which is one of the nation's finest, largest, well-capitalized banks. if it's too risky for your company, what stops it from being in the future too risky where you lose not $2 to $4 billion, but $50 billion. create a size that ultimately creates a risk on the bank that takes that bank into the possibility of a run and then ultimately becomes the collective responsibility of each and every american? that's what we're trying to prevent here. so i've heard you talk about the fortress balance sheet and i'm glad to hear you say we should take comfort that banks are more collateral liezed. but in saying so, one way to think about this is, i wonder what your views do you regret calling the efforts to require banks to hold more money, quote,

un-american, end quote. today you site the balance sheet of your bank as a way to prevent against the challenges, yet you railed against us when we were trying to pursue greater capital lieization of these banks. >> i supported parts of regulation and reform. i supported higher capital and liquidity. we supported standardized derivatives going to clearinghouses. we supported a lot of the things that you requested. we did not fight everything. when i mentioned the anti-american thing, i was talking about between dodd-frank and boz l, things being skewed against american banks. and american banks can't have preferred stock like foreign banks can have. >> did you not specifically say as part of your un-american comment that the requirement for

banks to hold more money was un-american? >> i did not. >> well, you know, i'd be happy to look at that again. i think you might want to review that because what you criticize then and what your bank has been lobbying extensively against is the very types of protections that at the end of the day can guarantee that the american taxpayer doesn't become responsible. i think about the fortress balance sheet you talk about. i'd like to remind you that fortress balance sheet has a mote that was dug by taxpayers to the tune of $25 billion in bail out money in more than $450 billion in loans from the fed. so it seems to me that the american people are a big part of helping to make your bank healthy and the one thing that they would seek in return is to

ensure that you're not working against the very essence of what are legitimate efforts to control the risk so that you can prosper and your shareholders can prosper, but at the same time, it doesn't become the collective risk of the taxpayers of this country. do you think that's not a fair ask of the american people? >> i want a strong financial system like you do. we have supported it a lot. there are thousands of l rules and regulations. we're not fighting them all. we're giving informed advice in some of them. there are some we think don't make sense and we think we're entitled to tell you the things we think don't make sense. >> i also think that the american people after making major investments in your bank and other institutions are entitled to ensure that they don't have to reach into their pocket again. >> senator demint. >> thank you, mr. chairman. thank you, mr. dimon. i really appreciate you

voluntarily coming in to talk with us. it is important that we talk about things happening in the industry. i think it will advise us, help us as we look forward and hopefully it will contribute to best practice scenario in the industry and i appreciate your emphasis on continuous quality improvement. we can hardly sit in judgment of your losing $2 billion. we lose that here every day in washington. and plan to continue to do that every day. it is comforting to know even with a $2 billion loss in a trade last year, your company still, i think, had a $19 billion profit during that same period. we lost over $1 trillion. if we had a crawlback provision, we wouldn't be getting paid. so it's not to sit in judgment, but to understand better what happened. my concern, and some of the

questions have been very helpful, as you can tell, there's a temptation here every time something goes amiss, we want to add a regulation. we have surrounded the banking industry with so many regulations. and we still seem to have problems here and there. i think we do need to recognition that you are a very big bank, the biggest in the world. you've got very big profits. periodically, you're going to have big losses. we need to look at that as part of doing business, but also in the context of making sure as the senator just said that we don't create additional risk for the taxpayer, which you appear to be in much better fiscal shape than we are as a country. and we know risk is required to make a profit. you're dealing with a lot of capital that you have to put to work, which certainly is going to experience profits and losses and generally you've done pretty

well. but i do want to follow up on senator corker asking about the dodd-frank regulation, which a lot of us are concerned about. i think a lot of us are frustrated bank managers and want to manage your business for you, and as i mentioned, we're not capable of doing that for what we've been given to manage. but i would like to come away today with some ideas on what you think we need to do, what we maybe need to take apart that we have already done to allow the industry to operate better. at the same time, not put the american taxpayer at risk. i'm really honestly looking for some ideas as we look over the next year and hopefully in a position where we can make some positive changes. >> the only real suggestion i have is i believe in strong regulation, not always more. it's not more or less, it's good. what we set up was a system with

more and more regulators. we don't know who has jurisdiction any more. so sometimes we're dealing with four or five different regulators. i would prefer a simple, clean, strong regulatory system. that's not what we did. we create d a really complex, hard to figure out who is responsible, no one can adjudicate between all the agencies. it's not clear to me who has the responsibility or the authority. >> in a lot of industries that i have worked in, they get together as peer groups to evaluate best practices to share information with each other. is that something that you regularly do with your peers and other banks around the world of how these committees should work and what the failures are? is that going on in a way that we used to do a lot more? >> we are constantly asking for feedback and rules. we send them a lot of analysis and detail.

there's less collaboration at either among banks or legislators there there used to be. it's become more adversarial. >> as we have seen, the laws and regulations are not necessarily improving things. skpo and some of the things you have done voluntarily and other banks, i think a best practice, if we could do anything to encourage the industry to develop a lot of its own voluntary rules, that would guide us a lot better. so i guess if i could just leave you with any one thing, if you could come back this time next year and talk about how the industry has put together large-scale best-practice committees, that would help us keep banking as a private enterprise rather than as a government institution. thank you. >> senator brown. >> thank you, mr. chairman.

you have some 19,000 employees in the columbus area who are also my constituents so we have a mutual interest in your institution running safely and soundly. i don't want to see consumer lenders losing their jobs because cowboys in london make too many risky bets. ive five minutes. if you can give a yes or no answer when appropriate, i would appreciate that. to start with, and the chairman touched on this earlier, if you could give a yes or no, did you personally approve of the chief investment officer's trading strategy? >> no. i was aware of it. >> did you personally monitor the chief investment office? >> generally, yes. >> okay. thank you. last week i asked at a hearing about these issues, a series of questions of the occ about their oversight or lack of oversight

in the trades in question. i got their answer this morning. their response was okay but a bit inadequate. they say they have five examiners in london who divide part of their time examining your operations. the portfolio in question is about $200 million, which is bigger than the vast majority of banks in the united states, as you know. in april 1, executives told that the trades in question were transparent to the regulators as part of our normalized reporting. the occ letter says though that occ examiners were unaware of the level of risk occurring at your chief investment office until april. here's my series of questions. was the occ told about the trades taking place in your cio office prior to the april 6th media reports? >> we try to be very open with regulators.

we give them reports. they do get some reports. we give them what they want. we give them the information they want. we probably have them misinformed. the mistake we made, we passed on to them. but the second we found out, the first people on the phone was to our regulators to explain we have a problem, we want to describe it to you. they have been engaged with them. >> april 13th, earnings call were they told about the trades prior to the earnings call? >> like i said, they get some of our reports, but since we were misinformed, we probably would continue to misinform them. once we found out shs the first people we call is the board and then the regulators. and probably not even in that order. >> the issue is partly your side, partly the occ side. do you know if occ inquired about trades as the regulators, these five regulators, did they

inquire about the trades prior to the earnings call? >> i don't know. >> at what point can you tell us did occ take steps to challenge the trades? >> i think the second that they understood the significance of the trades they started to challenge it every day. and they continued to. >> five regulators in london enough? >> i don't know the answer, but i would say in a modern day in age, they get all the reports from london. they can do it by tell presence. so physical location isn't important. i should point out the 19,000 employees in columbus serve global clients. they serve 30 million americans. they serve a lot of middle market companies. we run a lot of call centers there. they process our credit cards, which we ship around the country. so those employees are not just

doing ohio-based business. >> a couple other points. since 2007 your chief investment office has grown. occ says that your activities were not considered to be high risk, but they go on to say a similar situation large hedges that are liquid and otherwise very complex is not present in other national banks. other large banks don't conduct activity to the extent in size or complexity that jpmc in this location. should occ have been more focused that they admit now were larger and more complex than any other banking system? >> i think we should have. if they were, they stopped us from having that problem, i would have been very happy with that. >> if your bank didn't have $2.3 trillion in assets, would your cio need to be that $370

billion? >> a lot of that was because we bought wamu. what we're doing now is we have about a thousand small business bankers in the states where wamu was. so investing in the assets and conservatively is what we do. >> senator corker made a statement a moment ago, or offered the observation, i'm not sure exactly where he was going, that the possibility that jpmorgan chase may be too complex to manage, which also begs the question is it too large to regulate. i want to finish. it has quad drup led in size to $2.3 trillion today. there are six american banks that are $800 billion and above. over the last five years alone,

you have grown by $400 billion, in part what from what you just sited. this case demonstrates that neither you nor the occ could monitor what was happening at a $370 billion chief investment office that would, if it were standing alone be the eight largest alone in the united states. we have 559 subsidiaries, executives and regulators, it appears from listening to you and your comments from watching what's happened and talking to the regulators and seeing the occ response, it appears that executives and regulators simply can't understand what is happening in all these offices at once. it demonstrates to me that too big to fail banks are too big to manage and too big to regulate. mr. chairman, i yield back. thanks. >> senator jo hans. >> thank you, mr. chairman. mr. dimon, let me just say thank you for being here today.

i have listened to the various questions about the trade and i think to summarize everything, you have acknowledged definitely was a dumb move. the loss is unfortunate. you have apologized for that. you have kind of walked us all through that. so what i want to do is ask you about some things maybe at a 25,000-foot level. how many regulators do you have on site in your organization from some federal entity? >> i believe there are hundreds. >> hundreds? >> and it's across multiple regulators. >> right. when something like this pops up, are the channels clear anymore as to how you deal with and who is regulating what and who you need to be paying attention to?

how do you deal with that? >> you know, we're always going to treat the regulators the way they deserve to be treated. we have to deal with it. we have people who were sirened specifically to deal with regulators. the occ, the fed, we deal with all of them. on this particular issue, the first three were all engaged. >> how much have your regulatory costs increased as a result of dodd-frank, vul ker rule, whatever it is? >> you know, i have estimated, but i would call it a rough estimate. we're talking probably about $1 billion a year and its cross systems, technology, risk, it cuts across maybe 8,000 programs. we have to accommodate rules. so we're going to do all those things. meet all the requirements. but it will be a little costly.

>> one of the things that i have maintained in many hearings as we have examined dodd-frank before and after its passage is that there's just a point at which where it's economically better business to do business elsewhere than the united states. do we run that risk with dodd-frank that literally we have made life so complicated, so hard to navigate through that you have enterprises who decide, look, i'll just go to singapore or wherever to do business? >> we're going to be fine ourselves. we'll be able to navigate all that. i talked to a lot of business people and i hear a lot of people saying it's easier to be overse overseas. and several companies have moved overseas recently. >> my concern doesn't stop there. what i saw about dodd-frank, you know, we started out with i

think a laudable purpose. let's try to figure out what happened in '07-'08 and how do we fix it. then all of a sudden farmers co-ops were showing up in my office saying, what are you doing? and i'm thinking, well how did a farmers co-op have anything to do with what happened in '07-'08? i haven't verified this because somebody just told me this last night, and maybe you're aware of it, but somebody mentioned last night that there had not been a single bank charter last year in the united states and it had been 78 years since that had happened. do you have any information on that? >> i was unaware of that. >> mr. dimon, it further occurs to me that an enterprise as big and as powerful as yours, you have a lot of fire power and

you're just huge. we'll find a way to navigate what has happened here. what i worry about, though, you're not located in my state. and i doubt that you're probably considering locating in my state, although state, although it would be a great place for you to do business, but i -- >> we hope to be there one day. >> what i suspect is happening is that our medium to small banks are now trying to navigate through this very complex legislation. these are banks where maybe they employ a dozen people or two dozen people, and they're just going to give up. what's your impression of that? >> like i said, we bank a lot of smaller banks, and i think some of these things are harder on smaller banks than they are on some of the larger banks, unfortunately. >> thank you, mr. chairman. >> senator chester. >> i want to thank you, mr. chairman. i appreciate you holding this important hearing. thank you, mr. dimon, for being

here. i think it gives us a better chance to understand how and why mr. jpmorgan, in your words, performed a poorly constructed hedging strategy. i'd like to focus, however, on jp morgan's role in the days leading up to the bankruptcy, losing more than a billion dollars in client funds when jp morgan was required by law to protect. what mf global treasury edith brian described as a show game. they saw their funds wiped away overnight in this so-called shell game and the firm's failure to segregate these funds. though mf global's commodities customers have received about two cents on the dollar back, the trust that many commodities have in the system has been

broken because of the firm's violation of the law as well as their failure to segregate client funds which is the bedrock of commodities trading. we have new information on the release of mf global's trustee's gibbons recommendation last week, and we need to get to the bottom of this issue to ensure that montana farmers and ranchers see their funds returned, and those responsible for the breach of segregated customer funds are held accountable. over 100 of my constituents had their accounts rated by mf global to cover the firm's institutional losses, and if anybody was complicit in this, i want to know about it. the collateral your firm held in the liquidation more than 7 months ago, funds rightfully belonged to mf global customers, including farmers and ranchers.

why did it take your firm more than seven months to return these funds? >> we were banked with mf global, and the second they ran into trouble, we immediately went to the trustees of the courts to tell them exactly what we had and didn't have, and we waited for them to finish their work before we did anything. there was no hiding anything. we were every step of the way with the authorities. >> when mf global went down this path by your firm, there was 168 million, i believe, that was held seven months. why? i mean, if it was there, it should have went to them. >> i think we were waiting for the guidance of the court and the tris tustee. we weren't deliberately holding the money. >> i know the investigators singled your company out. it highlighted your negotiations with mr. glidden and charges

that he may bring against jp morgan chase. we have concerns about the health of the firm, mf global, and the guidance of customer funds. your firm was focused on whether collateral by mf global on october 28 and 29 was paid with customer-segregated funds. according to mr. gibbons, your firm took steps to protect itself and mf global, placing mf global on debit alert. mr. dimon, despite senior attempts by very senior analysts at your firm, including mr. barry zubrow, whether the transfer request was in compliance, mf global did not sign a con fifirmatory letter t

your firm demanded. without this signature, jp morgan chase ultimately transferred those funds and accepted the collateral. were you aware of the effort by senior risk management, officer at your firm, to seek compliance confirmation from mf global? >> not at the time i wasn't, no. >> why did jp morgan chase relent on efforts to secure the letter and allow the transfer without written assurance? >> i think the transfer had been made and we were doing a follow-up letter, which was not required. we were asking to make sure they had done the right thing. >> so what you're saying is even though you had placed mf global on debit alert and you limited -- you increased collateral requirements, when they asked you to transfer the money, there was no conversation about whether this money was segregated funds? you just transferred it? >> they transferred it to us, yes. >> it was within your institution they requested a

transfer? >> right. it was covering an overdraft from the prior day or something, yes. >> so the question is, the real question here is, you guys were concerned about mf global. you guys know the industry better than anybody sitting up here. you guys knew what was going down with mf global because you put them on debit alert. they had requested money to be pulled out of -- that was in your facility to be sent to another facility. there was some question by senior management officials in your firm whether this was segregated money, money that farmers were hedging with, and in your words, hedging was to protect a company from bad outcomes. can you tell me if jp morgan had any obligation to protect those funds. >> my lawyer gave me notes and gave oral confrontation and then went bankrupt. >> you got oral confrontation on this. is that general operating procedure? >> the general operating procedure is you don't have to

ask at all. they're responsible to make sure they have customer funds. we were using excessive precaution. >> even when a company is going belly up? >> yes, even when a company was going belly up. we were also trying to help them at that point in time. >> i appreciate that. my concern here is because there were a lot of farmers that hedged to protect themselves from bad outcomes. and if this money was transferred and it was segregated money, there is a real problem there. that's all. just looking out for my folks. >> i hope they're going to get all their money back. i still believe they will, by the way. >> well, i just want to make sure that the individuals that are held responsible are. i want to thank the chairman for his flexibility on the time and i want to thank mr. dimon for being here, and thank you for the hearing, mr. chairman. >> senator moran. >> mr. chairman, thank you very much. mr. dimon, thank you for voluntarily being here.

you answered someone earlier about the things that were good for smaller institutions and the things that cause problems in larger institutions. i don't have that list here, but hubrance stands out, arrogance. how do you oversee a company of that size and understand the things that occur in a larger organization? >> they can occur in smaller organizations, too. >> you aren't talking about the senate, surely? >> definitely not. not now. look, i think all companies want to have great employees, always analyze things, always challenging yourself, always learning from your mistakes. people are very honest all the time, you share reports. i think there are ways you can avoid the negatives of being a big company. hopefully we foster the right kind of culture at jpmorgan. we do believe we're in business

to serve clients. that is job number 1. we do it every day around the world in 2,000 communities around the world. we hope people believe that and it's in their heart to do everything the right way every day. we ask people to treat people how you would treat your friends and parents. if you have a question, raise your hand and call the right people. and we try to legitimiacknowled legitimized complaints. we try to acknowledge them and fix them. >> how you manage jpmorgan really is the picture of your board, shareholders. but it's for those of us who believe in the free market system, its values, its merits. i have since, and i hope that's the case, that that's a responsibility you understand. in protecting this free enterprise system how jpmorgan and any other company, large or small, conducts themselvesnd