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tv   Capitol Hill Hearings  CSPAN  June 19, 2012 8:00pm-1:00am EDT

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no one. every thriving business able to sustain the heavy financial burden of this law are not hiring and growing their work force due to the uncertainty. as we continue during this 112th congress, we must remain committed to reforming health care without the threat of new taxes and regulations that burden small businesses and the american people. congress must be aggressive but responsible and make these reforms as we stay focused on making america strong and prosperous for future generations. i look forward to working with all of you here tonight and to the lady from -- the gentlelady from tennessee, thank you for your leadership, it could not come at a more important time. we need to continue this discussion, again,ky not emphasize enough that the uncertainty surrounding this law is stifling job creation
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and as we are accused day after day of not presenting jobs bills, this is it. this is the number one jobs bill. when we repeal this law, we will lift the heavy hand of government and we believe, and i know, that the private sector will, with that certainty, once again begin hiring those people who desperately need these jobs all over this country. thank you so much and i yield back. . mr. black: thank you for giving us real situations and quotes right back from your district. folks who were providers of health care. i'm dalking the patients and talking about what our government was set up to do and bringing these very real situations here so we can let the american people know how this bill is affecting every segment of our society. i thank you so much for coming
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especially from the people of your district and these are the people are living with this and having to deal with what is being placed as a burden upon them. thank you for sharing that. that's the purpose of this special order tonight. i would like to recognize my good friend and colleague from ohio, from cincinnati, steve chabot. and i yield five minutes to you. mr. chabot: i want to thank the gentlelady and thank you for organizing this special order this evening on such an important issue and none of us knows for sure what the united states supreme court is going to do in the next few days, next week, maybe 10 days. no one knows for sure when it's going to happen but we anticipate it will be soon. i think none of us would disagree with the fact that whatever they do, it's going to have significant and real implications to an awful lot of people all across this country. and i think it's important to
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remember how we got into this position, this mess that we are in right now relative to health care and what happened. the democrats were incomplete control. president obama had been elected. and they controlled the house and the senate and rather than act in a bipartisan manner on something as important as this, which is what they should have done. they should have got input from both sides and done what is in the best interest of the people, they basically rammed through a bill. unfortunately few had even read the bill as we heard over and over again. and in fact, speaker pelosi, who was speaker at the time, even made a statement that it was important that they pass the bill so they could find out what was in it. what an incredible statement to make. and unfortunately, deals were made to get people to vote for
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this legislation. the ones that came out that seemed to be the most egregious were maybe on the other side of the capitol building in the other body, some of the things that we heard about there. but this is really not the way legislation is supposed to happen, especially something as important to people's lives is their health care is. and i think they thought that, in fact, statements were made that the people would like it. they would fall in love with it once it was passed, but clearly hasn't happened. there was a poll by the "new york times" and cbs that indicates that 2/3 of the american people hope -- they would like to see the supreme court either strike down this health care legislation or obamacare, whatever terminology one prefers to use, but would like to see it struck down either all together or at least in part. and unfortunately, when they
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focused so much attention on this health care bill or obamacare, they should have been focused on an even bigger issue, and that's how the economy is so weak and so many people are unemployed. they were back at that time and still are now. and instead of devoting attention where it should have been on the economy and getting americans back to work, they passed this so-called economic stimulus package. spent over $800 billion. and it did grow one thing, and that's government, but unfortunately, did not grow jobs in the private sector. and after passing that, they moved to health care and then passed this piece of legislation. it took them basically a year to get it passed. and unfortunately what has happened, it didn't -- as you indicated, and i think you did
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an excellent job of what was said and what actually happened. they said it was not going to raise taxes. it has raised 20 different taxes. they said it was going to drive down health care costs. it's increasing health care costs. they said it was going to create jobs. it has reduced jobs. it has been a wet blanket over the whole economy. and i have talked to a lot of small business people in my district in cincinnati and the greater cincinnati area and small businesses are afraid to hire people, they are afraid of new regulations and new taxes. and this isn't the only reason, but one of the biggest reasons that you hear our small business es say they aren't hiring folks, 70% of the jobs created in our economy over the last few decades have been in the small business sector and those are the folks that are going to be particularly hard life hit by the obamacare if the supreme
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court upholds it. of course as our colleague mentioned previously from alabama, in the house, we passed legislation earlier in this congress to repeal this bill. but the other body wouldn't take it up, and even if they had, i think most of us speculate that the president would have vetoed it and wouldn't have 2/3 to override the repeal. we hope the supreme court acts. and even if they don't, we hope this body and the body on the other side of the building will repeal it. relative to one particular thing, the employer mandate. it has been estimated that that has resulted in the loss or will result in the loss of 1.6 million jobs if that ultimately is imposed on businesses that they have to move to this obamacare. and a lot of businesses are going to drop coverage all together. people that have insurance now
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will not have insurance then if this goes through. we also know there is going to be more red tape. there is going to be more regulations. there's going to be higher taxes. and estimated, the higher taxes will be half a trillion dollars, $569 trillion to be exact. it consolidates power and puts it in the hands of 15, unelected bureaucrats who are going to decide how much of our seniorso medicare is going to be cut and that estimate is half a trillion of cuts also in medicare. it is an awful piece of legislation which we hope the supreme court strikes down in the very near future. there were alternatives that republicans have been pushing for a long time. for example, allowing insurance companies to sell insurance across state lines.
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that means more competition. that drives the cost down so people have more access to health care coverage. also, association health plans. that means small businesses can join together to negotiate with the insurance companies have more power to get lower rates for their workers and employees. medical malpractice reform. we have far too many doctors who or experience i have stesses to keep themselves from getting sued. we need medical malpractice reform and health savings accounts that more people are finding attractive and giving them more control over their health care dollars. those are some of the reforms that have been proposed over the years, but unfortunately, have been blocked and they put all their money and all the eggs in the basket of obamacare and i think the thing is likely to be struck down in the very near future. and decisions ought to be made
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by the people back home around their kitchen tables. mothers and husbands and fathers, talking about what's the most important thing. that's where the decisions ought to be made, not in backroom deals up here on capitol hill. yes, we need health care reform. we didn't need this big government copout really, this monstrosity, this takeover and i know some of my colleagues cringe when we say takeover of health care. not a complete takeover but a big takeover by big government. and that's the last thing we need. so this is bad public policy. it's bad for the american people. it needs to go. and i just want to thank you again for organizing thr special order this evening and look forward to doing future ones and talking to the american people. >> i thank you for coming here
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tonight to talk about this program and how to put a wet blanching et on our economy and you talked about real solutions that could help to deliver health care and make it more accessible, increase the quality of the care and at the same time lower the costs. i sure do appreciate that. mr. speaker, how much time do i have remaining? the speaker pro tempore: just under seven minutes. >> i'm going to go quickly to my last points. in the coming weeks, the supreme court is expected to release their decision regarding the constitutionality of obamacare and i stand firmly with the 26 states and the national federation of independent businesses who have laid out convincing evidence that this bill seriously violates our constitution and our founding principles. for the last three years, no one has known how or when the court would rule, so the house has worked to repeal and defund the law. because every day this law stands is a day that jobs are
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being lost, americans' health care insurance premiums are going up, job creators and consumers are bearing the brunt of obamacare's tax hikes. and in three short years, the obamacare has already resulted in fewer jobs, higher health care costs and more debt of the my first act here in congress was repealing this law in its entirety. subsequently, i have voted more than two dozen times to either defund or repeal obamacare since being elected to congress. unfortunately, these amendments and other like them have been blocked by the democrat-controlled senate. but due to the steady stream of broken promises, the growing and unrelepting public outcry and republican lawmakers determination that we have been successful in getting several of the most egregious portions of obamacare repealed or defunded. in fact, one of those successes was my legislation that closed the loophole in the health care
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law and saved taxpayers $13 billion. my bill was signed into law by the president last november. six other obamacare provisions have been repealed or been rescinded the funding and one of those that many of us will remember the 1099 tax provision that would drastically affected our small businesses. now, republicans aren't going to stop here. we will continue to pursue opportunities to get these and other defunding and repeal the bill to president obama's desk. before coming to congress, i worked in the health care as a registered nurse for more than 40 years and i have seen firsthand the problems and the obstacles that patients and health care providers face. but obamacare is only serving to exacerbate the current problems and creates entirely new problems. repealing obamacare is very important first step that must
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be accomplished, but that simply is not enough. for the past two sessions of congress, the house budget committee has produced full repeals of obamacare and set in place a constructive framework to replace the government takeover of health care. house republicans have built on principles and empower patients with policies that proven records of success. the house republican budget passed last year heeds the warning around the world. the simple truth is that obamacare is one of the string will most destructive things to happen to our economy. we can't micro manage 17% of our economy to mandates and price controls. our budget uses models that foster competition, innovation and choice as driving principles behind improving our health care system. now, a critical part of
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implementing real patient-centered reform is medicare reform. the premium structure would save medicare. premium support would reflect the structure of the overwhelming successful medicare part d program. medicare's prescription drug program is exceeding beyond all expectations. its delivering needed prescription drugs to the medicare beneficiaries at a lower cost than expected due to the strong competition, yes, competition among health care plans that work to keep costs down and negotiate with pharmaceutical companies for savings. this market-based program is seen by policy makers as a model for how to restructure health care entitlement programs. . .
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estimates show that it's -- that part d is costing more than expected. costs are now said to be 43% lower than the projection for the initial 2004 to 2014 estimate. and according to the c.b.o. baseline for 2004 and 2012. in march of 2012 the c.b.o. reduced its medicare part b spending projection from 2013 to 2024 by $107 billion. this was due to an increase in the thumb -- in the number of high volume drugs or generic substitutes available and changes in drug utilization. at the same time, c.b.o. projected increased spending for the rest of medicare. let's take a look at the average beneficiary part d premiums in 2012, far below the original projections.
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you can see here on the chart that the average monthly beneficiary premium for part d coverage is about $30 in 2012, virtually unchanged from 2011 and far below the $56 forecast that was originally projected. according to the former c.m.s. administrator, these consistently low premiums and i quote, from him, are going to make med cases more affordable to the medicare beneficiary and c.m.s. officials reported in 2011 over 99% of part d enrollees have access to the plan with a premium that's the same or lower than their 2010 premium. and you can see that very clearly here on this chart, what the projections were and what the actual amount is coming in. the same amount of the premium in 2011 and 2012. just remarkable. now research shows that increased access to med case
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achieved through part d is actually lowering beneficiaries health care costs. a new study in jama found that the implementation of the medicare scription drug program was followed by a $1,200 decrease in nondrug medical spending aamong those who previously had limited drug coverage which has been reported to generate over $12 billion per year in savings to part d from less use of hospital and skilled nursing facilities. as a matter of fact, what this has showed is because patients are receive tharlingemed case, can afford them, they are not going to the hospital as much, therefore saving costs. beneficiaries are also highly satisfied with part d. enrollees are overwhelmingly satisfied with part d coverage. 88% of the part d enrollees are satisfied with their coverage and 99% say this coverage works
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well. additionally, beneficiaries dually eligible for medicare and medicaid exhibit the most satisfaction. should the high court fail to overturn the law or sever parts of the disastrous piece of legislation, the house republicans will continue to fight to defund and repeal obamacare. while the country continues to suffer from failed policies and broken promises of the obama administration, my republican colleagues and i will not only continue to undo the damage, but we will also rebuild the health care -- a health care system that puts patients and their doctors in the driver's seat, rather than the unelected bureaucrats here in washington, d.c. mr. speaker, i yield back the
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remainder of my time. the speaker pro tempore: the gentlelady's time has expired. for what purpose does the gentleman from georgia rise? >> i move that the house do now adjourn. the speaker pro tempore: the motion -- could you repeat your motion? mr. woodall: i move that the house now adjourn. the speaker pro tempore: the question is on the motion to adjourn. those in favor say aye. those opposed, no. the ayes have it. the motion is adopted. accordingly, the house stands adjourned until 10:00 a.m. tomorrow when we
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later this week, we are working on a conference report for transportation programs. it expires at the end of june. also expected, an increase in oil and gas production that is equal to the amount from the cypresstrategic oil reserve. you can watch this live on c- span. >> the house oversight committee is planning a vote on holding eric holder in contempt of congress. they say he should have given more documents on the fast and furious and gunrunning operation. there is live coverage on our companion network, c-span3. tomorrow, ben bernanke held a
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news conference after the open market committee meeting. >> how do you approach bulk interviews differently? >> i think of them as gathering history. i think interview when i am working for the new sites as gathering contemporary information. >> how difficult is it not to get caught up in the hype? >> i will try to get people as full an understanding of what is happening in this campaign. it is not that difficult to put your biases to the side. >> no. what has changed your mind of worked? >? >> twitter is a prime new
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source. it did not exist four years ago. >> perdue university students interview dan balz on the newspaper business and the rise of social media. sunday at 8:00 on c-span. >> the controlling of the currency tell congress that that they have risk-management weaknesses. he is testifying about the trading loss. also, the head of the sec and the fdic. >> the chair wishes to remind our guess is that the manifestation of approval or disapproval including the use of signs and placards is a violation of rules which govern this committee. we wish to thank our guests in
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advance for their cooperation in maintaining order and decorum. our second panel is made up of one witness, ceo of jpmorgan chase, mr. jamie dimon. you are recognized for five minutes. maybe if the cameras will take a picture and then sort of excess it. we welcome you to the committee. >> thank you. i am appearing to discuss recent losses. >> could we get him to pull the microphone a little bit closer? >> these losses have generated attention. while we're still reviewing the
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facts, i will explain everything i can. jpmorgan taste has products and services to individuals, governments and nonprofit. these include deposit accounts, loans, credit cards, mortgages, capital mortgage advise, a mutual-fund, and other investments. let me explain what the chief investment officer does. like many banks, we have more deposits than loans. we held approximately 1.1 trillion in deposits and 700 billion in loans. they invest excess cash that includes treasuries, the agencies, mortgage-backed securities, corporate debt and overseas assets. assets -- it for also serves for the company.
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well the primary purpose is to have long-term interest rates, it also maintains a credit portfolio whose intent was to protect the company against a financial crisis. what happened? in december 2011 as part of a firm wide effort, we instructed them to reduce risk rate assets and associated risk. to achieve this, the cio could have reduced his positions. instead, it embarked on a strategy that said it would offset the existing ones.
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this created a portfolio that result in hard to manage risks. this morphed into something decorated potentially larger risks. let a lot of people down. we are sorry. >> we believe these led to the difficulties in any credit portfolio. these are detailed. the traders and not have the understanding of the risk they took. this should have been specific to the portfolio. only allowing lower limits on each specific risk being taken. the cio should have gotten more scrutiny.
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in response, we have taken a number of actions to guard against a recurrence. we appointed a new leadership for cio and our team has made real progress in reducing the risk going forward. this does not preclude losses of but reduces the probability and magnitude of future losses. >> are also conducting a review which our board of directors are overseeing. we take mistakes seriously. we're often our own toughest critic. will never say we will not make mistakes. we know we will make mistakes. we believe this to be an isolated event. these losses should be put into perspective. no client, customer, or taxpayer
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money was affected by the incident. our balance sheet remains intact. kopwe maintain extremely strong capital ratios that made excess of regulatory standards. basel 3 common ratio is 8.2%, among the highs in the banking sector. we expected them is to be higher by the end of the year. all of our lines remain profitable and serve consumers and businesses. while there's still two weeks left, we expect our quarter to be solidly profitable. our position did what they were supposed to do, protect against loss. mission not detract our employees from our main mission, to serve clients in companies
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and their communities around the globe. during 2011, jpmorgan raise capital of over 14 $8 trillion for consumer and commercial clients of 18% from the prior year. we have given credit of 52% over the prior year. over the past three years we have made a decision not to retrench. all of these activities come with risks. we remain focused on the business in given today is a global economic viability. we have come together as a firm and committed ourselves to fixing them.
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we will emerge from this moment stronger, smarter, and better company. i like to speak to our 260,000 employees. many are watching here today. and we need to know how proud i am of jpmorgan chase. thank you. i welcome any questions you have. s around the world. thank you. i would welcome any questions you have. >> thank you, mr. dimon. let me say that the first panel unanimously said that there was -- that jpmorgan had sufficient capital and that there were no liquidity problems and that depositors money and clients money were not at risk. >> mr. chairman, a point of order. are we going to ask the witness to take an oath and testify under oath or has that process been waived here? >> we have never done that and
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in my mind i see this is not a criminal proceeding or even a civil proceeding. he's manzaula for five minutes. >> thank you, mr. chairman, for calling this hearing. mr. dimon, on third to last paragraph of your written temperature, all activity come with a risk as we have remained focus on serving our clients, we are focused on manuel hassassagk
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of our business given today's financial volatility. i just returned from a conference in copenhagen discussing the tremendous crisis going on with the eurozone countries. the imf has estimated that the average debt of the 17 eurozone countries is 80% of gdp. in the united states, the debtg but in the united states the debt of this country which includes state, local and federal is 107% of gdp, and my question to you is what do you think is going to be the bigger story two years from now in terms of the health and strength of the financial industry? >> the trading losses at gpm or the eurozone?
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>> i mean, i'm sorry i take up so many people's time in this loss because it is so big in the global scheme of things when we have to worry about europe. europe is a significant event. i am far more worried about europe than i am about this trading position, and i hope the legislators over there overcome their complications and keep the eurozone alive. >> do you -- can you give us a reading in your opinion as to the impact, for example, on the u.s. economy, should the greeks decide to get out of the eurozone, go back to the drama or should the entire eurozone itself collapse. >> unfortunately, as a bank we have to prepare for all eventuality, we don't want to guess for what happened and i want to make sure we come to the shareholders and communities and say whatever happens, we can survive and thrive going forward. europe, grease defauece defaultt
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might result in a bank run. to put fire walls in place is not far from happening. if i had to guess at the outcome i think that might work. i think it's important to do that and hold back a crisis and then they have to go have a fiscal treaty among the 17 nations of the euro. they have to fix the underlying problems. >> italy has an economy that's two and a half times that of ireland, portugal and greece combined. to tell you banks don't have a liquidity problem they have a big problem with debt. can you address the impact of debt on nations as it relate to the ability of -- as it relates
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to liquidity, but more importantly the overall economy. >> the banking, italy, surprisingly is a very wealthy nation and they have the wherewithal to meet their debt, but they're having a crisis of confidence which is damaging that, they own a lot of the sovereign debt and banking systems don't function very well. if the sovereign system is not funking they have to go hand in hand. you have to meet both to make the whole financial system strong there. >> the reason i ask that is as you know, the eu is our largest trading partner and your bank is obviously involved in international finance. it's always important for members to be able to glean from people who are on the inside of seeing that happen -- can you give -- and i'm not looking for a forecast, but how do you see the eurozone issue as being resolved?
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>> in europe, what we see is that the politicians have the will and they want to fix it and there's only one plan which is to keep the euro alive. i think the way is very hard because you have 17 nations and 17 parliaments, so what we, what our economists think and the smart people listen to is there will abe fire wall because you will have growth for the southern nations and that the 17 nations will come to the pickal treaty which has more carrots and sticks in it and that will bring down the debt of europe. >> thank you. >> thank you. >> you said that you want it to be a smart regulation as opposed to -- the economy future's training committee budget was 200 million for the year and
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proposed to raise it at 2008. do you think at the level of 180 million to get smart regulation. i have never looked at the budgets and i don't know what they need and it's almost impossible for me to comment on it. >> i'm disappointed and the appropriations committee is 27 to 19. i am surprised because it did seem to me you were well informed about what the federal government does and doesn't do and to talk about smart regulation, but in effect, give them a pass on the substantial reduction and see if they made a mistake, the next question is the legislation that would remove any -- over and above the volker rule they would put out
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derivative trading which you spoke about favorably, but there is legislation that would have exempted the transactions in question and any other transactions conducted overseas and not in this country from the rules about clearing transparency. do you believe that we should enact that and exempt the kinds of activities here even when conducted by an american institution from these regulations? >> these trades are not exempt from regulations. >> no, i'm talking about the regulation, mr. dimon, you know what i mean. i'm talking about the specific rules enacted in the specific reform bills that are about to be adopted and transparency, et cetera, there is a bill, as you know that would exempt derivative rules, whether in a bank or know, but there are two sets of rules here. do you support that bill that would exempt these trades from the rules on derivatives that we hope to have in place? >> yes. >> why do you think that they are adequately regulated
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elsewhere? why would you not want the american regulators to have an ability to, for instance, transparency and clearing where possible? i thought you were approving of those. why would we want to except those activities and these rules? >> these trades are visible by occ and the fed. 16% of the traced were, in fact, cleared and all of them were fully collateralized. >> mr. then they would have met the rule, but it does seem to me there were problems with this in terms of knowing about when it happened and in terms of being underinformed and you are in favor of -- >> not any. >> the transparency is part of the thing that would be exempted
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from. and we have a time issue. you said -- because you have a fortress balance sheet, these are not a threat. what about institutions whose balance sheets are less impression national, a chain link or two. if we don't just legislate for j.p. morgan chase, is there a danger that the financial institution with less of a strong balance sheet might cause some problems? >> i don't know, but i think you should all take comfort in the fact that all banks are better capitalized. the system is far stronger today. that was know the question i asked and we can't assume that will be the case forever and there are some resisting the capitalization. would that have had problems in it that we didn't have because of the balance sheet? >> that assumes that there's
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something special about the way you are, but we can't assume that will be the case for every financial institution. >> we also said there was going to be profitable -- >> please don't filibuster. let me ask you, finally, that there would be some callbacks for compensation. we both have taken some responsibility here. will the callbacks for compensation, is your compensation on the table for consideration of clubex? >> this whole with act should be reviewed by the board -- >> answer my question. >> my compensation is 100% up to my board. >> mr. dimon, you said there would be callbacks for people -- >> they will do as they see appropriate. i can't tell my board what to do. >> thank you, mr. chairman.
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mr. dimon -- >> over here. >> let me explain to the witness just -- because a little unusual procedure, the republican side elected to go in order and not to come back up to the top to allow all of the members to ask question and the democratic members are starting over. >> with modifications for people 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
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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
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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
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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
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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
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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
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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.
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>> 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
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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
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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
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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?
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>> 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 --
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>> 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?
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& 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
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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 resid 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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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?
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>> 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
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they're not just people like me. so that's why we think t 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
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all of that happened. aty didn't have any problem all. >> as you know, the rulemaking
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to implement the rule is ongoing. quarks how should the rule be implemented to account for the complexity of traits like those that caused loss and the possibility that the move beyond edging risk? >> the strategy was badly implemented and tested it. it needs to be properly tested so that it never more some do something it wasn't intended to do. >> where do those risks stop?
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>> i cannot define that for you. >> that you chairman. good afternoon. we heard before that it was possible this trip would not have occurred. it would be safe to say but you did know trading at all you would have no losses? >> yes. >> if we may banks a utility, that would pretty much clear this up as well. with the clear up the rest? >> yes.
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i think the point is that regulators are there to look over the major roles such as minimum capital requirments. maybe some rules in place. regardless of whether you have a bad trading day, is it safe to say the we could never expect regulators to be able to have foreseen this loss? >> did they do their job the system will be healthier. >> if they do their job the system will be healthier victory o.
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goal isn't an unrealistic and we are setting ourselves up for failure. this is something that regulators can get their hands around. just to understand a little bit about your risk models without divulging proprietary information, what was your value and risk model? how did you calculate it? >> daily. we look 95%. >> that is approximately two standard deviations.
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would that have helped your scenario? >> is a basic statistical thing. there is nothing mystical about it. this is stress testing. we do all of these things to manage risk. i want to also go back and make a point. >> or the taxpayers ever at risk? >> no.
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>> i am trying to get my hands around this. we hear a lot about turning banks into utilities. with the but this will build the end of 2000 it happened, much of the concentration was in loans and sub crimes. based on size, they could see your desk activity. it is something that makes sense to banking institutions over all? .
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>> setting a specific limits on these things should of been in place. >> if i might, a red light to give back to some very basic concepts. in your opinion, is gambling investing. ? >> no. >> what is the difference? >> in gambling, on average you lose. >> that has been my experience with investing. >> i would be happy to get you a better investing adviser.
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>> i would tend to agree review, but we seem to be treating them quite the same. i used to think that all of wall street was on the level. that it facilitated investing. that it allowed people and institutions to put their money into something they believed in. to create jobs and be good for the country. now we are doing with this head jiang, -- hedging, it doesn't help anything.
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it creates the possibility of people asking if we know what we are doing. if you bet against your bet against your first the, you are throwing darts at a dart board. panacea that creates a job in america. if you were wrong, it puts risk.ic lee everything addrest
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the fact that you've chosen to do this overseas, raises a lot of flaws in this. how is this any different than
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protecting yourself by taking the odds to los vegas? >> do not gamble, but we do make mistakes. we raised $500 billion for the biggest american corporations. that is what we do. >> i want all good things to happen. wouldn't you be serving those clients better if you spent more time and energy in valuing
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investments? >> yes. >> why shouldn't we apply that to the whole program? >> i am raising a question on the purpose of hedging. there is nothing more important to the confidence. >> mr. fitzpatrick. >> thank you. much of the discussion has focused on whether the activities in question would have been prohibited if the volcker role had been in the affect. >> i do not know. it has not been fully vented yet and i do not know.
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>> what is your view on whether it should be prohibited? >> i believe that portfolio hedging properly done should be allowed. it protects the companies. the dramatic credit crisis -- what some have suggested that your position as a board member on the n.y. federal reserve board is a significant conflict of interest. they have suggested that you and other bankers should resign your positions. how do you respond? >> the rules are written by you all.
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i don't vote for the president or get involved with the supervisory. rounds andit's a gets -- talks about the economy and what is going on. it is more of an informational advisory group. i would personally want to hear from a lot of different kinds of people. >> nothing further. >> mr. sherman. >> thank you. mr. lynch one to swear you end. you already said something that is false.
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>> we had a hearing in september of 2009 where mr. frank was chairman. he made a decision not to swear in any of the ceos of the banks about what had gone on in september of 2009. what i am doing is following the standard policy.
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>> i am gratified did your following my president, and i will have a list for another list of presidents the week and all follow tomorrow. >> have you been sworn in the would face no legal liability for the comment you made that is a promise. we are in touch with mainstream to in our districts. you put for the idea at the jewish given to the injured and $50 billion to your investment office. there weren't small and medium- size businesses in the united states that for creditworthy that one of the money. i can assure you that their word behind 100 or more in need of
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loans from you. instead he took the money to london. . some of that money went to the gambling tables in london. that is why we are here. i would hope you are dedicated to taking the money away from your london operations and lending it to small and medium- sized businesses. we will do it for you if you cannot find them. out like to put in the record an editorial by the wild socialists over at lumber.
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they point to a study published by the imf as says your bank enjoys a $14 billion subsidy. that its cost of funds is .05% lower. what we saw is a belief around the world that if a bank of your size was going to go under, there would be a bailout of not just your depositors but of all creditors. that belief reduces your cost by .8% of your fund. you are in a position where you are too big to fail. the gentleman from wisconsin made this point. you only lost $2 billion or some
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multiple of that. it happened to be very well- financed. you bet over $300 billion. you are lucky you did not lose more. can you say on behalf of all of the banks with over 100 billion in assets, that all them could have survived a mistake this size? why should we allow you to be so big that if you go under, but we are going to have to bail out your credit towards? >> banks should take risk relative to their size and capability. a lot of bags were a porch in the storm. size and 2008, at
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2009 allowed us to continue to do things you want us to do. we helped the fdic fund. we tried to be a conservative company that does the right thing. every now and then we make mistakes. how could medium-size banks compete against you when your cost of capital is reduced by 0.8%? we borrow in the marketplace unsecured with the smartest people in the world. if everyone is so smart, we
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would be trading at 10 basis points over summary. most of that is in the united states, not in london. almost all of this was related to the mix. we have a tremendous sum of money that costs us very little right now. we have to put it out to large corporations including some of nations. our actual cost of funds with resell deposits and negotiated deposits is pretty much like everybody else. >> thank you, mr. chairman.
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years int a number of the banking sector and i am approaching this hearing keeping in mind a primary truth about the banking industry to read the business of banking is inherently risky. lending money is a risky proposition. this was evident back in february when your firm disclosed in an investor presentation that it had set aside $27 billion, more than 10 times its amount of recent trading losses. this provided that the lending was the largest risks facing america's banks today. but we must keep this in line as the hearing is focused on whether it is appropriate or not.
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in the years leading up to the financial crisis there was hardly a riskier proposition than extending mortgage loans in the midst of an artificially inflated housing bubble. if you want proof of this, look no further than of fannie and freddie. the irony is of course that had people corps rule then in effect, banks would have even more exposure to the housing bubble. risk is not like to -- created or destroyed, it is transferred. i feel the push for more regulation and our economy represents a continued misunderstanding of our banking system and the roots of our financial crisis.
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that this misunderstanding is by itself a great risk to our financial system and economy as we move forward with that said, during your testimony at the senate, he said we do not know who has jurisdiction over all the issues we deal with any more. did congress miss an opportunity to simplify our regulatory structure? >> it would have been my preference that we simplify it. >> howdy respond with those who cite the recent trading losses that the bank is too large to manage? >> there are huge benefits to size. you see them in terms of diversification.
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the benefit of science has to go to clients. there are some negatives to size. the company has done a good job for the clients and shareholders. we are helping a lot of american corporations travel around the world. >> if the activities of the sea of at j.p. morgan were limited by the volcker role to the point of portfolio hedging being disallowed, what would that do
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to the portfolio? >> we would modify the risk profile a bit and try to make sure that we are not taking undue risk. i would call it a fairly conservative profile and maybe change the nature of it. >> as i understand it the portfolio is over $400 billion of deposits that have not done lent out. if the activities were restricted the would be left with the unappealing option of lowering standards of underwriting or increasing risk in the portfolio. >> it is possible yes.
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>> it the volcker rule were implemented, the overall risk of the financial system would actually be increased? >> i do not know the answer to that. i cannot tell you the cumulative effect. >> think there is another reason why you are here. some of it has to do with politics. some feel that the franc has a role and others do not.
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we got into the program that we are in. i remembered the secretary of the treasury setting a disaster was about to happen. it came into existence so we could face -- fix the problem of. >> during that debate, there was concern about a lot of individuals doing business in london. i understand we have to get the best deal for your investors.
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i kept hearing about this london of loopholes. i heard you answering that there is no london blue bowl. it wasn't due to any lack of regulations in london. when i talk to other financial institutions and they tell me that if we put regulations in place, they will leave new york and go to london. they will have less regulation in the london of. isn't there some kind of loophole in london the other institutions who say that if we put these institutions in place they will leave new york and take those jobs with them to london. >> our problem has nothing to do
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with any loopholes in the london as far as i know. if a united states company calls up j.p. morgan and says make me an interest-rate swap and we cannot give them the best deal, and they can get the best deal in europe, that is where they will go. this will enable them to make the best deal. whoever the big company is will get less bids. and it will move overseas. some firms if they can will put some people overseas. if a bank cannot do the business at all, then we will lose a lot
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of business and jobs here. they will one day be in the china and all those parts of the world. last week you referred to a big dumb things. in your opinion, could a big dumb a bank be successfully resolved with about harming the american economy? >> will have work to do want that. more work needs to be done to make it real. we need the regulators to make this into will there are
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examples, is just a bigger and more complex world. i think it could be done it. it is going to take foreign jurisdictions working out common-sense rules and how it will take place. >> i think that a number of individuals -- >> your time is up. >> thank you chairman. before you came here, we want to
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make sure that the rules and regulations for out there. the only problem with that was sitting right where you are were five regulators and is one of them gave the same answer. they say they got to the accident afterwards never going to tell us what to do next time it. this analogy does not hold true as we are trying to do better than them in. we don't think realistically you cannot stop this from happening. if you are getting up every day
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to go to your firm to work, are you in a case where it is a bit of asia raid with the american public in regards to what it is that regulators are able to do in these circumstances? there are not really able to get into these kinds of things without modifications of the rules. >> i would never blame them for a mistake that we made. >> i concur and i hope that your
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part is to lobby for it as well. >> my highest -- the most important thing to me is the united states of america. it is not the interest of j.p. morgan chase. we will continue to serve our clients. part of the reform in this area is what? the extra territorial a fact of some of the rules we of had so far he has legislation with us to try to reform it.
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we've seen the regulations and rules in this area. variouscoming up with standards to swap. is that the appropriate manner that we should have? where we do not do a cost- benefit analysis before hand? >> >> this is a primary example of where we should have one set of rules on a derivative swaps. thinking through what makes sense in cost-benefit is always the right way to do it. >> you will agree that we have not seen that though? >> i am unaware of it.
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>> just to close, i thought your answers would be slightly different in regards to the volcker rule. i thought the answer would be at the vote rule bent law at the time there simply would not have been a trades going on because of the uncertainty. we try to finance companies at a low cost to investors and issuers. that is me -- to me the important part.
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it may very well end up being done right. they want to get them to the right place. it is just very hard to do. >> wheat yield back. first of all we will, your voice in the discussion of what is appropriate discussion. i do not think that i know the answers. i will come the voice whether we agree or not on the final analysis. i particularly welcome your analysis on dodd frank. you have stated that you are not too big to fail. is that true? >> no. >> i also fully agree with you
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that we have too many regulators. i wish that some of the large institutions -- even generally, these large institutions were on the side of trying to simplify the number of regulators, because it is too many people doing the same thing. i would work with you or anyone else to try and make your job easier. that does not mean we would reduce the regulation, simply simplifying it. again, i do not think you ever said anything that i disagree with. we want to keep our financial institutions competitive. i want to make it clear that i am understanding you correctly. you are not arguing that all financial institutions should seek the least regulated regime, that is not your argument right? >> snow. >> i would suggest they were not
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wrong about competitiveness. i think that is what the world is trying to accomplish now. we are trying to have similar approaches towards a financial institution. there are loopholes that exist in london and elsewhere. you may not be there for that reason, and i do not mind if you are art -- because you are one institution. what i am interested is the entire system and competitive and vintages we might have. people take advantage of us through regulatory schemes. we need to think about it openly and see if there regulations are better or worse than ours and how we can put
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them together so it is not just for you but for our competitors. when you say that it is working for the best field, you are right. but if it is only about the bottom line, he would be loaning your money on the corner of the street because they get a better deal than you do. the loan out their money at better rates than if you do. it is just less secure. this also the ability to get those loans payback and to make a profit. i refer to the best deal for the client. you have to note the deals you are making are good for the
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client. we may have a difference of opinion, but i want to talk to about one thing that is happening as we speak. >> i have never looked at the budget -- we are already said that there is duplication of effort for we stick to the duplication before we throw money at it. >> i agree with you on one thing else, but until we get there, do you really think it is a smart idea? >> we have both agreed that it is not what we want, but you think it is a smart idea to cut the legs out of those major regulators? >> i have enough problems, and i will leave that to you. you have no hesitancy whatsoever
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to express opinions on other matters. >> i know nothing about their budget or how many employees they have. i try not to comment when i know nothing. >> i would like to hear your answer before we go on the floor. thank you. >> you do know that we are in serious trouble on our budget down here. >> no comment. >> thank you, mr. chairman. i realize that the activity that we talked about in terms of the loss was bank hedging his within the institution that past even as late -- unanimously.
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it strikes me that this example of the potential risk undertaken -- there's always risk taken in these sorts of activities. it seems that it would highlight the need to keep those activities within institutions where they are more regulated if you will. i would appreciate your comments on that. >> i always thought it could make things riskier and not say for. >> we have broad support for that and i am hopeful we will be able to move that through. with regards to the fact that derivative activity seems to be concentrated in london, i get the sense that they are the specialists so to speak? the chairman implies that the
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rules are inadequate in governing those activities and yet through the key 20, all regulators have coordinated fairly closely. do you feel there is a need for us -- do you feel we need some sort of regulation to apply to art subsidiary's extraterritoriality? >> we need to be a will to compete fairly over there. they were always regulated. there is regulation at the top. the trades were collateralized, and 60% cleared. aig, which keeps coming up as an example, they were shorts only
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-- they were an insurance company who did not have regulators who understood credit derivatives. they accounted for them as insurance contracts. they were for the most part not collateral. completely different example of a different industry. >> and get an enormous level of risk. the you cannot match the rest on to the mortgage situation. obviously there are lessons. are there lessons that we can apply to our regulators when we look at our institutions undertake risk? >> we have a very strong risk committee. properly staffed and properly
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reported. independent mind and -- minded. the job is to challenge management that is what those committees are supposed to do. protecting and the management from themselves sometimes. in this particular case they made the same lack of oversight that i probably made it down the line about this one activity. there is good discipline in the other activities. >> in terms of obviously, at j.p. morgan has regulators in the house who closely monitor your activity, is there an element of comfort ability about how we do things that creates a hazard about these relationships over time?
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>> know there are not. they can be pretty tough on us, but what happens is that human nature, the next person doesn't spend as much time as the person before, so it becomes like that. we cannot be complacent about risk. it is not about trusting the person, it has to be independently verified. >> thank you, sir. i yield back. >> 5 minutes. >> thank you for your testimony,mr. dimon. we have many people in your industry complain about the de regulations that were put for the wall street reform act. four crew reason, the $2 billion loss has pressed the pause button on the constant stream of
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attempted rollbacks to dodd- frank. it seems to me that with the recent conviction of a prominent wall street director, firms do not seem to be going out of their way to restore trust with the american people. i understand. and that j.p. morgan will still turn a profit this year. the size of the loss and complexity of the trades still are cause for concern of treated there needs to be of valuation of not only prudent regulations but also be broken culture of wall street. a culture that some believe provides reverse incentives to play fast and loose with other people's money. after the crisis, there should have been major re-evaluation of wall street. looking back at this loss, do
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you feel that the compensation structure at j.p. morgan might have created incentives for excess of risk? >> i do not agree with what you said about wall street. i think there are a lot of people you can trust on wall street. when anyone blankets a whole thing. it is like when anyone blankets congress. i think it is not fair. when people the the long-term careers, they are not paid because of profits. they are paid because they are good managers, open-minded, and impended, the mentor younger people off. that is what we do. that is not just financial results that drive people compensation at j.p. morgan. nobody in this area have formulas. is it possible that people would say, i was driven by money? yeah.
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that should not be a great surprise. some people are driven by money, some are not. >> next question. do you feel there is a problem with wall street's culture? >> i think there might be a problem with some people on wall street. wall street for the most part are honest, decent, hardworking people. their clients' trust them. to the extent we lose it, we should earn it back. if if you talk to most of our clients, they would think j.p. morgan tries to do a very good job for them. when we make a mistake, we admit it and try to rectify it, and all firms are different so i cannot speak for every firm while i am standing here. >> mr. dimon, what would you personally recommend be done by congress to strengthen the dodd- frank act, so we can prevent actions it for the complexity of trades and risky derivatives and
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macro-hedging that caused the loss of at least $2 billion said morgan which brought us to this congressional hearing? we want to ensure similar losses do not occur in other banks. and i would like to hear your recommendations. >>. >> i have lost this argument publicly many times. -- -- regulation is not by near. is not left or right. it is not a democrat? -republican. these are complex things that should be done in closed rooms. i do not know if we can make a lot of progress and an open hearing, talking about what works, what does not work. we want a safer system, too. we want to invest in this eighth a financial system as anybody else. we will do anything we can to make it healthy and safe. it is healthier and safer today. the market did a lot of things like i mentioned - - no
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subprime mortgages, regulation has created more capital, more liquidity. it is a much stronger system today. a lot has been accomplished. >> off my time has ended and i yield back. >> thank you. mr. mchenry? >> thank you, mr. chairman. mr. dimon, there is a distinction between hedging and proprietary trade. can you defined to was the difference of hedging versus proprietary trade? >> i will tell you what i think. a hedge is meant to protect you if something goes wrong in a decision you make your proprietary trading, i think make a bet that prices will change. the problem with that is that every time you make alone, it is proprietary. the riskiest thing we do is loans. they are all proprietary.
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if we lose money on them, that it is to the house account. we still make them. we tried to do the right thing and risk management. i understand and never disputed the intent of the the volcker rule. i can make companies a safer. i agree. we made it something complex that it will be hard to legislate or put in regular terms that worker >> is there a distinction between hedging and proprietary trade? do they not look similar lester is a balanced trade on the other side that matches up? >> in some case, yes. >> how are doing in -- how long have you been in finance? >> a long time. 30 years. >> we will say a long time. for a living, you are supposed to know the distinction between this. you are testifying before congress. is there a bright line distinction between that, and if you cannot determine what that is, how can or regulator determine that? >> ok.
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i wouldn't have set it up proprietary versus hedging. if you want to make the system safer, i would've said for trading, proper capital, proper liquidity. make sure it is largely done with clients. you look at inventory and proper risk reporting. you have the ability to park police had to because you need this and you can track all of these things. it does not eliminate risk. it will mitigate the risk. >> ok, so did you support dodd- frank >> that is a hard one to say. we had a major crisis. >> it did you support dodd- frank? >> we had a major crisis. and the crisis unveiled a lot of flaws, not one flaw. we understood the need for reform. there are parts of dodd-frank we support. there are parts we did not. there are lots of parts of dodd-
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frank. >> suffice it to say you have a little bit of buyer's remorse. that is what i am hearing. you are saying yes, you understand the need for change, you do not like the result. >> some of the results. >> some. it'sith volkcecker, as being written, the distinction between proprietary trading and hedging, that is the debate that is going on right now. my concern is in the post-tarp erea, when we said we would end bailouts we have institutionalized it. in a company like to that received help from the government. had the trading loss, the government gets very involved. why? because we have found institutionalize too big to fail and bailouts with dodd-frank. to that point, during your
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hearing last week you discussed the distinction between a resolution authority and bankruptcy. would you touch on that, explain what is preferable -- the resolution authority as written in dodd-frank or bankruptcy? >> a lot of semantics. bankruptcy implies the equity get wiped out. the unsecured debt only recovers of some leftover and the court manages the wind out of the company. you do need an expert like the fdic to manage the process, that has the right people, the right capabilities to manage the wind down. that should be wound down. all clawback revoked. the company should be dismantled. the name should be buried in disgrace. that is what should happen. >> that's called bankruptcy, right? >> you guys can call it whatever
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you want. i will not get involved in the debate. >> you are involved in the debate, actually, sir. anyway, but the distinction between resolution authority which is codifying too big to fail, in essence codify the fact the government will lift it up if you fail. therefore the trading can be as risky as possible. this is the crux of the debate and why you are here today. >> they will not lead to out. keep it going -- unsecured is wiped out. without damaging the economy. >> thank you. mr. miller for five minutes. >> thank you. mr. dimon, your very dismissive last week with the senate about a bloomberg article. i think you told the senate committee not to believe everything they read that said the cio had changed from being a sleepy, cautious, risk
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mitigation unit and had become much more risk tolerant and profitable and it was your intention that it become a profit center and more than 1/4 profits for 2010 came from cio's trading. but there was a question that senator johnson asked to from that article about a -- that there had been a limit that traders had to liquidate, had to get out of any position that they lost $20 billion. you were called by that and said you knew nothing about it. have you been quiet since then if there was such a limit? >> no. i think referred something back to 2007 or 2008, so no. >> you did say last week that the failure with these trades
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was a nonot rogue traders. they were not violating their risk controls. a risk controls were not sufficient. >> that is correct. they were too high. >> did they have any limits? last week he seemed to weeknot. indicate not. >> they used the cio's limits. >> but a limit of $20 million losses and closed a position, that would be a granular risk control. wouldn't it? >> if that were true, it depends the area, but yes. >> you have been critical of jpmc in this matter, and he said it was a significant risk management failure. but onrloorly managed,
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february 29 you filed a case required by law that you had adequate risk controls in place that there were no material weaknesses and its internal controls over financial reporting since december, 2011. i know you are entitled to rely upon your subordinates and i am sure you relied upon your subordinates to make that certification, but was that certification correct? >> it was to my knowledge at the time. >> not based on your knowledge at that time, but based upon what you know now, was that certification correct? >> that is why we are having the review, to make sure that we have all of that certification is in place. that is what companies do when they have problems. the review is not done yet. >> who is entitled -- it seemed like that certification is intended for regulators and investors. are they entitled to rely upon
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the representation that there were adequate risk controls? >> i do not know the thing you have in front of you. i do not know what you are referring to, but we tried to give proper disclosures to our investors feared >> i am referring to the certification about risk controls. the certification is required by law. presumably, it is for both regular this ad for investors -- both regulators and investors. >> we tried to disclose what we are supposed to disclose. >> what inquiry did you make about risk disclosure at cio before you signed that certification? >> i believe that the risk controls were properly being done at that time. >> you were surprised last week at a question about the $20 million limit. it appeared to be something you were hearing for the first time, and you have not inquired and the six days since then is
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whether or not that was true. i notice you -- you are entitled to rely upon your subordinates. it seems like there must be a limitation on that entitlement if you have noticed that there may be something wrong. one of the ways he might get other information would be from the financial press. did you read the bomar article? >> i do not know if i read the bloomberg article. >> there is an article that says there is a $100 million limitation, that traders had to disclose positions, and that would seem like that would stick out as a pretty big deal. >> it would not stick out to me. it happened many years ago. i would pay virtually no attention to it. i am sorry. >> your time is expired. >> thank you, mr. chairman, and thanks for being here today, mr. dimon. before you were seated, we had a first panel where we have five regulators and the two things that struck me out of that panel
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were something mr. alvarez from the federal reserve said about capital. that is a theme we had today about how your strong capital position saved this and ensures that it will cause the rest of the system a problem. the ftse talked about risk- management. that is the question you got from ms. hayworth. 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 a few things about models and implementation of models, making sure risks is independent- minded. not just sitting around and having a cup of coffee. there will be more than just that. >> mr. frank talked a little bit about smart regulations. we had those five regulators sitting in the seat before year. not one of them really is in
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charge of the others. they do not court made. they have a lot of questions about the share information -- communication. no questions came up about harmonizing the regulations between europe that passed on march 29 with the u.s. regulations. and there do not appear to be a and lessons learned that are shared with other firms after what you go through to make sure there is real shared knowledge. do you want to comment any more about what smart regulation means to you? >> when dodd-frank was done, one of the things i had was an oversight committee to make sure that the learning is shared. we supported that, but it was set up with no teeth. but someone should tell who is responsible for mortgages and for volcker, as opposed to five people who have jurisdiction. d.c. how long it takes t work it out with foreign regulators -- do you see how long it takes to work out with foreign
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regulators? clarifying it, adjudicating disputes, and given responsibility to the same people would be a good thing occurred >> do you want to comment about how the impact on the multinational financial firm like yourself with regulations in europe and regulations here that are not harmonized? >> we talk about dodd-frank which has 400 rules. we have to accommodate basel, which is hundreds of things. we're not against them all secured the rules come of and severalsa 7an others. we have to do with the law. we are going to. i wish it was more coordinated and we dealt with the important ones first. and treat every one like we are all the same. to hammer, everything is a nail. >> some questions that came up earlier today. there have been a lot of questions about too big to fail. as a cop -- as a policymaker,
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too big to fail only happens with policymakers. let it happen. i am not asking you to comment on that but that is a fact. i do want to talk about the volcker rule a bit. you had some questions about it before but the key on the volcker rule will be getting it right. i do not want financial institutions that can run for the fed funsds, barring money and then putting it in a trading account and eventually gambling -- borrowing money and putting it in a trading account. you have to be able to hedge your positions, so i hope we can work with the regulators and with the industry to craft something that makes sense. if you have any ideas for us, i got a minute and four seconds, i will let you tell us if you have any ideas. >> the only idea had -- i have is that people should get in a room, go to the specifics, and not pretend they are for or
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against volcker. it is the process. you may want to get rid of it, but we have to deal with it and it is a very detailed plan. i remind people, we have the best capital markets. we should go home at night and say we sit upon the best capital markets of the world, the best job creator of the world. we need to start doing jobs again and we need to fix the mortgage market. we need to do a lot of things. if we do, we will help this economy recover quicker, not slower. >> one of the things mr. kinsler it vanished europe has been in the times on between asia and the u.s. and there have been -- the advantage europe has in the time zone between asia and the u.s. and why some trades go to london. >> thank you. your time is up. the answer is yes. >> yes. >> mr. scott.
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welcome, mr. dimon. good to have you. i want to start off by paying you and your operation in georgia a compliment. georgia is number one and home foreclosures. we had a great home foreclosure event down there and i want you to say a good work for your folks down there in georgia. mr. david baylow and todd williams and vanessa williams -- vanessa mims. your chase home ownership center, good job. good work. but a wait for a moment because i think it is very important for us to set the stage here. i think we in the united states of america and the world economy dodge the bullet. we dodged a bullet basically because of your size, because of your largeness. you were able to handle and absorb this loss.
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but there is much we can learn from it. and i think if i get my hands around this correctly one was not enough attention was paid early on inthe game. is that correct? would you say that was one of the major reasons? >> in hindsight, yes. >> your report and was diluted in the aggregate which caused a problem as well. the fundamental issue here so we can learn for the future is risk-management tool is referred to value at risk. it was one of the reasons it we used to affect his tough, but it is predicated on a large financial institution. you are the largest financial institution in the world, certainly in the united states of america, and that is why you are still profitable. taxpayers did not lose anything on this and it was affected. but here is the question -- what
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would smaller firms have been able to have those same protections using this same risk at value model as chase? >> we used lots of protections. value is o ne one of many. there are reasons for big banks and small banks. j.p. morgan chase is one of the biggest bankers to bankers the history of j.p. morgan is to bank banks. some of them can, yes. i cannot go through each one. they have different business models. each one should do what they do for their own business. >> let me ask you this -- as a result of this, should one of the things we do know, should banking entites like chase morgan -- j.p. morgan banks be allowed by our regulators to
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specificly on position- bases as opposed to on an aggregate or portfolio basis? >> if i were the regulator, and allow portfolio regulator, i will give you one example because several people mentioned. j.p. morgan has been doing banking in europe for 75 years. j.p. morgan loved italy and would go there. we have exposures to italian companies that you cannot get out of tomorrow. if you or your board of directors and say, i do not want battalion exposures, there is only one way to do that and that would be -- i do not want italian exposures, there is one way to do that. to do it by individual name is impossible. >> i think the american people would want to know when this happened, when this, when you first got wind of this $2 billion loss, what was your initial reaction? >> when i fully realized it, i
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told our people that everything is going to happen from coming down to washington, to questioning volcker, we have heard other bankers. it causes a lot of commotion inside a company. soul-searching. let's admit our mistakes, fix them. we would have to make changes. it would be a tough time for a however, it did not affect -- it should not attract us -- detract us from serving clients. we have 82 chase home offices. we will do all the things we have to do to serve the client's right. i do not want this detracting from what are 60,000 people do every day. >> i cannot let you leave about this question because the fundamental question going forward is this issue of too big to fail. how do you feel about that, especially since you are the biggest of the biggest? >> our goal is not to be the
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biggest. it is to be the best. i think everyone agrees we have to get rid of that in any incarnation. >> you said get rid of too big to fail? >> we cannot have too big to fail. we cannot have too big to fail, therefore allowing a big bank t fail in a way that damages the american economy and the taxpayer never pairs. we are on the way to working through the things that allowed this to take place. and that two minutes, will conclude our hearing. >> on april 6, blumberg had an article. you are familiar with that article. i think "the wall street journal" had an article the same day. were you aware the regulators had come in to your shop on april 9 and had expressed this concern about this article in the trade? >> i am aware. i do not know if they came or we
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call them. we share everything with them. we described to them what they thought about it, yes. >> it is reported on tuesday, april 10, the position lost $300 million. and subsequently on the next tuesday and wednesday were smaller losses. were you familiar with those? >> yes. >> on april 13, he made a statement that it is no big deal, it is a tempest in a teapot. was that an accurate reflection of that transaction? >> it is a positive aggregate reflection i believe that the time because folks had done work to look at the additional stress, that they -- the first trading day after the article. part of that was expected because we showed the world are handled that. the stress test showed it could be that dramatic. several people believed that off. on april 13, i believed it was a tempest in a teapot. i obviously was a dead wrong.
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it will not be the first time i have been wrong, it will not be the last and i think -- concern i have one said that was a couple of days at after that $300 million pop. and that is a pretty big pop even in your organization? >> our folks to look at reports, we stress tested. some of the reports i may have seen them, but it did not show it could be that much worse. if that is what we believe, i would consider that a small thing for j.p. morgan. we had profitable quarter. have to put things in relative size. >> mr. green for two minutes. >> i'll be quick. mr. dimon, thank you for appearing today. is it fair to say that you have had more than 50 meetings concerning this issue we are talking today -- about today? 50 meetings.
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probably 100. more than 100. it is fair to say that you are amenable to meeting with and talking to various peoples of about these things and probably meet with congresspersons and talk to them about these issues? >> i talked to people if appropriate. we operate about -- under a lot of rules about what i can and cannot say. >> if a program, do you meet with congress people? >> on occasion, yes. >> i want to talk to you about a concept that is near and dear to my heart. we have been talking about too big to fail. i want to talk to but concept i had called too small to live off. we have in houston, texas, some janitors that are paid $8.35 an hour. this is very small compared to what we have been talking about. he made $19 billion in 2011, is that right?
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>> yes. >> i understand your fourth highest-paid person makes $14 billion -- $14 million. i will not mention the name, but there is a reason. with person making this kind of money -- by the way, i salute you for it. i am a capitalist. i commend people for making the money they make within the rules, of course. but what i want to talk to about is this -- $47,000 is what it costs a family of four to live in houston. the poverty level is $23,000. the average janitor working full time will make $18,000 a year. cat is working full time and living below the poverty line. i would like to meet with you and talk to you aboutt too small to live off. i'll pay my way. i will not use congressional funds. i will be willing to do it any place to live. can you and i meet and talk about too small to live off?
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>> yes, we can. >> i will talk to you after the meeting. >> actually, maybe tomorrow. >> thank you. this concludes the hearing. the chair thanks the pedals for his testimony. the chair notes that some members may have additional questions for this panel which they may wish to submit in writing. without objection, the hearing will be held open for 30 minutes for members to submit questions. and their responses in the record. this hearing is adjourned. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]
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>> the controller of the currency said jpmorgan says " serious risk management witnesses." also, the head of the securities and exchange commodities and the fdic. >> today the committee meet to examine bank supervision and at j.p. morgant had je
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chase. they had a $2 billion loss. it generates concerns and raises questions not only about the bank's risk-management controls but also the action or inaction as the case may be of the regulators. what the size is a small fraction of the total assets, this serves as a reminder that no institution the matter how managed is immune from the mistakes to use mr. dimon's words "stupid, sloppy, and their results of bad judgment." it is not the taxpayers to pay for such mistakes. being borneses are not
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by the taxpayers of the banks. since the losses were disclosed, the company has lost $23 billion in market capitalization and separate reputation of harm in the marketplace. employees have lost their jobs. at least some of them. this is how the system is supposed to work. those that take the risk are the ones that suffer the loss or realize the game. it stands in sharp contrast to the regime of taxpayer bo bailouts with the experience mae,ses of aig, fanny freddie mac and solyndra. could we have order among some of the staff of?
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? thank you. those who take the risk are ones that realized the game. it stands in sharp contrast to the regime of taxpayer funded bailout some privatized profits. we have experienced this. the bank has more than sufficient capital. it is protected from being brought down by the mistakes of the institution that is deemed too big to fail. that is why the most important lesson to be learned has nothing uleso with any of the 400 roll found in the dodd/frank act.
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problem at j.p. morgan. if you have been sure that there is an efficient capital. a bank with sufficient capital is able to absorb losses whether beyond the institutions control or internal problems caused by risk-management. a bank with sufficient capital is not a threat to the financial system even if regulators failed to do their jobs. a bank was sufficient capital and take risks without putting taxpayers in jeopardy. just as jpmorgan should be and is being held accountable for is a risk failures accountability must also be demanded by the regulators to oversee the bank's activities.
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because dodd/frank failed to consolidate and streamline the current convoluted regulatory structure, achieving accountability is every bit as important as during the height of the financial crisis. how fragmented is the current regulatory framework? sitting before us are five different regulators to have some supervisory responsibility over the straits and several of whom have examiners imbedded in jpmorgan. none of them was aware of the hedging strategy or raise concerns. it makes it impossible for any regulators to do their job. the volcker rule is staggering in its length and complexity.
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they cannot say whether the volcker rule would have prevented jpmorgan from making these trades. contrast this with the simplicity of capital. capital is the risk posed by too big to fail. we will have the opportunity to discuss this with our witnesses. and want to emphasize the point that jpmorgan and its shareholders, not the tax payers or depositors, are the ones paying for the banks. this is the way the bank is supposed to work and it did. >> i will begin by convincing that my memory has appeared to fail me. i do know the structure we
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inherited when we took over in 2007 was a little bit more complex than the current one. we did abolished the merger. and remember that any such one [inaudible] what do i remember? i acknowledge there's a big problem here. i do not think it has ever been politically possible given the cultural differences. to me this is not a hearing about jpmorgan chase. they are an example of the larger issue. the effort by my republican colleagues to redirect the derivatives that has been a
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driver appeared they have not done it head on. i do believe there is some popularity for the notion there should be some regulation. here is where we are. as we sit here now the appropriations committee will be voting on a budget proposed for next year for the commodities future which will incredibly reduce the amount they have from this year to next year. while there will be criticism for not washing the windows of people's cars and other things, this republican majority is proposed to reduce their funding by $180 million. i stress million. with regard to derivatives, that is the only time it is millions and not billions.
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secondly, this committee and voted to exempt from regulation a derivative transaction conducted by the foreign subsidiaries. there are other bills that they have been trying to put forward. some try to lock in what could be done better. this is the issue. the relevance of jpmorgan is it shows this. it is considered to be a very well-run bank. if in a very well-run bank you can get this lost a several billion dollars in a fairly short time it is an indication of the problem of derivatives. not every institution has a fortress balance sheet.
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some may have a picket fence balance sheet or a chain-link fence. we would like all of them to get up there. we are not there yet. the notion that we should under fund this and exempt foreign subsidiaries from it, these are very great errors. the fact that jpmorgan chase and mr. dimon were taken by surprise, i believe that if you look at the very line of business you would find it to be unlikely that a captain in any other line of business. it is complex and highly leveraged. it is obscure. that is the point.
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we are not micromanaging jpmorgan chase. it is a fact that they were taken by surprise and lost so much money so quickly in derivatives. they did not understand what they were doing. they made the choice when they were confronted with a problem. they're not trying to wind the project down. it did not cause a systemic problem here. waiting to happens would be very grave error. i intend to focus on this. many on our side will. does this not argue against the proposal to deregulate derivatives in what we see on the part of the public. it is a systematic piece by piece effort to render us and
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able to regulate derivatives to go right back to where we were before the terrible crisis of 2008. >> the chairman of the subcommittee is recognized for one minute. >> thank you. we are here to welcome the risk- management team. normally the losses of a private company would not be something that comes before congressional hearings. dodd/frank failed to end to big to fail and codified into law and institutions like j.p. morgan argued by participants as being systemically important firms that may be bailed out by taxpayers in times of extreme distress. dollars were at risk in this case. as long as too big to fail, and this should be vigilant to ensure regulators are employing sufficient risk models.
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we know they lost this not pose a risk to be firm. they were holding $128 billion of tier one capital. could they survive the loss? is there transparency in the system? there are five regulators here to talk about this. why was it not seen by all 5 decks why was it not shared if it was seen at? >-- five? why was it not shared if it was seen? >> i think mr. frank has set the tone and direction for this hearing. i would like to continue. before we get into the specifics of the circumstances surrounding jpmorgan chase's trading lost it is important to remember the
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context. we are having the four year anniversary of the most significant financial crisis since the great depression. millions of families have lost their homes. many of which were completed with fraudulent paperwork. those that remain in their homes have lost trillions of dollars in housing as well as losses to their college funds. it is within this context the whole this hearing. this is not just about a $2 billion or $3 billion trading loss at jpmorgan chase. it is about the $10 billion or the 50 billion loss that could come next either at jpmorgan or any other bank that is backed by the u.s. taxpayer for financial reform. we asked dodd/frank to respond to this crisis. nearly two years since they
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passage we're waiting for many of these provisions to be finalized. did the initial complaint about all the uncertainty over dodd/frank. the industry is a central reason for these delays. there is a debt by 1000 cut approach to undermine the financial reform. this includes undermining dodd/frank right here in congress, lobbying our agency to weaken the rules, and suing the regulators when they do not like the rules of potentially put forward. many of my republican colleagues are complicitous in this effort by failing to give the regulators what they need to do their job. i want to implore the regulators appeared to resist the pressure they face and to get their work done and finish their role making. otherwise we may sit here wishing that we would have acted
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to prevent the next financial blow up. >> next the chairman the subcommittee on markets. >> the recent trade loss at jpmorgan is regrettable. our banking supervisors should be examined of themselves. a private business loses money. the institution is losing billions of dollars literally every day. it makes you wonder where was the out rage when bear stearns was bailed out with billions of dollars and republicans ask for a committee hearing to look into it.
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whenever had the hearing. where was the outrage when it fannie mae and freddie mac lost money every quarter? where was the outrage when half a billion dollars were lost to solyndra? where is the outrage? that is significant. in a society sometimes that happens. my colleagues continue to demonize losses in the private sector. i yield back. >> thank you. mr. frank for 30 seconds. >> the previous speaker started to say -- he did not finish his sentence. we are no further than we were before. nothing has come to the committee to change that.
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and they said this was continuing, he is confessing his ability to do anything about it. this is as far as it went. i yield back. >> the point has been made that taxpayers did not lose any money. shareholders lost $23 billion in market value. the taxpayers will go $3.6 million in the hole. we have imbedded regulators in these entities. we did not seem to catch this issue.
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when we have regulatory failure brings a question. a lot of people call for more regulators. don't we just think the regulators to do their job? there is transparency of these trades and what members are saying. we had just a few days before this problem became a real issue. the ceo said it is like a tempest in a teapot. we also have the cfo of mfn global saying they have never been in better shape. i think these are important issues we need to discuss. >> welcome to the regulators.
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since the financial crisis we have worked to improve regulation of the financial industry. are we on the right track to prevent another 2008 from happening? to regulators have the tools to prevent another crisis? our ceo is managing their institutions with the lessons they learned from 2008? why were the losses incurred dax could they have been incurred in york as easily? by very indication, at j.p. morgan chase is a well-managed firm. it happened at another large financial institution. there are parts of dodd/frank he supports it. there were parts that needed to be clarified. i think the industry is policymakers can agree that the volcker rule including the market making provision needs to
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be as clear and straightforward as possible. i believe it should be put in place as soon as possible. >> thank you. thank you for holding a very important hearing. i do find it somewhat interesting in an institution that now witnesses serial trillion dollar deficits as an order of magnitude $2 billion. it seems to pale in comparison. i am somewhat curious about certain members levels of outrage. they said "i told you so."
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some of us reflect i told you so, maybe we do not need institutions in america that are too big to fail. dodd/frank has codified into big to fail -- codified too big to fail. in powering the fdic to wind down these institutions and allowing them to borrow the fdic of to the book value of the institution from taxpayers, an amount that could be outstanding in trillions of dollars, we have codified too big to fail. before we get too far down the dodd/frank road, it is time for this nation to reexamine us. i think we should be very careful about outlawing risk .
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without risks we do not have a rate of return. without a rate of return we do not have jobs. and the economy that still suffers 3.5 years after the president has taken office. thank you for calling the hearing. a look forward to the testimony of the witnesses. >> how much time do we have? >> 01 minutes. >> i have been thrown off. if he keeps saying the same thing over and over, it will become fact. i want the the red sox to go and win. they are still in last place. you can say it all you want. dodd/frank did not codify too big to fail. where was the outrage? he must have missed the hearings. it made me a star.
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they were passing the most important bill of their lifetime to express outrage to the way we are supposed to through legislation. you and your friends have tried to kill at every opportunity to make sure that the regulators cannot do their job. he will not give them the time to put the regulations in place. i am not outraged by this particular loss. the numbers are relatively small compared to other things. i do think it is important to ask insightful questions about why they happen and how we can avoid them from happening. that is the outrage. >> thank you. you can see that we're not quite ready to break into a coup by
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kumbayhah moment. this concludes our opening statements. all members will be made part of the record. the chair wishes to remind our guests that the manifestation of approval or disapproval including the use of placards is a violation of the role that govern the committee. the chair wishes to thank our guests in advance for their cooperation. there is an agreement among all budget agencies are all functioning under increased workloads. you are facing many challenges with but only the economy but with adopting new rolules.
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you are functioning under budget restraints. your workload has greatly increased. your budget does not reflect it. >> we will do that right now. >> aloysius introducing this. the -- i want to introduce this. this is under the same. >> if you have been introduced to the panel, you wish to protest, all right.
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we will go forward. you will each be recognized for a 5 minute summary. our first panelist is thomas of currency.roller o we look forward to productive working relationship is with you. we welcome your attendance. thank you. my written testimony also includes background on our approach to supervising large
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banks and our effortso re supervisory expectations on these institutions. this provides important context for understanding how we are increasing our awareness of risks facing banks and the banking system, insuring these risks are understood and well managed and managing our expectations for oversight and liquidity. it will take some time to achieve these objectives. we must be vigilant. that course leads to a strong and effective supervision and to ward improve salamis of our banking system so that it can surf as customers of communities. the occ is the primary regulator. we are responsible for the supervision of the banks. in early april information
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became available, indicating risks and certain activities conducted within the investment office. they have met with bank managements to discuss this and the current state of the position. occ examiners directed the bank to provide additional details. our examiners run in the process of a body waiting the current position in strategy for risk reduction. at the end of april the value of the position would deteriorate rapidly. they return corrective actions. in response to these events, we have undertaken a two-pronged review. the first focuses on the
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adequacy of risk controls at the bank. we are assessing the quality of management and risk management, broad oversight, at the types unreasonableness, the model government's review process and the quality of work by the independent risk-management team and internal auditors. we're also assessing the reporting provided by banks management and to the occ. quality supervision is dependent on the quality of information available to examiners. the second component evaluates the lessons learned that could enhance management processes. consistent with the supervisory policy of heightened expectations, we're demanding that the bank a tear to the highest risk management
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standards. we are not limiting are in great to the transactions. we are assessing the adequacy of risk management throughout the bank. we're using these event to evaluate the effectiveness of the risk management with in the cio function and improve our supervision a. if corrective action is warranted we will pursue appropriate remedial reaction. while the losses raise serious questions that may affect the earnings, said these losses do not present a solvency issues. at the national bank has approximately $1.80 trillion assets and $101 billion in tier one common capital. it has improved this as a financial crisis and those levels are sufficient to absorb this loss. it is worth noting that this loss is not threaten the broader
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financial system. there has been much discussion about whether these activities would be permissible under the volcker rule. while it is premature to reach these before it is complete, at this episode will help focus our thinking on these issues and to help regulators asked fresh questions. i want to stress of my commitment to supervision and taking every opportunity to prove how we accomplish our mission. this runs throughout this. i look forward to answering your questions. thank you. >> thank you. >> the sec chairman, happy birthday. you are recognized for your five minutes. >> thank you. >> i ask that we silently insert happy birthday into the record.
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>> that is right. >> thank you. i appreciate the opportunity to testify regarding the significant trading losses announced last month by j.p. morgan chase. they announced they had incurred a $2 billion loss stemming from trade executed by the chief office. the also stated they could save additional losses. the losses reported appear on other affiliate's banal and the subsidiaries that is directly supervised by the sec. as a publicly held company, they are subject to reporting requirements and must disclose certain risks and their reports. this includes line item requirement of disclosure of
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specific information about risk as well as principal disclosure about the uncertainties. although they do not discuss this publicly, the sec post a primary authority relates to the completeness of the financial reporting and other disclosures. under the rule that requires quantitative market risk disclosure, companies are promoted to have one of three alternatives. this discusses a potential loss of fair values of cash flows of markets and to the instruments over selected times and the likelihood of losses resulting from changes in marketing favor.
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they are required to show analysis of the sources and effects of any changes reported at the close of the previous year. a company chooses to use more it must also disclose any changes to key model characteristics and to the parameter is used as well as reasons for the change. changes to the scope included in the reasons for those changes must be disclosed as well. the company must provide qualitative disclosure of primary market risk exposure and now manages. like a quantitative disclosure, qualitative disclosures are required annually. accounting principles include this in the nose of the financial statement. the disclosures include aggregating this
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involving fair volume. if there are compensation policies to create risk and are likely to have a material affect, the rules also called for disclosures as they relate to risk management and risk taking incenses and the company's annual statement. our rules required that the statement contains specific disclosures of the rule and risk oversight. certain principal based rules require disclosure of a broad range of discs including events and uncertainty that are reasonably likely to have an effect on financial condition or operating performance. this would mandate disclosure it a company was experiencing trading losses that differ from
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past experiences. sec rules require companies to describe the material risks they face and how the titular risks affect the company. all disclosures must be complete and not fleeting. although the trading losses and not appear to have occurred in an entity directly supervise, and the review of the implications of the trading losses on going. once we have a fuller understanding we will be in a better position to see if action is appropriate. i am pleased to answer your questions. >> thank you. at this time, gary gensler, the cftc chairman.
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thank you. i believe this is my eighth time. >> i sleep better note that there are common sense rules of the road. there are stop signs and speed limits. there are cops on the streets to enforce all these roles. they invested their settings. their family benefit it. it was during the great depression that president roosevelt ask congress to put in play roles to bring transparency to the security markets and protect investors against fraud manipulation and other abuses. i believe these reforms are at the foundation of our strong capital markets and many decades of economic growth.
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these provide a means to lock in a price of a commodity. our economy benefits from a well functioning market as it is essential that companies have the ability to manage their risks. the swaps market place lacks street lamps to bring it out of the traffic signals to protect the public. in 2008, swaps concentrated risk in the financial institutions and contributed to the financial crisis in the worst economic crisis americans have experienced since the great depression. congress responded with the dodd/frank act bringing common- sense rules to the swaps market place. the cftc is promoting this. we have made the victim progress in implementing the historic
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reforms completing 33 key roles. two years since the passage i think it is time we finish the job incomand complete the role. we cannot forget the crisis. swaps executed offshore can send your risk back to our shores. it is true with the london and cayman islands affiliate's of aig, lehman brothers and bear stearns. a decade earlier this was booking is $1.20 trillion where iin the cayman islands. it executed swaps through its london branch. for the public to be protected the reform should cover transactions with the overseas
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branches and affiliate's here. failing to do so would mean american jobs and markets will likely move offshore. they would. they go there where is lower cost and regulation. part together early in the crisis, where would they come back? dodd/frank was successful in closing one london loophole for exchanges. why would we leave another loophole for the dealers tax some have suggested we retreat. some have suggested we cut the funding a market oversight. the ever going cloud hanging over europe and lessons from the crisis should guide us. now is it time to bring common sense rules. 8 million americans lost their jobs. millions of families lost their homes. small businesses folded one institutions were permitted to drive on dimly lit swap roads.
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i think we would sleep better if the complex roads were well let with transparency. they had enough funding. i say hold onto your car keys. >> thank you. at this time, it chairmen marty -- at this time, chairman marty gruenberg. welcome back before the committee. >> thank you.
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thank you for the opportunity to testify this morning on behalf of the federal deposit corporation. on bank supervision and risk managementt -- >> pull the microphone closer to use a you do not have to lean over. >> these reside within financial institutions. the also highlighted the south africans of risk controls and governance at these institutions. before fdic insured subsidiaries, $842 and domestic deposits.
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as a backup supervisor of jpmorgan chase, at the fdic staff works through the primary federal regulators and the federal reserve system to obtain information necessary to monitor the risk within the institution. the fdic maintains an outside presence which consist of a permanent staff. the at-staffing gauges and risk monitoring of the firm -- the fdic staff gauges the rest monitoring of the firm. the fdic has added temporary staff to assist in are currently view. the team is working with the institutions primary regulators to investigate the circumstances that led to the losses and the institutions ongoing efforts to manage the risks of the firm. the agencies are conducting an in-depth review of the
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measurement tools used by the firm in missing structures in place within the chief investment team. following this review we will work with the primary regulators to address any an adequate risks that are identified. following the announcement of these losses, the fdic join them in daily meetings with the firm. initially they focused on gaining and understanding of the events leading up to this. the fdic has continued to participate in these daily meetings with the firm and the primary regulators. we're looking at the governance and control frameworks including the monitoring of risk limits. we're also review the quality of
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risks. our discussions have focused on the consistency of the models used in the cio as well as the approval process surrounding them. although the focus of this review is on the circumstances that led to the losses, the fdic is also working with j.p. morgan regulators to look at the gaps. as a general matter, evaluating the quality of financial institutions practices is an important to focus on the safety examinations. on-site examinations provide an opportunity for supervisors to evaluate the qualities, a credit
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review, establishment of adherence to limits, and other matters pertinent to the profiles. one important part is timely information about the risk to which a firm is exposed. they are needed to support decision making and satisfied disclosure requirements. it is important for their review. without speaking to the specifics for which a review is currently under way, the recent losses attest to the speed with which risky materialize in the large derivatives portfolio. the recent losses highlight that it is important for regulatory agencies to have access to timely risk related information about risks into regularly share
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the findings and observations. thank you. i will be pleased to respond to your question. >> these are ongoing examinations. there is some restraint on their part from giving conclusions. our next witness is the general counsel. before you began, i want to thank you for being with us today. as many of our members know, at the federal open market committee is meeting this morning. normally representatives do not testify while the fomc is meeting to discuss policy. we appreciate the willingness to accommodate the committee by making the general counsel available to testify this morning. the chair reminds members that he is here to testify about the
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supervision of jpmorgan chase. you not entertain questions on monetary policy issues on which the fomc is needing to take. members will have a chance to question chairman bernanke about monetary policy during our hearing. >> thank you for making that statement and to reinforce that. i ask all the members to respect that. >> i think the ranking member. alvarez, you are recognized. >> thank you for the opportunity to testify this morning. last month jpmorgan chase announced since it began trading losses on derivatives positions. these arose out of a complex synthetic credit portfolio that was primarily composed of long and short credit default swap positions on the number of
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different credit assets and indices. they have stated that a combination of risk management failures and execution errors and the illiquidity of the positions led to the losses. in response to the significant losses come at the fed has been assisting the occ in the effort to de risk the cio portfolio. we're also working closely with occ the fdic to make sure any failures and weaknesses or other potential problems that may have given rise to the losses are probably and appropriately addressed. the federal reserve continues to evaluate whether any weaknesses exposed may be present in other parts of the firm engaged in similar activities. all we found no evidence there are common this work is not complete. this is a strong reminder of
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capital requirement importance especially for the largest banking firms. the purpose of capital is to absorb unanticipated losses. with strong capital, business losses are burned bytorn by the shareholders and not the taxpayers. this means not threaten the safety of the firm. for this reason of the past several weeks the federal reserve have finalized reforms that will strengthen requirements applicable to the most complicated banking firms. also permit changes to their requirements and the dodd/frank act. many of these specifically addressed and strengthen the capital requirements applicable to training activities and positions.
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the stress test our supervisory compliments to these improvements of the framework. the most recent stress test demonstrated that a 15th term of the 19 largest firms would maintain capital above prescribed standards even in a very stressed economic scenario. the tier one common ratio, which compares high-quality capital to risk weighted assets, has doubled in the past three years for a weighted average of 10.9% at the end of the first quarter. the trading losses announced also focused attention on the volcker rule provision of the dodd/frank act which contains an exemption from a ban on proprietary trading to allow risk mitigating hedging activities. they have jointly propose rules
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that incorporate terms of the statutory exemption. the agency have also proposed to add requirements designed to enhance the risk management of hedging activities. among these added restrictions are a requirement for formal policies governing and hedging activities, a hedging instrument and strategies. documentation requirements, and internal audits and requirements that compensation do this not and proprietary trading. the federal reserve have received many comments including comments about the treading lawson's -- trading losses. we will consider these carefully as the work to finalize the blogger role. thank you very much. i will be pleased to answer your questions. >> before i begin my five
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minutes, if you have not gotten your question completed before the five minutes is over, you will be stopped right there. only if you have your question about and the witness is responding. you will be allowed to have an answer to that question. you testified before the senate banking committee two weeks ago about the risk management deficiencies at jpmorgan chase. have you learned anything new over the last two weeks about what led to these losses? or their appropriate risk controls some place?
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>> thank you. we're continuing our review of the facts surrounding the trading losses. we do believe that there are serious risk management weaknesses or failures at the bank. we are attempting to continue to examine the root causes for those failures and to determine whether or not there are other weaknesses elsewhere in the bank besides the chief investment officer. we are looking to ensure that we also learn how to improve our supervisory process sees an examination practices to make sure that we have a better handle on similar risks in the institutions we supervise, particularly our large bank areas supervision.
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>> thank you. >> during the 2012 panelist call in with jpmorgan chase officials dismissed the significance of the london will trade, the chief financial officer said we are very comfortable with our positions as they are held today. i would add that all of those positions are fully transparent to the regulators. they reviewed them and have access to them at any point in time and get the information on a basis as part of the normalized reporting period is the description of the regulators access to information being taken by the firm at any given time accurate? >> we have wide access to the management reports that the bank itself has, given a variety of
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the activities including the activities of the occ office -- cio office. we're looking to see whether it was sufficiently granular and whether it exposed the complexity and risk of the positions that they took with their synthetic book. >> the occ failed to identify the risk inherent in the positions until after the fact. you did have access. they were not transparent. >> in hindsight it be reporting were more robust are granular, we may have had an inkling of the complexity and risk of the position. what we're looking at this to insure that there is a
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robustness to the reporting of the risk management reporting their out the bank. >> i guess if there is proprietary information, you have to make sure there is no disclosure. >> absolutely. >> one of the things about the amorgan chase loss that i having difficulty with is which regulators are responsible for what. i know the occ regulates the national bank. the federal reserve regulates to be a holding company. what did the federal reserve do in the holding company that could have invented a sudden loss like this from happening?
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>> it is true that the set up for regulation of these institutions is divided among different institutions. the federal reserve is the holding company supervisor. i do not think it was the results of the difference in point of views or the division of responsibility that paid a role in this particular case. we have been working very closely with the other regulators to understand the rest care. i think what has happened is a breakdown in the risk management of the organization itself. the firm has acknowledged that. we're working to make sure they prepare these risk-management problems. one of the things they're focused on is the supervisors making sure these institutions have capital. that is the best for any supervisory or management
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failure. there is adequate capital in this case to a store of the losses and make sure the shareholders and not taxpayers of toward the losses. >> mr. frank for five minutes. i want to stress again -- i am aware of the proposal from either side of a consolidation beyond where we were. we put the occ and ots together. . but the fed reserve in geochargr what they do it? there is a complex structure in the banking structure. they are being resistant to be regulated by the federal banks. the midwest and it's the coast and -- hates the coast and vice
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vera. -- versa. [laughter] you have been able to work together. when he talks on page 6 about what they are doing on the volcker rule, one of the things that seems useful is that the rules that you are proposing for hedging, i have read some of what jamie dimon has said. the bank is afraid of losing money from a certain set of events in the world. anything they do to make money somewhere else counts as a hedge. it would be an offset against that loss. you talk in your testimony about requiring specific hedging activities. that would be useful. if the legislature passes the
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committee, would become law? if that had become law, what would affect the bank had been on transactions at j.p. morgan chase? >> it would be a major retreat from reform. as i in the sand, these reforms were executed at london and -- they would be subject to bank supervision. they are not subjected to derivatives? >> i believe so. it depends on how it is interpreted. but yes, i believe so. >> if the provisions have been fully implemented and held up because you have that 3-2 situation, you have been sued a couple of times, people threatened to sue you if you do not out at them carefully, it is
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hard to be upset. >> thank you. >> if the provisions of the bill had been fully implemented, what would impact have been? the volcker rule is only part of this. if all we did was enforce a tough volcker rule, that would not make anyone better off. take the non-volcker rule provision of the bill. if that have been fully implemented, would that have had any impact? >> i think there would still be brisk, but there would be more transparency. the trades themselves because they are largely in the credit to embassies. not only for the banks, but for the hedge funds on the other side. there'd be transparent pricing to the public. this tends to be better management of public market transparency. i think the chairman said that earlier. transparency helps a great deal.
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>> i am glad you mentioned that. there is much attracted to in the derivative field. outside the volcker rule, there is -- i find some of my friends in that community see it as a spectator sport. it is too a delicate and complex and obscure to survive it. it seems to me that if this was in a effect, jamie dimon and his people might have learned something about this earlier. is that possible? >> i think that is right. conduct our risk management, it has to go up the chain. transparency would have lowered the risk and also central clearing for the hedge funds as well as the banks. >> about the volcker rule, it is still being considered. the dahlin some of the hedges were going
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bad, jamie dimon would diminish none to cut the losses. but the expanded them and got themselves in a more -- into difficulty. the volcker rule defines had is more nearly and specifically. i think we would be much better off. my time has expired. >> thank you. i'd like to ask for unanimous consent to correct the record by in traducehr 33-11 -- introducing hr 33-11. but the desert into a new agency. and also -- and the fed reserve
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into a new agency. >> what was not introduced? -- when? >> march. >> you were the chairman. >> now you are the chairman. have we taken action on that bill? >> no. we are having trouble enough dealing with dodd-frank. >> you have not introduced it into this contest? -- congress. >> during this passage, many of us were told in the sector of too big to fail, many of us thought opposite might be true. the big would get bigger and the small would get fewer. and the tax payer would get poor.
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chairman, i have looked at the .dic's q1 banking profile not that i expect you to memorize this, but if i have my citation right, page 7, a table 3a, the cost of earning assets for institutions greater than $2 billion is 22 basis points less than institutions between $1,000,000,000.1410067792 dollars in assets. are you familiar -- between $1 billion and $10 billion in assets. are you familiar with this? fannie and freddie have in your implicit government guarantee -- maybe it was 30 basis points. here we are, almost two years after the passage of dodd-frank,
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and yet we see these larger banks still enjoying and funding differential advantage over their smaller competitors. if the legislature had and the specter of too bid to fill, wouldn't you have expected this funding differential too narrow? >> we are seeing among some of the reading agencies of downgrades of some of the larger institutions because of the reduced expectation of public support in the event of failure. we do that as a posive -- view that as a positive and a core part of the legislation. >> since the passage of dodd- frank, the five largest banks have grown larger?
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in fact, i am sure you are familiar with the report. "for all its bluster, dodd-frank leaves too big to fail entren ched -- largest banks are bigger than they were before the financial meltdown." it goes on to list vice president jinping it morgan and bank of america. it goes on to list j.p. morgan chase and bank of america. does the sound accurate to you? >> i recall during the financial crisis, there were some mergers
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of troubled institutions. >> start with the basic question. it is that accurate? >> i do not know. the general idea sounds right. there were some acquisitions and troubled firms. j.p. morgan baought wamu. there were various mergers. >> my fear is the taxpayer getting poorer. the congressional budget office has estimated that the orderly liquidation authority contained within dodd-frank could weigh in at roughly $22 billion of tax payer money. they have scored it. have you read the report in this
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regard? do you have a comment? >> i am aware of it, congressman. the point i would make is that the assumption behind that report is that a large up-front borrowing from the treasury. the dodd-frank prohibits the use of taxpayer money in the event of a failure of a systemic institution. this would have to be paid for out of the access of the paid company. >> i believe by definition treasury funds are taxpayer funds. thank you. >> ms. waters for five minutes.
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>> thank you. continuing with questions of the branches and the affiliates. basically excluding them from dodd-frank. when risk is taking in a london branch, does that stay in london? >> no. it generally does not. in a crisis, aig was in london. often it comes right back here and crashing to our shores and to the vice chairman. if america billails out the company here, they bail out london as well.
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>> this trade has an impact on the u.s.? >> if they were large to bring? -- if there were large enough to bring down that institution. it is impossible to sever off a limb even if it is overseas. >> chairman, we have heard that he outlined his approach. what can we expect from the cc? -- fcc? do you agree with him? can you speak into the microphone? >> i agree with respect to the london branch in this instance of the u.s. bank. i think he is right about that. with respect to the other issue, we have been working with lee --
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working closely with the staff. it had not yet approved anything. i cannot speak on what we will do. our plan is to issue a relief that looks at the application of each and every dodd-frank rule and allow commager's the opportunity their views on the approach when all the rules have been proposed for comment. we hope for some time later this summer. >> additionally, house j.p. structure figures into this? dodd-frank the powers regulators to review compensation structures that encourage risk takers from -- at financial institutions. this rule is one year overdue. one can expect them to act on it? >> you are right.
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but the general provisions. one is against company pension -- compensation arrangements. for companies over $60 billion, it consolidates assets. it is a proposed requirement for referral for three years of 60% of the executive officer's compensation. an improving the compensation, policy, and plans with respect to risktakers within the firm. we are working closely together to try to finalize the rule among the seven agencies. we have received a lot of comment letters. i do not have a specific date when it will be done. the fcc has put into place a set of rules that requires disclosure about compensation and plants that can expose accompanying to material
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adverse financial consequences. that disclosure is already happening. >> how long do we have to wait for this? >> i would hope from the occ's perspective we could accomplish a will as quickly as possible, congresswoman. >> we strongly agree this should have a high priority. we should try to move on this as quickly as we can. >> the fed reserve put in place guidance was that was -- before the dodd-frank was passed. we are working hard with other agencies to turn it into a rule for all. >> thank you. >> thank you. >> mr. ross. five minutes. >> thank you. my view in terms of the meltdown was caused by the overlie rich.
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the over leverage -- overleverage. the housing market turned. investment banks about the leverage of 30-1. they were doomed once the market turned. aig was 170-1. tradinggan chase's losses brings to center that capital is king. it is the ultimate buffered to protect against those unforeseen losses. it protects against the risk models that the bank might have. it protects against the mistakes that regulators might make. the fed might set the rate too low.
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but the bottom line is, if you have the ratio right, you can survive the storm. now a number of economists institutionalize this too big to fail model with dodd-frank. the reality is that the only thing standing between the tax payer and failure of these institutions in the massive amounts of additional capital that would be required is the enforcement on these capital ratios. that is what i wanted to go to. investors are losing confidence in the major banks and asset models. there is a recent study of 130 institutional investors that found that 63% have less faith in banque models than they did
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one year ago. 81% want to get rid of model discretion. that is what i want to go to hear. as a move forward, a committee made this observation that capital levels in american banks employing their own internal growth would experience a capital reduction of 7-27%. they are adhering to the standardized approach would have a 2% increase in the capital demands. rest and to you is, what is the benefit of continue to rely on internal -- my question to you is, what is the benefit of continue to rely on this internal approach as opposed to the standardized approach? >> to answer your question, i agree with you wholeheartedly on the importance of capital. it is the cushion that protects against errors of risk
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management which is the primary bulwark against lost and solvency. in terms of the issues, with respect to the ability of risk weighting of assets and the use of models and setting capital levels, the issue of models and use of capsules is a key component of regulation. occ's focused occ of th of the internal models for capital purposes. we have a guidance that we issued a year ago, emphasizing the the importance of making sure that these models are appropriately designed and monitored and updated. that is essential if we will continue to rely on models as a key component. >> if institutional investors
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are demanding to move away from mobled discretion and -- model discussion and when you consider the banks are likely to use this less standardized model, it seems to me that during the models built,ese ri internal it seems to me it is pretty clear going forward that you have the discretion now to solve that problem. while we are talking what the benefits of capital, the conversation should not end there. i would hope that this incident at j.p. morgan reinforces the notion that internal risk models often fail. when it comes to mandating capital levels, we would be well served to focus our efforts on a simple, minimal leverage ratios. think about that report if you
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would. >> thank you. >> it has a ready begun to spin off their proprietary trading desk in advance of the volcker rule. >> thank you, congresswoman. i believe that is a practice among many banks. the actual activities of engaging have prohibited the proprietary trading and private equity investments and hedge
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funds are done at the holding company that we do not supervise with the occ. i believe that is trend to move away in advance of the volcker rule. >> is the added benefits of doing this? is it because they are legally " required to? what role does the occ play in this process? >> we are not directing institutions to take specific actions with respect to those activities. the fed reserve i believe has issued some guidance that we have signed on in terms of that period. they will take appropriate steps to adhere to the volcker rule. >> can you list those
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institutions? >> i would have to get back to you. >> ok. thank you. i would like to ask the regulator without a disturbing few years the lsaast of london becoming the center of financial trading disasters. aig was bailed out. the trade losses of lehman brothers are historical. the ubs trading. it seems to me that every big trading disaster happens in london. i would like to know why? why is this happening in london and not the u.s.? mr. gensler than mr. curry. give us some insight. it is a pattern that is happening. >> i think i have some time zone
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advantages. i also think that large financial institutions set up legal entities or are they can. they set up hundreds if not thousands of entities to find the lower regulatory regimes are tax regimes to set up. it is a disturbing pattern, but it is a very real pattern. >> is there a lower regulatory regime? is there a lower tax structure? i have asked others and they have said that there is not. i would like to know, is there a lower standard for non-u.s. trading activities? >> i say this in terms of the derivatives regime. new york has done a great job and has passed legislation similar to dodd-frank. it is not up and running yet.
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it does not have the pieces of transparency that this congress adopted. there is still quite a debate. i think if we were to leave the london branch or even a guaranteed affiliates out, it would be another loophole or retreat from reform. risk would come crashing back to our taxpayers and our fed reserve. the fdic insures its composite. why would believe the branches out? i do not understand why we would do that. >> your comments, how would dodd-frank allocate? i heard there were only five examiners from the occ in london. basically, what is happening
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with other challenges? will this impact how to allocate your examiner resources? and your comments on why landed? >> in terms of our london presence of the occ, we will use our experience here and a review of j.p. morgan chase to reevaluate the numbers and strength of the personnel in our london office. our focus is really -- the london office is a branch of the bank. that is our traditional hook for the activity over there. the headquarters of j.p. morgan chase supervises that entity. we have examinations and overall supervision of the bank. the entire strength of the occ in terms of expertise and number
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of examiners are close to 2500 individuals. those are brought in as needed into any particular area. the number of 5 maybe misleading as the ability to leverage our activity. i would also look to coordinate with the market regulators in terms of issues that would affect both the branch and their jurisdiction. >> thank you. five minutes. >> thank you, mr. chairman. i would like to talk about the issue of transparency. there are examiners at j.p. morgan. with all of these people there, i am wondering how was this mess? in the april 13, 2012 analyst,
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the chief financial officer said, all of these positions are transparent to the regulators. you get info on any of these positions on a regular basis. is that a true statement? >> we are up in the process of dealing exactly what happened. that is one of the prongs of our review. we will see whether there were appropriate controls in place or not. our understanding is that neither the management of the bank was fully aware of the scope of that investment and we were initially relying upon the information that was available to the bank. >> you are relying upon the information that is reliable to the bank. it is a critical component of risk management. there needs to be a strong
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architecture that has controls in place. that is an area we are looking into. we met the standards that we expect. that jp morgan would have and other areas of the business. >> the cio office has additional offices all throughout the country and the world who have additional offices throughout the country and the world. it is the expectation that the information will -- i suppose that is the system. >> the office is centrally located within the new york headquarters. had there were trading activities conducted in other
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locations including london. and terms of the management controls and record-keeping, they were predominantly within the new york office. that is where our focus has been. but let me talk about communications between the five examiners in the cases of these large institutions. what kind of controls the you have for your communications? what are your protocols that you put in place since we know that was one of the major failures in 2008? >> we have set up a variety of ways of communicating with other agencies. for a large institutions, we have supervisory colleges that include the relevant supervisors. we meet regularly to talk about issues of concern.
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the examiners in the field also talk with each other. we talk with the occ examiners and the fdic and sec when there is a brokered deal. we have a matrix of communications. >> it has come to light that even with this matrix of communication, nobody was touching it. nobody was seeing it. we know the hedge funders saw it eventually. but is the communication really working? are you communicating the information not as robust as it needs to be? >> to keep this in context, a significantere werwe changes in the cio portfolio in the first quarter of 2012.
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those changes were significant contributors to this law. the company itself has mentioned the reports they generated and the kind of review they had been the place had serious flaws to it. we had access to that information. but its own management did not have a good handling on the information and understanding the risk. that would make it more difficult for us as well. we have to rely on information degette from the organization itself. >> thank you. let me say this. right to vote order would be when the second panel comes on to start over but in fairness to the members who have been here of the whole time, i have no control over the minority. the will continue down of the row. we will not come back in fairness to all of our members.
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i want to acknowledge to loss of your mother. the members of the committee express our sympathy and recognize you for five minutes. >> thank you. chairman schapiro, jp morgan chase change to its value to risk model several times over the past six months. are there penalties for failure to disclose the changes to invest tearsand the fcc? -- to investors and the fc? >> if they change their risk models all the time. the area we are concerned about this change with respect to their earnings release on april 13 that had the affect of understating the value at risk.
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our rules do require that changes to the model and parameters have to be disclosed. part of what we are investigating is the extent of that disclosure, whether it was adequate. >> if you conclude that the rules were broken? these penalties were apparently not enough to prevent jp morgan from such activities. ivo like for you to explain to us -- i would like to you to explain to us how these penalties should be structured going forward? >> we need to finish the investigation and see the full scope of conduct that potentially violates the federal
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securities laws. then the commission would determine what the appropriate sanction is to deter such conduct in the future and to mediate the violations. it is hard to say what that number would be, whether there would be a special consultant to help re-work their financial reporting controls or whether there could be other sanctions. we have a wide array of sanctions but available to us. but we have to understand what their behalf issues that are risk-management or other disclosure shortcomings or failures. it is hard to guess where we might land. >> thank you. chairman, proprietary trading was one among many factors that
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contributed to the financial crisis in 2008. an opponent of the volcker rule argued it would do more harm than good. in light of the jp morgan loss, if the rule were delayed or scaled back, of what other measures such as increased capital requirements on controls on derivatives be sufficient to mitigate the risks posed by proper kerry trading? -- propietary trading? andt's the law asis the law we must implement it. capital requirements are very important but the provisions of the volcker rule -- we have an obligation to implement those as well. >> and do you believe that increased capital requirements
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on derivatives be sufficient? >> i think the provisions of the volcker rule, requiring the reporting and record-keeping and governance provisions relating to proprietary trading, are quite important. in order to focus the attention of management and the regulators on this activity. that would be a valuable complement to the capital and other requirements of dodd- frank. >> thank you. >> thank you. >> mr. curry, the bloomberg article came out on april 6. when did you have knowledge there was problems with his portfolio? >> the size and complexity of the portfolio at j.p. morgan
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chase became clear to us at that point it at a time. after that, we began to ramp up our discussions with bank management. >> what date was that? >> i believe or around the 9th. >> so you were having extensive conversations with management about -- about this position? >> that is when we became aware of the significance of the situation. >> schapiro miss, -- miss schapiro, when did your agency have concern around this issue? what's it would've been around the same time. but since this is not in the brokers deal, we would not have had people focus particularly on that. >> mr. gensler?
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>> if we were standing up our reforms for credit in derivatives -- even this ig9 one is in there. >> mr. alvarez? >> we were informed of the same time they informs o ted the occ. >> i want to go forward to april 13 when jamie dimon said this was blown way out of proportion. did you find his comment interesting? the fact that these regulators were activating some action?
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>> we were still trying to determine the underlying strategy and ramifications to the bank's financial position. >> would you call that the tip of the teapot? >> i would not have had information at the time to make a conclusion one way or the other. >> mr. shapiro -- ms. schapiro, do you have a comment? >> the number really did not change for the earnings release. if you choose, you must be truthful and completely. the number did not change much at all from your end to the earnings release and that as part of the context. when the q1 statements came out
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and we saw that the numbers doubled, it is part of the context of how you view those statements. >> in your area of oversight, the statements ceo's make are -- >> they are always a part of what we are looking at when we make issues like this. >> i can understand if you are a ceo of a company and you have bad news but there's also a fiduciary irresponsibility -- responsibility for whatever information and statements are coming out of that organization to be accurate. would you agree? >> that is right. you must speak truthfully and completely and not allow yourself to lead -- give a misleading impression from the
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information you put out. >> is there an amount of duty for whoever makes those statements? >> i do not know their internal processes. >> if you are going to make a statement on behalf of the sec, dont you ask your people of this is a fair representation? >> csi did. -- yes i do. the duty is to speak truthfully. >> thank you. >> mr. chairman, i like to point out that anybody interested in breaking up these large
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institutions should sign on to h ther 149 -- on to hr 149. the republicans repealed -- it allowed the beasts of wall existence.come and into the comments of transparency are appropriate. but this is very complicated stuff. i tried to read as much as i can. the problem on this particular hearing -- all i could get was news reports based on assumptions and educated guesses. even the congressional research service had to piece together. amounts just a -- small of information.
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whatever facts you unveil to yourself, make them public as soon as you can so the greater public can engage in a discussion which will enlightened are thought as to what might happen. mr. currey, this is only a $2 million item. is there anything you have learned that would have limited it to $2 billion? could it not have been a bigger loss? >> part of our review process is to look at the unwinding of their position and our review process along with the other federal bank agencies. >> could it have been $20 billion? >> the concern from the supervisory standpoint is the result of an apparent collapse in rigors of risk -- so it could have been $20 billion or $200
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billion? >> in another institution, possibly. >> is there anything you found that would limit the loss only to jp morgan? >> resurveyed other large banks that the supervisors embayed not believe any of those banks -- >> but they could have. >> be believe they do not engage in similar -- >> but they could have. why are you being so resistant? you would know it if i were. >> the view that as being a very serious issue that is why it is the focus of our -- >> so it could have been a $200 billion item and every other major large bank. that is my concern. what i would like to find out -- i read your testimony. that is the biggest question here. not necessarily what happened in this instance other than the
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way it might enlighten us as to what could happen. what i am asking is to be sure that when everything is said and done, it is not just focused on one instance, one event that lost $2 billion for a bank that could apparently handle it. it is whether it could have shaken the system again. are you confident that what you have found would be to tell us that the system is now sound? >> we do not believe the system is at risk from this situation. that is why we are focusing on making sure that all the institutions we have supervised have rigorous >-- >> thank you. do you feel the same way? >> i can we have to get the title seven regulatory regimes in place that would give us access to the kind of information we need in the public needs.
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>> thank you. mr. gensler. >> i think the american public is not safe on these roads until we get the transparency and rules in place. i think the american public or by standards to some taking on excess of risk. >> based on what you found in this instance, is there any indication that what happens here might expose a risk to the system? >> is still exposes risk probably in a regulatory system that we're not covering london and also in credit derivative products we have not yet finished. >> your testimony was very important on page 9. i want to read back what you is veryhich i thinjk good. it seems all about london. >> your time has expired but you
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go ahead and read a statement. >> the statement was that section 7 -- 22 d says if there is a direct and significant connection, that you do have oversight. >> thank you. >> in this is an interesting debate we're having here. over the last for five years, the american public has finally found out what goes on and in the banking and financial- services institutions. diminished risk. that is how the system works. a lot of folks did not know what went on behind the doors and offices of banks but now they do. every day they take risk and manage risks. sometimes they win, sometimes they lose. today we are discussing an
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entity that took a risk and lost. i think that the things we are working on is finding a way to talwalk the fine line. otherwise perhaps they will not do investing in the whole system collapses. or find a way to pass the risk on to other entities, in other words, taxpayers. which is not the way to go either. i thank you for your services ever try to do that. to follow up on the gentleman from california with regards to capital. he may, in your testimony that it went from 5.2% to 7 %.
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it looks like capital for jp morgan is 5.7%. is that accurate? they are below average? >> no, i am sorry. they meet existing minimum capital requirements. >> he said the tier one capital average now is a 7% for the same size. >> the testimony refers to bank level capital and bank holding capital and that may be part of the confusion. >> ok. i they well-capitalized? >> yes, they are. >> what was the capital account prior to 2008? >> i cannot recall offhand but it has increased since then. that has been the overall objective of our heightened supervision program, an increasing level of capital and
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putting it in reserves. >> by increasing capital, they made more money. do they do that through the normal management practices of running the operation? we iya expect banks -- expect banks to take manageable risks and have been effective internal controls over those material risks. ultimately, we look to capital as being the cushion for those risks that occur. >> mr. gruenberg, the investment banking portion of jp morgan is underneath the name bank which would be covered by the fdi insurance. is that correct? quick jp morgan is an fdic bank.
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they have a separate affiliate. >> therefore there are nofdic -- no fdic insurance dollars at risk? >> i believe it was in a branch of the bank itself, not in the investment company itself. >> there are a lot of banks and branches, some of them are covered based on their activities. my question is were the activities taking place part of the umbrella underneath the main bank and the insurance expose? >> they were. >> so insurance would have had to kick in and take care of it. >> if activity did occur in the bank, yes. >> that is the issue raised here. i think it is a serious question. it is why the inquiry is going forward. i think we need to understand -- >> we have a situation with the
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banking structure now that is to me a real problem. you have these big entities that have this enormous exposure. do you feel they are paying their fair share compared to the rest of the banks that do not do this? >> well, in terms of deposit insurance premiums? >> right. >> for these large institutions, we do have a risk based insurance system specifically targeted. the kind of trading activity that occurs here is taking -- taken into consideration. >> thank you. mi lynch for five
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nutes. then we will dismiss the first panel and go to the second panel. >> thank you, mr. chairman. i also want to thank the witnesses for attending in helping the committee. if not for the exposure to the taxpayer, and we probably would not be here. i do want to note that starting back on the fall of 2008, j.p. morgan and other wall street banks received about $700 billion from the american tax payer. jp morgan chase itself received $25 billion in those top loans. the amount of federal reserve lending support to jp morgan exceeded $456 billion. in november 2011, --
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been made nearly $48 million in profit from those emergency loans from the fed. tippy morgan chase has access to the fed discount window and its depository base. which is fdic and taxpayer ensured. there is a lot of exposure here for the taxpayer. that is why it defies logic that we would allow an institution with that type of support from the taxpayer to act in this way. mr. gensler, i enjoyed your opening remarks. i thought the testimony was great. myself so igirls have empathy for you in giving your car keys out. but i do know that in mr. dimon's testimony, he confirmed
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his reports that these trades, all while they were managed in the new york office, there were actually executed in the london office. i guess you're saying some of these were executed in the cayman islands as well? >> i do not know about the cayman islands but i do know that in other circumstances, bear stearns was in that cayman islands. there were other circumstances. but jp morgan chase as i understand executed out of london. the deposit insurance fund was at risk. >> we also heard prior testimony that -- in discussions of legislation -- that a substantial percentage of jp
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morgan chase's derivative business has moved to london or as in the process of moving. is that correct? >> they are very significant operation out of london. they operate as a branch in many countries. they have advocated to this commission that that not be covered by dodd-frank reforms. i have a different view and hope the commission will get public comment this thursday. >> that is what i want to ask about. how does your oversight toolbox differ when trades are executed through london as opposed to in the united states? what are those london loopholes you described? >> congress has given us discretion to interpret the provision of the act as to where -- if it has a direct and
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signet get a fight to commerce and activities, than it is covered. there is a debate going on of an interpretation of a critical part of dodd-frank. i believe these would be -- would have a direct or significant affect. >> one last question. on may 18, morgan stanley issued a research note estimating that they jp morgan losses could reach as high as $5.2 billion. the report also contains analysis of how fresh -- how these losses might have occurred. this is assuming they were right. there is a limited amount of information but assuming that it was what you mentioned before, and more standardized derivative, there are estimates
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the losses could reach as high as $5.2 billion. is that accurate? >> i am sorry? >> we're still reviewing that with our examinations, the scope of the potential losses. are the focus is to monitor. i've tried to get an estimate here. a simple yes or no. >> no one knows. >> that's what we have the witnesses so they can testify. not for you to answer for them. if you know how much the loss will be -- >> that is what we're still reviewing under our examination
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activity. >> thank you. >> thank you, mr. chairman. if we are going to look at derivative trading and prioritize the risk that these major firms have come up with that activity be in the middle or the top? is that a risky thing or not very risky? in what priority should be looking at will be considered derivatives? >> i am not sure what priority congress wants to -- >> we simply oversee. you are in charge of risk. that is what you say. >> we are taking too high priority approaches. we think it is important for firms to have a good risk management. >> my question is not fat. derivative trading itself was a very high risk? >> it can be.
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>> ok. that is all i'm trying to establish. mr. chairman, i have five minutes. >> he is trying to answer your question. >> my question was not what they were doing. it was the priority based, the difficulty of regulating derivatives. that was my question. what i'm going to next is you are the supervisors in a charge. in charge of the people regulating the activities. i see mr. curry says he has 65 people on location. these are people with 20 or more years of experience. he then identifies in the next paragraph the examination teams have three objectives. one of which is to -- key
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risks. with the 65 regulators on site, but you know the names of the ones who monitor trading derivatives? you are the guy in a charge. >> know, we are not a and charge aocc. the -- we supervise the unregulated portions of the holding company. the specific activities within the national bank, those 65 examiners your talking about -- >>mr. curry, d you have the name of the person in charge of the derivatives? >> biya resident examiner in charge of the institution. -- we have a resident examiner in charge of the institution. they examine particular areas the bank that can change over time.
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they can also to the results of someone been bought in -- >> to you have an aim of was in charge during the time -- do you have a name of who was in charge during the time? >> no. >> to say in the testimony that you are monitoring and yet mr. alvarez is alarmed with the changes. i'm just thinking what are we doing here? why do we have these people on location? he at least admits that -- we are seeing recent losses that reveals certain risks. we're all supposed to be out there. you have on site teams. and now we're starting an
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investigation that should be are you talking to people on location, finding out if they're doing their job or sitting there with their feet on the desk drinking coffee. we ask you all to do this yet i read all this testimony and it is all angling toward the same thing. nobody is really in charge are supervising. this gets very frustrating from my point of view. >> that is part of our review process, to see what went wrong in this particular case and how we can bet -- better performer duties. >> the chair thanks the panel for their testimony. some members may have additional questions which they may wish to submit in writing. the hearing record will remain open for 30 days for members to submit written questions for the witnesses and place their
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responses in the record. this is an ongoing investigation. that was one reason we delayed are hearing until at least more information could be gathered. i think as mr. curry said, some of it was granular and not appreciative within the firm. it would be difficult to determine some of these things. the panel is dismissed. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> for more information on members of the house financial- services committee, checkout the congressional directory. a guide to the 112th congress. inside he will find each member of the house and senate, including contact information,
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district maps and committee assignments. information on cabot members, supreme court justices and the nation's governors. you can pick up a copy for $12 .95 at cspan.org/shop. >> darrell issa and attorney general eric holder met today to talk about fast and furious the gun operation. that is coming up next on c- span. then president obama at the g-20 summit in mexico. later, a preview of the national internal of the upcoming presidential and congressional elections. tomorrow morning on "washington journal," the last days of mg global, headed by former new
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jersey governor jon corzine. more than $1.6 billion in customer money was missing. you can find the article on our web site at c-span.org. the author takes your phone calls tomorrow morning at 9:15 eastern. friday, supreme court justice ruth bader ginsburg talk about the current term, including -- including this case. >> no case has attracted more attention to the press, the academy. the ticket line outside the supreme court, a line that formed three days before oral arguments commenced. some have described the controversy as unprecedented. they may be right if they mean the number of press conferences, prayer circles, protests, and counter protests going on
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outside. >> she also spoke about press reports on the decision. expected this and the week -- this week opr not. >> the media has published a steady stream of rumors and accounts. my favorite wisely observed, at the supreme court, those who know not talk and those who talk do not know. >> walked the rest of her comments from the american constitution society online at the c-span video library. the chairman of the house oversight committee said today he is prepared to hold a caucus vote against attorney general eric holder. mr. issa was the justice department to turn over documents.
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they met at the capitol this evening but they failed to come up with an agreement on the document. after the meeting, mr. issa spoke with reporters. we will also hear from congressman elijah cummings, the top democrat on the oversight committee. >> we have had about a 20 minute meeting with the attorney general. to summarize, he came with an offer of a briefing. we went through the process of what was being offered. we responded -- the document they may choose to give in the future, all we need to have before tomorrow. ultimately the documents necessary appear to be in their possession. we are hoping we have them tonight. if they can evaluate them even partially, that will give us
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grounds to negotiate a postponement and perhaps a final resolution. >> the deadline was early this morning. >> the deadline will always move to the very last minute. we always want to be respectful that if we get the information or any information that allows us to rethink and make progress on behalf of the family and the american people, then we will take them. we have no hard deadlines. we do have a marked up for tomorrow. if we receive no documents, we will go forward. if we receive documents, we will and die with them. we will be short -- sure whether they are sufficient. >> it sounds as if there was that much progress made in the meeting.
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>> essentially this meeting, i would characterize it differently. it was a reiterating up positions in both had in the letter. our position is give us the document. their position is a briefing that a document supporting their assertion that there was no wrongdoing. i think we have to see documents that convinced us that it is time to say -- speak of the sufficiency of the subpoena. if they have documents, they certainly should give those to us first. we also discuss -- we did not make progress on that but we hope to make progress on if there are things they do not want to give us, at least they tell us what and why. he said he was prepared to do
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the briefing then handle the documents. what was not resolved that is causing me to be out here is we need the documents, not the briefing. we need them to know whether or not he is being responsive to a peeper request. we welcome a briefing once we have seen the documents. >> are you disappointed you have not gotten the documents during this meeting? >> we are. we hope and some services reported the expected documents to be delivered. we never expected to get all the documents but our hope was and still is that later this evening, of well-received documents that will allow us to to evaluate. we never moved towards contempt until the flow of meaningful documents dried up. and that ultimately is what caused the impact that led to the speaker's may 18 letter in which he narrowed to the minimum
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he could. because of the receipt of the wiretaps, we further narrowed it to one issue which is not resolved. [inaudible] >> you said the administration should not release documents. why the difference now? >> i do remember the day we had a press conference. the question of firing of the u.s. attorney was betteed through a great many hearings. the firing of political appointees needs to be within bounds to be looked at.'
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dead.erry is then false statements were made about letting guns walk. holding people responsible for his death was in the distance -- in the justice department is important. the american people relied on this for eight months. this is also critical if it was your loved one who was gunned down, you would be equally upset. getting answers to these questions where a real law enforcement agent was killed with guns is fairly unique in my career. >> [unintelligible]
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>> we are not looking to hold people responsible. we are looking for document production. the attorney general is the custodian of the documents we wish to receive. that is why the content sites him. we would hope the president would ask -- would ask his attorney general to be more cooperative. >> [unintelligible] >> good evening. we had a good meeting with the attorney general. he offered to provide the documents with regards to post february 4. he also agreed to provide a briefing on the department's actions and to request -- a
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request for description of the categories and documents produced and withheld. he also agreed to a follow-up request for an formation. all the asset was the good faith that we could bring this matter to a resolution -- all he asked was the good faith that we could bring this matter to a resolution. answering these subpoenas have taken up a substantial amount of time of the attorney general's office. i thought he has been very reasonable try to address this issue. keep in mind that this effort to subpoena the records from the attorney-general is a legitimate duty of our committee. our committee has as part of its
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mission to investigate and bring about reform when appropriate. the attorney-general had been asked before -- if you read the first contempt citation, to produce documents that were unlawful for him to produce. such as application wiretap -- and to produce documents that might have placed investigations in jeopardy. on the outside, we issued a dissenting opinion with regard to that original contempt citation. the result last wednesday,
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chairman eisa narrowed -- issa narrowed this down to information regarding the possible cover-up and also information looking into whether any whistle-blowers retaliated against -- i am convinced none of that happen. that is that there was no cover up or retaliation. i thought that today's meeting -- i'm glad the chairman had narrowed its second citation to the february 4 letter imposed february 4 letter issue. that is what we are down to now. i thought the attorney-general
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was gracious and very forthright when he made the offer is that he did to provide documents and briefings and to give access to his office said they could explain anything. clearly it appears that the chairman made that his mind before we walked into his room. i think it is unfortunate things have gotten to this point. i do believe that we were on the 1 foot line. we could've gotten this ball across the goal but unfortunately, that it not happen this evening. the chairman then at the end of the meeting said at the attorney-general has produced documents to postpone. >> what makes you think he made
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his mind that before you went into the room? but just the way the conversation went. >> if you have not seen the documents, how you know it was a cover-up. ? listening to what the attorney general had said, they had nothing to hide. they want to provide the documents and the briefings. he sees this as a never ending process and he wanted to bring some type of conclusion to the process. there were a number of documents that were not a part of the original subpoena. this was basically just narrowed. also keeps in mind that the attorney general's office had
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prior documents, thousands of pages of documents. they have gone through millions of e-mails. that is just with regards to the original subpoena. it was clear that even some of the things they wanted, because they were not covered by the original subpoena, they had not been able to investigate. >> is a your understanding that the committee will proceed with the content regardless of what the attorney general does? >> i will take the chairman at his word. what he said was if certain documents were produced by morning, and he claims he will stay here all night, he said if
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he produces them, he implied that there might be a delay. >> but a delay is not an end. >> the attorney general is looking for a resolution. he wanted some type of assurance that this matter would come to an end. he was willing to cooperate and work hard to provide the chairman and what he needed the that the same time, to make sure that he was consistent with a lot. >> [unintelligible] -- consistent with the law. >> attorney general eric holder also spoke with reporters on the
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capitol today. he said the justice department has offered a mr.issa an unprecedented number of documents on fast and furious. >> good afternoon. the deputy attorney general and i came here today in good faith in an attempt to resolve the ongoing dispute we had with the committee and mr. chairman issa. we have made to date and then visit -- available an unprecedented number of documents. we provided materials to the
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committee. we laid out a plan that might resolve this matter. we have offered to make the chairs -- documents available from february to december of 2011 and to answer any questions that might come up with regard to documents. as of now, the committee has rejected that proposal. it is our hope that we can somehow find a way to prove that the offer we made is still there. it is far beyond what any justice department has done previously. >> what were the documents to burgoyne to present? -- that you were going to present? >> we offer the documents on the
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condition that we would resolve the subpoena question. that he would view the provisions of the document. it is a variety of material and is consistent with what we have already made available. e-mails, documents of that nature. dagos and to the ways the department handled itself from february to december of 2011. it demonstrates there was no intention to mislead. this is material -- in an attempt to resolved this matter, we would make this material available. >> based and what you heard, do you believe there is anything you can do this point? did you get the sense that it is a done deal?
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what the ball is in their court. they reject it but i thought was an extraordinary offer on our part. we made an extraordinary offer. distributionre for to them. we will make someone available to brief on them and we will answer questions connected to them. >> congressman cummings said earlier he believes that chairmanissa already made up his mind. do you believe that? >> given the nature of the offer we made, i think we are involved more in political gamesmanship as opposed to getting the information they say they want. nevertheless, we are prepared to provide the materials and answer
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questions about them. >> will you hand over any material tonight? >> what we ask from the chairman was an indication that if he provided these materials, that would be considered to resolve the subpoenas. he is not indicated a desire to do that at this point. i hope he will change his mind. [unintelligible] >> id not want to answer that question. -- i do not want to answer that question. not necessarily. we have made an offer that we will make these things available on the conditions that the sabena will be considered resolved. to the extent that there were other questions generated, we're prepared to enter those questions.
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>> what needs to be done? what the house oversight committee is planning a vote tomorrow on holding attorney- general eric holder in contempt of congress. committee republicans say he should have given them more documents related to the fast and furious gun operation. we that 10:00 a.m. eastern with love -- live coverage on c- span3. tomorrow afternoon, ben bernanke. he is holding a news conference. next month, award when an author and historian david pietrusza, his passion for u.s. presidents his passion for u.s. presidents and baseball has

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