best deal. >> exactly right, but the best deal is more than just the lowest common denominator. it's security, stability, operations under the rule of law to know what those rules are so you know the deal you're making is the deal you're going to be able to enforce. >> that's true, yes. >> see, i told you. we're not that far off from what we may have difference opinion where we go. as we speak, there's another committee meeting. news reports are reporting they're going to cut out $25 million from the cft's ability to pay their staff. do you think that's a smart thing for us to be doing, to be cutting the ability of regulators to do their job? >> i have never looked at the cftc budget. we've already said we have a duplication. i prefer we fix the duplication before we throw more money at it, but that's what i do at my company. >> i agree with you, but in the meantime, until we get there, do

you really think it's a smart idea? with the regulatory regime we have today, we both agree it's not what we want, but it's what we have. do you think it's a smart idea to be cutting the legs out of one of those major regulators? >> i have enough problems. i'm going to leave that to you. >> the only reason i ask is you have had no he is ten si in expressing other matters. >> i know nothing about their budget. i don't know how many employees they have. i really don't know. i try not to comment when i know nothing. >> well, i'd like you to learn it and get back us to. the truth s i'd like to hear your answer. thank you, mr. dimon. >> you do know we're in serious trouble down here on our budget. i guess you'd rather have your budget than ours, i'm sure. >> no comment. >> ms. hayworth. >> thank you. mr. dimon, i realize the activity that we've talked about in terms of the loss for morgan in april was bank hedging that

was within the institution, but i have introduced legislation, passed it unanimously through our subcommittee and committee to repeal most of the swaps push outs, section 716 of dodd-frank. can you -- it strikes me that this example of the potential risk undertaken -- and there's always risk involved. there's going to be loss from time to time. the potential risk undertaken in these sorts of activities does -- it would seem, perhaps, highlight the need for us to keep those activities within institutions where they are more regulated, if you will. i'd just appreciate your comments. >> i agree with that. the push out, i never understood it. i always thought it could make things riskier, not safer. >> right. >> i never understood why it was put in at all. >> right. and we did, in fact, we have broad support for that. i'm hopeful we'll be able to move that through expeditiously.

with regard to the fact that derivatives activities seems to be concentrated in london, i get the sense it's because they're the specialists, so to speak. they do that kind of thing all the time. but the chairman implies the rules are inadequate, governorigovernor i governing those activities. yet, through the g-20, regulators have coordinated fairly closely. do you feel there's a need for us -- the sec is about to come out with its ruling -- do you feel we need to have some sort of regulation that we apply to our subsidiaries extraterritorially? >> no, we've been clear. the foreign laws should apply over there so we can compete fairly over there. it's not -- they were always regulated. the occ and the feds. it's not true there was no

regulation. there was regulation at the top. the trades i mentioned were collateralized. 60% cleared. i'm thinking some of those rules wouldn't have mattered at all. aig, which i know keeps coming up as an example. aig was insured only. they weren't trying to hedge anything. aig was an insurance company. aig didn't have regulators who understood credit derivatives. aig, they accounted for them as insurance contracts. for the most part, not collateraliz collateralized. completely different example in a different industry. >> right. yet an enormous amount of risk that had great implications. but you cannot map that situation on to the morgan situation. clearly, sir, there have been questions about the activities of risk committees. obviously there are lessons that you've referred to that jpmorgan has learned. are there lessons that we can

apply to what our regulators use, the criteria they use and look at to how our institutions take risk? >> we failed in this regard, but we have very strong risk committees. properly staffed, properly reported, independent minded. their job is to challenge management. all the way to the ceo. why are we doing that? why don't we have more limits? what can go wrong? let's stress test it. that's what those committees are supposed to do. proper reports, granular limits, and protecting the management from themself sometimes. our risk committees do report independently. in this particular case, the risk committee made the same lack of oversight that i probably made a little bit down the line about this one activity. they had some pretty good disciplines in the other activities. >> yes, sir. in terms of -- obviously

jpmorgan has regulators in house who closely monitor your activities. is there an element of human nature that makes us, to a certain extent, comfortable with each other and how we do things that may lend a certain amount of hazard to these relationships over time? >> no, they can be pretty tough on us. i think what happens sometimes is just human nature. i say it's okay. the next person doesn't spend that much time on it. around the table, everyone says it's okay. >> because you have a track record. >> all of us. you can't be complacent about risk. it has to go through a rigor. it's not whether you trust the person, because i trust a lot of people. it's got to be very independently verified. >> right. trust but verify. thank you, sir. thank you, chairman. i yield back. >> thank you. >> mr. dimon, thank you for your testimony. the recent jpmorgan loss comes at a time when we have many in

your industry complaining about the new regulations that were put in place for the dodd-frank wall street reform act. for good reason the $2 billion plus loss has pressed the pause button on the constant scream of attempted roll backs to dodd-frank. it seems to me that with the recent conviction of a prominent wall street corporate director, wall street firms do not seem to be going out of their way to restore trust with the american people. i understand that jpmorgan will still turn a profit this year, but the size of the loss and the complexity of the trades and macro hedging that caused the loss still gives cause for concern. there needs to be an evaluation of not only prudent regulations but also the broken culture on wall street, a culture that some

believe provides perverse incentives to play fast and loose with other people's money. after the crisis there should have been major self-reflection and re-evaluation of wall street. mr. dimon, looking back at this loss, do you feel that the compensation structure at jpmorgan might have created insentives for excessive risk? >> i don't agree with what you said about wall street. i'll be direct about it. i think there are a lot of people you can trust on wall street. there are a lot of people you can trust anywhere. i think when anyone blankets a whole industry with the same thing, i think we're making a mistake. it's like when people blanket all of congress. i think it's not fair. we try to have a culture of the company where people are -- have long-term careers. they aren't paid just because of profits. they're paid because they're good managers, they recruit, they obtain, they're open

minded, they're independent. they mentor younger people. that's what we do. it's not just financial results that drive people's compensation at jpmorgan. no one in this area had formu s formulas. is it possible someone here says, yeah, we're driven a lot by money. yeah, people -- it should not be a great surprise to you or anyone else. some people are driven by money. some are not. >> next question. do you feel there's a problem with wall street culture? >> i think there might be a problem with some people on wall street. wall street, for the most part, you know, are honest, decent, hard working people. their clients trust them. to the extent we lose it, we should earn it back. i think if you talk to most of our clients, they think that jpmorgan tries to do a very good job for them. including if we make a mistake, we try to rectify it. all firms are different. i can't speak for every firm while i'm standing here.

>> mr. dimon, what would you personally recommend be done by congress to strengthen the dodd-frank act so that we can prevent actions for the complexity of trades and risky derivatives and macro hedging that cost the loss of at least $2 billion at jpmorgan, which brought us to this congressional hearing? we want to ensure similar losses do not occur in other banks. i'd like to hear your recommendations. >> i have lost this argument publicly many times. i'll make it again. regulation is not binary. it's not left or right. it's not democrat or republican. these are complex things that should be done the right way. in my opinion, closed rooms. i don't think you make a lot of progress in an open hearing like this, talking about what works, what doesn't work, and collaborating with the business

who has to conduct it. we want a safer system too. we have as much investment in a safe and financial system as anyone else. i should point out, it is a lot healthier and safer today. regulation has created more capital, more liquidity. it is a much stronger system today. a lot has been accomplished. >> my time has ended. i yield back. >> thank you. mr. mchenry. >> thank you, mr. chairman. mr. dimon, there's a discussion today, the distinction between hedging and proprietary trading. can you define to us the difference, in your view, of hedging verse proprietary trading? >> i'll tell you what i think. a hedge is meant to protect you, that if something goes wrong in

a decision you make. proprietary trading, i think, you can make money in a price change. the problem with that is every time we make a loan, it's proprietary. the riskiest thing we do is loans. they're all proprietary. if we lose money on them, and one of the congressmen mentioned how much money we can lose on loans, that's to the house account. we still make them. we still try to do the right thing to risk manage it. i never understood the intent of the volcker rule to make companies safer. i totally agree. we've made a very -- something very complex, which is going to be hard to legislate or put in regulatory terms. >> is there a bright lin distinction between hedging and proprietary trading? don't they look similar n unless there is a balance trade on the other side that matches up? >> i think in some cases there's a bright line, yes. >> okay. how is -- and how long have you been in finance? how many years. >> a long time.

30 years. >> okay. we'll just say a long time. for a living, you're supposed to know the distinction between this. you're testifying before congress. you've spent a lot of time doing this. so is there a bright line distinction between that? if you can't determine what that is, how can a regulator determine that? >> okay. i wouldn't have set it up proprietary versus hedging. if you wanted to make this system safer, i would have said for trading, proper capital, proper liquidity, make sure it's largely done with the clients. look at aged inventory. you have proper risk reporting. you do have the ability to portfolio hedge because you need that in trading. and you can track all these things to say if you're running a good customer business or not. it does not eliminate risk. it will mitigate the risk. >> okay. so did you support dodd-frank? >> that's a hard one to say. we had a major crisis. >> did you support dodd-frank in

its inception? >> when he a major crisis. we never denied that. in the crisis unveiled lots of flaws in our system. not one flaw, lots of flaws. we understood the need for reform. there are parts of dodd-frank we supported. there are parts we didn't. you do remember there are lots of parts of dodd-frank. it's not like we had the same vote -- >> suffice it to say, you have a little buyer's remorse. that's what i'm hearing. you're basically saying, yes, you understand the need for changes. you just don't like the result. >> some of the result. >> some. okay. >> you modified it. >> okay. with volcker, as it's being written, the distinction between, you know, proprietary trading and hedging, that is a bit of the debate that's going on right now. so my concern is in the post-t.a.r.p. era when we say we're going to end bailouts,

we've codified it and institutionalized it. therefore, when a company like yours received support from the government, has a trading loss, the government gets very involved. why is the government very involved? because we've institutionalized too big to fail and bailouts with dodd-frank. to that point, during your hearing last week with the senate, you discussed the distinction between a resolution authority and bankruptcy. would you touch on that? would you explain your view on what is preferable, the resolution authority as written in dodd-frank or bankruptcy. >> a lot of semantics. i wouldn't use the word bankruptcy. that implies the equity gets wiped out. a court manages the wind down of the company. you do need an expert like the fdic to manage the process. that's got the right people, the right structures, the right capabilities to manage the wind

down. it should be wound down. board of directors fired. the company should eventually be disman dismantled that does not effect the economy. the name should be buried in disgrace. that's what should happen. >> okay. so that's called bankruptcy, right? >> you guys can call it whatever you want. i'm not going to get involved in a debate. >> well, you're involved in the debate actually, sir. i don't know if you've been here for sloenas long as -- anyway, distinction is essentially codifying the fact the government will lift you up if you fail. therefore, these trading risks can be as risky as possible. that's the crux of the debate. >> they won't lift you up. they'll keep it going. the equity is wiped out, management is wiped out, company gets dismantled without damaging the economy. >> thank you. mr. miller for five minutes.

>> thank you, mr. chairman. mr. dimon, you were very dismissive last week with the senate about a bloomberg article. i think you told the senate committee not to believe everything they read. it said the cio had really changed in the last few years from being a fairly sleepy, cautious risk mitigation unit and had become much more aggressive, much more risk tolerant and profitable. it was your intention that it become a profit center and, in fact, more than a quarter of jpm c's profits for 2010 came from cio's trading. but there was a question that senate johnson asked you from that article about -- that there had been a limit that traders had to liquidate, had to get out of any position they had lost $20 million. and you said you knew nothing about it. have you inquired since then if

there was such a limit and it was changed? >> no. >> you have not asked within your organization? >> i think it was refer tored t something back in '08 or '07. i did not ask, no. >> all right. you did say last week that the failure with these trades was not -- that it was road traders. they weren't violating the risk controls. that is correct, right? >> they were too low. they were too high. they should have been much more lower limits. >> did they have any limits? last week you seemed to indicate not. >> as a total, had limits. this unit didn't have its own, but they used the cio's limits, which they eventually helped hit. >> but a limit of $20 million in losses and then you close a position. that would be a fairly granular risk control, wouldn't it? >> if that were true, it depends with the areas, but yes.

>> and you have been very critical of jpmc in this matter. you have said it was a significant risk management failure. said it was flawed, complex, poorly reviewed, poorly executed, poorly managed. but on february 29, you filed a certification required by law that you had adequate risk controls in place, that management's assessmenassessmen firm's determined there was no weakness in controls as of 2011. i know you're entitled to rely upon your subord nants. i'm sure you relid upon them in making that certification, but was that certification correct? >> i believe. >> it was correct? >> to my knowledge, at the time. >> not based upon your knowledge at the time, but based upon what you know now, was that certification correct? >> that's why we're having a review, to make sure we have all the right things in place.

that's what companies do when they have problems. they analyze them, review them, and make determine nationsrevie >> all right. who is entitled to -- and it seems like that certification is intended for regulators. it's also intended for investors, isn't it? aren't they entitled to rely upon the representation of their adequate risk controls? >> i don't know the thing you have in front of you --? >> what's that? >> i don't know the thing that you're referring to, but we try to give proper disclosure to investors. >> i'm referring to the risk controls. the certification is required by law. presumably for regulators and investors. >> we try to disclose what we're going to disclose. >> what inquiry did you make about risk controls before you signed that certification? >> i believed at that time that

the risk controls at cio were properly being done. they were properly being done. >> you were surprised last week at the question about the $20 million limit. and you haven't inquired in the six days since then whether that was true. i know you're entitled to rely upon your subordinants. one that you may get in other information would be from the financial press. did you read the bloomberg article? >> i don't remember if i read the bloomberg article. >> there's an article that said there was atraders had to disclose once they lost $20 million. that seems like it would stick out as a big deal. >> it wouldn't stick out to me. it happened many years ago.

i would pay virtually no attention to it. i'm sorry. >> you're out of time. mr. stivers for five minutes. >> thanks, mr. chairman. thanks for being here today, mr. dimon. before you were seated we had a panel with five regulators. two things was something that was said about capital. your strong capital position saved us from causing jpmorgan to have a big problem and ensures it won't cause the rest of the system a problem. the other thing is he talked about risk management. that's the questions you got from mr. grim and miss hayward. is there anything in your internal review other than capital and risk management that have come out that are lessons learned that other institutions should know? >> i think you all had some things about models and

implementations of models. making sure the risk committee is independent minded, not sitting around having a cup of coffee. there will be all that and more. >> mr. frank talked about smart regulation that you referred to earlier. we had the five regulators sitting in the seat before you. not one of them is in charge of the others. no questions came up about harmonizing the regulations. and there don't appear to be in any lessons learned that are shared with other firms after what you go through to make sure there's real shared knowledge. we kind of supported that but

set up with virtually no teeth. you see how complex it gets. how long it takes. how long it takes to work it out with foreign regulators. simplifying it, clarifying it, and giving authority to the right people would be a good thing. >> do you want that talk about the impact on a multifinancial firm like yourself with regulations in europe and regulations here that are not harmonized? >> yeah, we talk about dodd frank, which has 400 rules. we have to a accommodate basil. liquidity, capital, et cetera. the rules come in from brus sells, which is in the uk and others. we're going to deal with it.

i wish it was more coordinated and not treat everyone like they're all the same, like they're equally important. to a hammer, everything is a nail. and that's what we're doing. and some questions have come up earlier today. as a policymaker, too big to fail only happens when policymakers let it happen. i'm not asking you to comment on that. but that's a fact. i want to talk about the rule a little bit. you had some questions about it before. the key thing will be getting it right. i don't want financial institutions borrowing money and putting it in a trading account and, you know, essentially gambling with it. but at the same time, you have to be able toll hedge your positions. i hope we can work with the

regulators to craft something that makes sense. and you have any ideas for us, i'll let you tell us if you have any ideas on how to happen. >> people should get in the room, talk about what it will accomplish, go to the specifics and not pretend it's either for volcer or against volcer. for us it's the law of the land. we have to deal with it. you should go home and say we sit upon the best economy in the world, the best capital in the world, the best job creator in the world. we need to start doing jobs again. it will help this economy cover quicker, not slower. >> one thing said earlier today, not many things i agreed with. one thing he did talk about was the advantage europe has being in a time zone between asia and

the u.s. and a lot of questions about why certain trades go to london. isn't there some vak to the time zone. >> thank you. and your time is up. i think the answer is yes. mr. scott? for five. >> thank you, mr. chairman. welcome, mr. dimon. good to have you. i want to start off by paying you and your operation a tremendous compliment. georgia is number one in home foreclosures. i want you to say a good word for your folks down there in georgia. vanessa williams. good job. we saved over 1,785 homes. many of them yours. so good work. let me just wait for a moment. i think it's very important for

us to set the stage here. i think we in the united states of america, probably the world economy, dodged a bullet. and we dodged a bullet because of your size, because of your largeness. you were able to handle and absorb the laws. but as much we can learn from it. and i think if i get my hands around this correctly, one is not enough attention was paid early on in the game. is that correct? would you say that is one of the major reasons? >> in hindsight, yes. >> and your reporting was diluted and deaggregate, which caused a problem as well. the fundamental issue here so we can learn from the future is your risk management tool is referred to as value at risk. that was your model. and it is one of the reasons it was used to effectiveness, but

is basically predicated on a large financial institute. you are the largest financial institution in the world, certainly in the united states of america. and that's why you are still profitable. taxpayers didn't lose anything and it was effective. but here's the question. would smaller firms have been able to have the same protections, using the same risk at value model as chase? >> we use lots of protection. ours is one of many things we do to manage risk. i should point out that there are reasons for big banks. there are reasons for small banks. the history is to bank banks. i think some of them can. i can't go through each one. they have different business models. but each one should do what they need for their own bin