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