really matters in our ability to be an advocate for a free market system that creates jobs and economic opportunity and allows americans to pursue the american dream. anything i'm missing here? >> i couldn't agree more. >> let me ask a more specific question. our ranking member, senator shelby, talks often about sufficient capital as the greatest deterrant toward too big to fail, toward systemic risk, and i certainly agree with that. one of the other components that is involved, i think, in trying to make certain that the taxpayers are not responsible for the demise of a company like yours, a financial institution like yours, is the living will. so-called living will. would you describe to me what process has jpmorgan gone through to develop that living will, how transparent it is, what role the regulators play? what evidence, if we saw the living will developed for jpmorgan, would give me or

others satisfaction that your company can be dissolved without a call upon taxpayer dollars? >> i think i would agree with most of the people here. we have to get rid of anything that looks like too big to fail. we have tool l allow our big institutions to fail. we shouldn't prop them up. we have tool lou th allow them . going one step further, you want to make sure they fail and not damage the american public. you want to be in a situation where a big bank can be allowed to fail. i don't think i would call it resolution. personally i call it bankruptcy for big, dumb banks. i think if you have bankruptcy, i'd fire the management, i'd fire the board, i'd wipe out the equity and the unsecured and recover what they would recover in a normal bankruptcy. this revolutionary story which puts together a structure and a living will means giving information regularly and they know how to do it. remember, the fdic has taken

down a lot of large banks that damage the american public, including wamu, you may remember american savings bank. it's a little more complex now. we have to update it. they need to know what happens to this legal entity, what happens to that legal entity, what are you going to do when this thing happens, and we actually fired recently an analysis report of how they would go about firing at jpmorgan that didn't cost the taxpayer. if the fdic ever put -- i think the bank should be dismantled after that, but even if it cost the fdic money, like today, that should be charged back to the other big banks. so today -- i know it's in a government program. it's paid for 100% by jpmorgan. during this crisis we'll pay them $5 billion. so we're paying the fdic. i think it puts a hell of an

incentive on other big banks to collaborate and make sure rules are in place that we don't jeopardize each other. >> if jpmorgan became a big, dumb bank and was in serious financial difficulty, is your sense that it would be -- you don't want to use the word dissolved, the circumstance would be concluded with jpmorgan's demise and no cost to the taxpayer. >> yes. that's the objective, yeah. >> thank you. >> senator cole? >> thank you, mr. chairman, mr. dimon. >> i understand that jpmorgan is lending more money to businesses and i appreciate that. however, it appears your bank's lending is not keeping pace with the deposits you're taking in. last year jpmorgan reported that it had $1.1 trillion in deposits. this, of course, is more deposits than any other bank in

the united states, but the other big banks reported loan to deposit ratios that are 10 to 20% higher than your banks. it seems like lending to american businesses would be less risky than what was being done in the london office. is your loan to deposit ratio lower than your peer banks because you are, perhaps, prioritizing these risky trading activities over lending. can we hope that you are going to focus more on lending in the american market? >> we are making all the good loans we can in all due haste. we are a global money center bank, and what that means is we have deposits from governments around the world from sovereign entities, from large corporations that can be taken out tomorrow. so we do have to keep what we call liquidity. we have several hundred billion dollars right now invested, like i said, in central banks around

the world in case the biggest companies call us and say, send me the 5 billion. so we need huge liquidity funds. >> but i understand, and i think the records indicate, that your reported loan to deposit ratios at your other big banks, theyir reported loan to deposit ratios are 10 to 20% higher than yours. that would seem to not square with your statements that you're wanting to lend but you don't have the customers to lend to. >> our middle market loans are up 12% on average, our small business loans are up 52%. large corporate loans change all the time because corporations have a lot of choices out there. our mortgages were at $100 billion, which is a lot of new mortgages. we do need to keep a lot of cash around to deal with the

immediate cash demands of people who deal with us. when you're talking about the largest companies in the world, they can move 5 to $10 billion in a day. >> i appreciate that. just one final comment. again, the biggest banks with whom you are competing are generally described in the way you just described yours. >> yeah. >> and their loan to deposit ratios are higher than yours. >> yeah. they're all different for historical reasons, though. >> mr. dimon, senate offices like ours often hear from constituents who are trying to get a modification on their home loans or stave off foreclosures. they typically come to us because they're having trouble getting through to their lender. sadly, it's all too common for our constituents to say that the bank lost their paperwork. and four years since the crisis began, they're still hearing about these mix-ups. as a constituent and just one of many, i'm sure, who had a loan with jpmorgan quoted recently,

quote, i don't want to lose my house because they can't keep their paperwork straight. so the question is why a bank has been unable to sort out these paperwork problems, mr. dimon. >> i would agree the constituent, they should not lose a home because we failed in the paperwork. i would love for you to send that to me and i'll follow up on that one right away. we have hired 20,000 people to deal with default modifications. we've offered modifications of 1.2 million loans. we've offered alternatives to foreclosures to 470,000 loans. we're doing it better, we're doing it faster today. i have to confess we weren't very good at it when the problems first started. we were overwhelmed, yes. >> mr. dimon, i'm sure we all agree that the cio office carries out very complicated transactions and you employ some of the smartest people in the industry to work for you. your bank undertakes such

complicated business on the one hand, but on the other hand, oftentimes you and other banks of your size can't seem to do something as simple as straighten out your own paperwork promptly. does the plight of the american homeowner have the same attention or should it have the same attention that the bank gives to its cio office? >> yes. it should. we should do it properly and for anyone in this room if they have issues that we're not following up on a constituent, send it to me or send it to our governor fairstaff who will take care of it right away. >> thank you, mr. dimon. >> thank you, mr. chairman and thank you, mr. dimon. i think this has been very informative to members of our committee. i think you told senator shelby that the purpose for hedging is to earn a lot of revenue in the event of a crisis, and i think you said that hedging worked to

an extent in 2008 for your company. can you quantify the extent to which hedging worked in 2008? >> i don't recall the 2008 year, but this synthetic credit portfolio did earn several billion dollars of income in the three or four years before it just lost some of it. >> okay, so -- >> we could follow up and give you more specific detail on that. >> i think that's probably what we need to do. with the avvoca rule -- i think you said you didn't really know what the voca rule is, and if you don't, we don't, either. but i think you said you know how it's currently drafted, and as it's drafted, how would that have affected the cio's ability to do that hedging in 2008 and prevent several billion dollars worth of loss? >> i think you're allowed to put portfolio hedge on the voca

rule. what it would morph into, i don't know what it would do. the real thing about the voca rule is not about portfolio hedging, it's the ability to actively raise capital for companies and clients and investors. we have the widest, best, deepest and most transparent capital markets in the world. the capital markets of america are part of the great economic business engine. we have the best in the world. we had some problems. we don't want to throw the baby out with the bathwater. how does it benefit you all that we have the best in capital markets? the cost of buying or selling a share of stock is a tenth of what it was years ago. the cost of buying a corporate bond is a tenth of what it was years ago. the cost of doing an interest swap is a tenth of what it was years ago. they do it for a cheaper price, which means they, fidelity of

penco, are doing it cheaper. that's a good thing for them. it also allows corporations to issue deals cheaper. they get a better deal at a cheaper price than they otherwise would have gotten. the liquidity in the markets keeps the spread low and benefits both investors and and issuers. if consumers and investors are educated about companies, then these issuers can do it -- remember, the investors are not infidelity, it's the people they're investing for, and those are retirees, mothers, veterans, it is a good thing. the voca rule, when it came out, has so many pieces to it, all we've been urging people is don't think of it as binary, more or less, think of it as traffic laws. some cars should go 65, some shouldn't.

some streets should be different, some lights should be bright, things should be done right. we have the widest, deepest and best carpetal markets in the world. it would be a shame to shed that out of anger or something like that. and remember, all of these securities are different. if we're going to make markets in liquid securities, we need to own that for a while. we can't turn them over very quickly. we need to buy securities in anticipation for investment or demand. we need to buy securities from you that we may not be able to sell tomorrow but you want to sell right now. and you're a client. and we make a little bit of money every time it hamppens. not a lot. we don't take a lot of speculation in these areas. so when it goes to the vault, we make sure we take a little more detail to do it right. i don't want to be sitting here in 20 years to try to figure out why it's elsewhere. >> thank you. i hope you can appreciate that i only have five minutes. >> i needed to say it. i'm sorry.

>> it's the second round here. i think you told senator corker the financial system is safer today, and you can't say dodd-frank has helped at all. but i think then you went on to say that actually the regulation regime is not necessarily stronger today but it's more complex, and you don't really know what the jurisdiction is. have i paraphrased your testimony correctly? >> i think some of the things dodd-frank and other things made it safer, but the most important thing was higher capital, higher liquidity, better risk management. and a lot of things that caused a problem don't exist anymore. and that wasn't because of regulations, that was because of markets. >> and you said something else that really sort of caught me by surprise. and that was this testimony about that nobody got all the parties in a room with people in your industry.

democrats, republicans and folks affected and talked about what was needed to -- and what really needed to be fixed. did i hear you correctly there? >> yes. >> did you volunteer to be part of that conversation? >> yes. me and lots of other folks said we'll do whatever you want. we'll even get apartments down here. let's go through it in detail. we spoke to a lot of people. a lot of people were interested, and our folks did a lot of analogy and research. i think the real -- i know the anger led to that, but i think it would be better if there had been more collaboration. at the end of the day, we can shake hands. let me ask this question about the living will. are you telling this committee that jpmorgan chase that has a prood by government.

>> no, it has been drafted. i think it has taken several iterations. and they have to coordinate it so they have a little time. in 2008-2009, your company benefited from half a trillion dollars in low cost federal loans, 25 billion in t.a.r.p. fund, untold billions indirectly through the purchase of arg that helped with your purchases and derivatives, with all of that going down. >> i think you were misinformed, and i think that information has problems with what we're doing

today. jpmorg jpmorgan, chairman of the federal reserve ben bernanke. that the nine banks there, we can go to all oert banks and stop the system from going down. we did not borrow from the federal reserve rmt. >> we would have had a direct cost of lj went down. and dpoou a fan fan sir, i'm asking you to respond to questions, and i only have five minutes.

>> i think you would. jpmorgan would have gone out and you would have been out of a job. and it goes to the frustration of the country have been offered half a trillion dollars in low ba. banks are in the lending business, not the hedge fund business. do you share that sentiment? >> we are not in the hedge fund business. >> okay. i want to turn to the bloomberg report of a few days ago, and it reports that jamie dimon, cio, had her report directly to him, encouraged her to seek profit by speculating on the higher yielding aspects such as credit

derivatives. that sounds like operating the hedge fund and doing so at your direction. >> here are the facts. we have $350 billion in assets. the annual. the avrmg yield is 2.7. one of the other senators mentioned out -- in addition to that, we have 150 billion sitting in central bank tloult the world. the other snar just pointed out that we don't make a lot of loans. in this. so daid olson, former head of rating. . >> i don't believe everything i

read. i hope you don't, either. >> you disagree? >> i don't know what he means but i would have to get details of the conversation. >> here's a general picture which emerges. it's one where the assets in cio were doubled five-fold. we were told at your personal direction, they should hold in assets. however, you take it -- they were following the game plan that you personally laid out. >> the $350 billion porg ty. i already said extend these credit. the buck stops with me. >> the heart of the a voca rule

addresses liquidity management and says that the fund should be adjusted by treasuries or government-backed insurance. taking those same deposits and putting them into high-risk investments and credit did i have riveras. thaen laid out from your comment that you're not sure of the visibility set up here that you set up in london. >> it is very conservatively done. you want us to have a nice, conservative portfolio. i already confessed to the sins on the credit side we will not do something like that again. we are doing what a bank is supposed to do. we do it every single day. >> so i hear from what you're saying is your game plan going

forward is when you have surplus deposit examine you're managing them, you're going to respond to the operating, ul, in the. >> the current strategy is relatively safe and rell til liquid. >> thank you very much. >> you're very welcome. >> i understand that we have two votes beginning at noon. >> thank you for, here and for your testimony. you made the answer that the answer is not more regulation, it's stronger regulation. i absolutely agree with that, and i think most of dodd-frank has been more regulation which, in many cases, has been more confusing, unhelpful regulation.

another way i might put it is i think we may need more systemic changes, less micromanagement. the big systemic changes that are under discussion that impact what we're talking about are capital requirements and the voca rule, so i wanted to explore that with you. capital requirements. i understood when you criticized previously basal 3 that at least part of the creditism was higher capital requirements for bigger banks. is that correct or not? >> it was more about the details behind it. when we went through the crisis, we had 7% t1 basal capital. during the worst time we bought them and they never went down. today we have 10% basal 1.

the issue is how much is enough? but the calculation should be done fairly and properly. some of them, i think, made it harder to have proper capital, and i typically have complaints how the g-sippy requirements are done. >> compared to the sort of 7% flor f floor for a bank as big as yours, where do you think that should be? >> in my opinion, they should have come to us and said, you can have eight, and looking down the road eight is plenty, and it doesn't create confusion. the people don't know what the real requirements are yet because the rules aren't in place. that takes years to come in. >> but your suggestion is just 8. clearly the requirements are beyond 8. >> just eight, and if the regulator thinks he's on time,

what i was a little worried about is we created what's called capital confusion. people don't know where the capital is, where are they going to be. >> clearly there are other folks who, for instance, switzerland is requiring, i think, 9% of their two large banks. do you think that's clearly overkill? >> yes. but the 19 is not comparable to my 10. >> what would be an apples to apples comparison? >> it is much higher, and i don't remember the number. but they have a different problem. those banks dwarf the size of those countries. >> the voca rule, is there a clear version of the voca rule that you think makes sense and should be implemented? >> i think we will really struggle to get it right because

it was written so vaguely it's going to be hard for the regulators to actually come up with rules that make it easy for market makers and regulators. >> i'm not asking about the current process, i'm asking if we start with a blank sheet of paper, would you support a properly designed but true version of the voca rule. or would you say there should be no such -- >> i thought it was necessary when it was on top of all this other stuff. >> so you think it's basically unnecessary. >> i think it's unnecessary, and maybe there are pieces -- fussed the intent that they take so much risks in the trading books, i think there are ways to do that. i wouldn't try to write the rules as currently constructed. i think they're just too confusing. >> what are sort of the systemic simple rules ways to do that? >> proper capital, proper liquidity. make sure most of it is done with customers.

make sure the h inventory is turned over, proper risk controls. >> i strongly endorsed an overall concept of not more regulation but a stronger, smarter regulation. i guess what i'm concerned about is sort of like the dodd-frank reaction to the crisis. i don't think the solution is we're going to have really smart regulators this time rather than just simply smart regulators as before. quite frankly, my concern about some of your testimony about the chase reaction is that i sort of hear that tone in y'all's reaction, well, we're going to be smarter this time, we're getting it right this time, we're going to bear down this time. i wonder if there shouldn't be a more systemic change within the company to avoid this. >> i understand your point, yes. >> are there any more truly

systemic changes that have occurred in light of this incident? >> in our company? >> yes. >> we're going to make sure there are no other issues like this around the company, but we operate in a risk business. i can never tell you we're not going to make a mistake. >> i'm not going to ask you to do that, but have there been more broad scale systemic changes within the company as a direct reaction of this incident? >> just a thorough review of every single thing that happened. and we do think it's isolated. >> thank you. >> you're welcome. >> staff tells me they will hold up the vote for a few minutes. senator hagen. >> thank you, mr. chairman. thank you for holding this hearing, and mr. dimon, thank you for your forthright testimony and answers to the questions. i know you said your company encourages people to raise their hands when they see something go wrong, and i appreciate you doing that today. i really want to talk, my first

question, about the action of the trades. i would like to get some perspective about the size. we saw press reports about the london whale and investors talking about strange movements in the swap indexes. how big was the position? and then the real question is, how could it be so large without coming to the attention of management, of regulators and ultimately shareholders? >> senator, i'm going to have to decline a comment of some of that, because my first number one job is to protect my company, and to manage it, i think disclosing certain things could hurt my shareholder and i don't want to be put in that position of the. >> i wouldn't want you to be. >> it was a complex series of trades, it wasn't just one single thing. like i said, i can give you a number of reasons why it should

never have gotten to this size. >> i wouldn't ask you anything to put the process at jeopardy. let me talk about var. in may, jp morgan changed how it calculated the amount of money that the firm's chief investment office could lose in a certain day. you've talked about this somewhat, but could you discuss the rationale about making these changes and when those risks were made? >> the old model had been in effect until about january 15 of this year. the new model was put in place. on april 13, we had no reason to believe the new model wasn't better, nor did we realize the severity of the problem we already had. shortly after that, which is why we went public, we find that the 10-q was going to be filed on may 4. if it was delayed, we filed it on may 10. between the last week in april and the first part of may, we realized the problem w