- sorry to interrupt, but the -- the first step is to determine the nature of it, and the second step is to determine the risk, the attention to risk in the institution. will that -- is that second determination dependent on the nature of the transaction? >> no, no. they are really, and one is the first prong is to assess what is the financial risk to the institution, and that is really a priority, particularly immediately after this issue surfaced, but we are looking at it from the almost postmortem standpoint of what happened? where were the deficiencies? what needs to be corrected? is there additional risk management gaps elsewhere in th organization? and is there an opportunity to

learn from the experience in terms of the risk management practices at the other large institutions that we supervise. that is the general scope of our review. >> governor, anything to add? then i have another question for you. >> senator, if you will give me the question. >> well, i wanted to shift to your -- you made an observation earlier that i thought i heard you say that the low likelihood of a tail experience of europe? >> well, no, senator, i was referring to the fact that at least in my observation the modeling that financial firms do via modeling and trying to understand what the risk of losses are from a number of contingencies tend to be not as oriented towards the tail risks

which mean events that while appearing at that moment to be low probability would if they transpired have enormous losses. >> so in that spirit, since we are about, and i don't know if secretary wolin, how do you view that risk right now, as you are sitting here? i understand that the balance sheets here are in better shape than the balance sheets in europe, but the risk of collapse -- >> well, senator a couple off of things east and, first of all, european leaders tend to be moving with a sense of heightened urgency, and the run-up to the los cabos meetings will allow them to make further progress with respect to the banks and the restructuring of the banks and as you have seen, they are considering those things really on a now european-wide basis, and you know, the europeans have the

will and they certainly have the capacity to keep this thing together. the president and the secretary and the treasury and others throughout the administration engaged and you know, i think that we will see as developments move forward it is not as useful for me to hazard a guess, but think they what is clear is that they have the will and the capacity, and i think that they understand more than ever the urgency to take the actions that are consistent with avoiding some of the most unpleasant outcomes. >> thank you, mr. chairman. >> senator brown. >> thank you, mr. chairman. thank you all for joining us. i am glad to hear my colleagues on both sides of the aisle talk about the importance of capital requirements and they seem less convinced of that in the drawing up of dodd/frank, but if there are changes to dodd/frank maybe that is where we would want to

look and especially the discussion of mr. too in mey and mr. moran on the importance of the higher capital requirements. mr. curry, my questions are to you if i could. i have sent you a number of written questions and i look forward to the substantive responses and i look forward to those answers prior to mr. dimon appearing before the committee next week. i hope you can do that. last june, about a year ago, my committee held a hearing before the occ in which he testified. i know you were not there, and i appreciate your coming to testify, especially with the history of your agency, and i want to share some of the testimony and i appreciate and i would insist on brief answers, because i have several questions and limited time, as you know how it works and i would particularly appreciate a yes/no response, and the head of the occ has testified, quote, that given the importance of the role

of the institutions play and the overall financial stability of the united states we've instructed or organizations if they should not operate with anything less than strong risk management, and audit functions and anything less will no longer but sufficient. unquote. jamie dimon himself said that jpmorgan's trades were complex and flawed and poorly reviewed, poorly executed, and poorly monitored. i would like a yes or no answer to this question. did the occ meet the standard prior to your being there, meet the standard that it set for itself in this case? >> before i answer that, i do want to acknowledge that we are working on the written answers to the questions you sent, and we will get them to you before mr. dimon's testimony. and the answer to the question is no, not in the case of the cio's office, it does not appear they met the heightened expectations of the demand.

>> thank you for that answer. mr. wilson also said at that hearing that every report of examination is reviewed and approved by the responsible adc or the deputy comptroller before it is finalized and both units have formal qualification processes that assess the effectiveness of the supervision and the compliance with the occ policies. again, i know you were not there, and did they just not -- and did the deputy controller and the assistant deputy controller simply not know about them? >> well, this is part of the inquiry that we are conducting in determining how to improve our processes. >> you are -- thank you for that. your written testimony suggests that the examiners and the supervisors were unaware of the activities occurring at jpmorgan's chief investment office until april of this year, and what is intriguing about that is this, this office was making $360 billion in trades and this is larger than the assets of 7,299 banks in the united states.

if this were a stand alone bank, it would be the eighth largest bank in the united states. it was making a trade that you say is the biggest and most complex trade in the entire banking system, and the question is this, should the eighth largest bank in the nation be allowed to make the biggest, most complex trade, your words, in the entire banking system without the occ's knowledge? >> we would expect to be aware of significant risks to have the bank identify them and for us to have adequate reporting about the risks. i would want to clarify that the cio's office invests that a pool of approximately $350 billion, but that this particular area was a discrete portion of it, and that may be part of the reason why it was not identified as quickly as we would like. >> okay. still should have been identified, and that is an issue of the structure of the occ and again, under different

management than when you were there -- and you are there now, of course. this is not about -- i hear and this is going to be a discussion for next week, but i hear about the $2 billion or the $4 billion lost at the chief investment office, and that is serious, but obviously more than that. jpmorgan took a $25 billion hit to the stock, and that is 401(k)s and the pension funds. and that is a loss of wealth to a large number of people. we went through that in multiples higher than that of course two and three years ago, but there is a signal that the market believes this event demonstrates bigger problems in the management and the oversight at jpmorgan. this begs the issue that these trillion dollar, $2 trillion in that case mega banks are not just too big to fail, but too big to manage, and too big to regulate, but the occ's position has been that, quote, they do not subscribe to the view that big in and of itself is bad, unquote. as long as occ continues to

insist that big, complex banks are actually essential to our economy, they are responsible for their inability to properly examine and supervise these mega, mega banks. i appreciate your working to improve the oversight, but i heard the same promise last year, again, under different management, for the occ to determine in your words in what respect the occ could do differently, and i know you want to look forward, and that is your job, but you have to identify who made mistakes, and how they were made, and if jpmorgan can hold the senior executives accountable which they appear in part to be doing. we should expect nothing less from you, mr. curry, and the people who work for you, whether they are the people there now or the people whom you replace them with. thank you. >> senator schumer. >> thank you, mr. chairman, and thank you, witnesses. one of the issues raised by the

jpmorgan risk management losses is the role of the risk management in the small banks and the large banks. as you know, i have fought to have in dodd/frank, a provision requiring all banks with over $10 billion in assets and all non-bank financial firms supervised by the fed to have a separate risk committee that includes at least one quote risk management expert having experience in identifying, assessing and managing risk exposure. and you say in your testimony, quote, that you will adhere to the highest risk management, end quote, and in your assessment did the jpmorgan risk have the sufficient risk management personnel to carry out duties and, in addition, is jpmorgan changing the risk management policy committee, and can you provide the committee with update of the changes and

discuss whether you think the new members of the committee have sufficient expertise. >> the introduction of the risk committee through dodd/frank is a welcomed improvement to overall corporate governance of the financial institutions and particularly large institutions, and we view the role of the board in terms of corporate governance as a mitigan to excessive risk as being a critical feature of sound risk management. in this particular case, there appears to have been a breakdown at the cio level's risk management architecture and system and controls. that is a matter of significant concern to us at the occ, and it is also one in which, you know, we have endeavored to make sure it does not, and that it is not endemic throughout the entire organization.

we hope that the reconstituted risk committee members of the board will be experts in that area. >> and have you reviewed the risk committees of other banks worth over $10 billion to make sure if they have the necessary expertise? and that is for mr. tarullo as well. >> mr. senator, one of the provisions that you referred to is that as the enhanced provincial standards it will precipitate a horizontal review, meaning that the larger supervision institution committee will compare them and it is that process that will actually give the individual supervisory teams on the ground more guidance and more insight as to what they should expect. >> right. i suppose some difference and some banks that are over $10 billion that are plain vanilla banks and others that are doing all of the fancy, sometimes unfathomable things. >> that is correct.