raise any eyebrows but hey alas there wasn't one maybe that's only for the politicians we will give you the real lowdown though and we were also trying to figure out if we'd seen this dog and pony show before we found this. illusion is really what i'm telling you what i'm exposing. the human race and everybody this is my. we wish we saw a repeat of the valachi mafia hearings in the nineteen sixty's where the country really got some insight into the workings of organized crime not the case today with jamie dimon nonetheless we talked to marketplace's heidi moore on capitol hill fresh from the hearings on what did come out of it of value plus we're wondering if banker bonus arbitrage is upon us when toxic assets unloaded on bankers turn out to be the gift that keeps on giving or perhaps we're seeing a breed of genetically mutated bank executives who are the only ones that can digest toxic assets these are the questions we have to ask after

a reuters report we read will tell you about it let's get to today's capital account. so you know we were hoping the hearing of j.p. morgan c.e.o. went a little something like this. there were twenty seven might be sixty three goes up a lot you know with all the organized crime. is what i'm telling you what i'm exposing. for you grace and everybody this is my. that was from the famous the laci hearings of the one nine hundred sixty s. which were touted as a major breakthrough in intelligence about the mob well that wasn't what we got

with jamie dimon today you know what can i say a girl can dream that's not what we saw but first let's back up to quickly recap on how we got here. it's been a little more than a month since the beast revealed its true nature publicly. j.p. morgan's now infamous london whale weighing in with at least a two billion dollar loss. before disappearing back into the vast murky waters of the largest bank in the united states only to rear its head again in the form of p.r. spin so banks you can make loans or invest the money in securities you have a huge security put forward big bank in fact the securities before it does have an unrealized gain of eight billion dollars but in how we manage that portfolio we did lose two billion dollars trading fishy euphemisms amidst a sea of criticism over the risk taken by a taxpayer backed too big to fail bank and its chief executive he's responsible for

this the buck stops here but this isn't financing business or creating jobs or building plan equipment or. structure this is this is gambling jamie diamond now answers to the senate banking committee on capitol hill where we've already seen regulators paraded before him in recent weeks we are assessing the adequacy of risk management throughout the bank with little in the way of revelations the reason of course is that both you and abuse treasury and the federal reserve are so heavily allied with the interest of the largest banks in the world systemically dangerous institutions and as far as the interests of this senate panel keep in mind when jamie dimon addresses the leaders german johnson ranking member shelby he's talking to lawmakers who can think j.p. morgan is top campaign contributor number one and number two that's according to the center for responsive politics. so as far is too big to fail wales

london and otherwise we may still have no assurance they won't be coming seemingly . again some time soon. so that brings you up to speed to today now more reasons for that view i expressed at the end the whole issue with this trade and the volcker rule is the question of if this was a proprietary trade or a hedge and if the trade would have violated the volcker rule which will aim to stop taxpayer backed banks from proprietary trading now this is the benchmark regulation really to try to stop a two thousand a repeat well listen when a lawmaker as jamie diamond as hell if we can even distinguish between a trade proprietary trade and a hedge and if so you know how they make that distinction. i think has to be very hard to make a bright line distinction between proprietary trading hedging because you can look at almost and it seems we do call it one of the other. they can't even be

distinguished so you know just forget the vocal role which is we can quit no go home not say it right you know why don't buy this do they i don't know let's us jim de mint. but i would like to come away from the hearing today with some ideas on. what you think we need to do. what we maybe need to take apart that we've already done to allow the industry to operate better and. yes you tell us jamie dimon how should we regulate you you know forget your mistakes let's let bygones be bygones don't worry about what the bank did to mess up or that outsized risks are getting away with with an implicit bailout guarantee of taxpayers forget all that what can we do to better serve you so forget all that forget the hearing i was there earlier i have a much better look take a look. jamie dimon has descended upon capitol hill so naturally so did we

now of course this is reminiscent of two thousand and nine when we saw bank c.e.o.'s answer to lawmakers here for their actions related to the financial crisis now of course we have the benefit of history and the precedent that was set to know that just because they're questioned doesn't necessarily mean annie thing is going to change or come out of the hearing so we're going to talk to heidi moore she is the new york bureau chief the wall street correspondent for marketplace to see if she thinks this dog and pony show will be any different heidi moore thank you so much for joining us in washington which is so exciting because usually in new york and the weather is cooperating which it never does in washington so. for absolutely the skies parted for jamie dimon. that's what happens here on capitol hill so now that we have. i've seen him testify and we heard him say that the volcker rule is not necessary get a little defensive still over tar but really do you feel like anything new was

revealed in terms of this writing was or do you feel that jamie dimon was even really brought to task i don't he definitely wasn't brought to task i think there were only a couple of senators who were really tough on him merkley maybe brown maybe menendez but everyone else was one out of their way to say how smart he is and how good he is at running a bank and you know they all want to pay me to others toenails basically they were just it was a love in that sense but i think in what he said there were a couple things that stood out number one his willingness to at least say that personal responsibility lay with him was interesting so you know he said i was dead wrong about calling this a tempest in a teapot i take personal responsibility the buck stops here that's just good strategically because it takes the wind out of the sails of people who say you're not getting it but if you look a little deeper there are some other interesting nuggets one of the things was that he said that the trading loss came about because j.p. morgan was planning to make a profit if there was

a global financial crisis so that tells us a lot about the motivation of that trade it tells us last year j.p. morgan was expecting a global financial crisis which makes us think back to two thousand and eight we saw how awkward things were and how easy it is to tip off the financial markets into chaos so what i would have liked to see at the end of that god is a two billion dollar trading loss at one of the biggest and most secure banks in the country could be the kind of thing that throws the markets into panic because it comes out of nowhere but he didn't say that so if they're preparing for global crisis they know that a panic could start at any minute but they're not really acknowledging their role in that right great point now along the lines too of what this trade even was you know when we first spoke about it it was right when the london whale trading loss news broke you said if this is. a hedge this is a unicorn hedge because i have never seen it before we've never seen it before now that you've heard jamie diamond's explanation and of course all sorts of other news

has come out in the meantime do you feel ever more strongly that that's what this is a unicorn hedge or not a hedge at all i don't think it's a hedge at all i mean senator menendez said something pretty funny he paraphrase shakespeare you know to hedge or not to hedge i don't think in the sixteenth century this phrase would have been so sonorous or had such resonance but the question is was this a hedge and so jamie dimon was saying this was not this was a hedge right but in another way he said we were looking to make revenue on it when you have a hedge you look to make money you look to not lose money so you should be roughly equal it should come out at zero if you do it right but they were actually making a bet and he said that in his own words so now i think that's really interesting because we can just dismiss the whole hedge thing it was a unicorn hedge it doesn't really exist doesn't exist put it to bed once and for all exactly it was just a bad and senator menendez said you said it morphed did it morph into russian roulette again taking that issue of risk so you're actually making

a bet are you acknowledge in the risk because when you and i talk about risk we hear the word risk when you say that to a banker they hear a reward and that's exactly what was going on there that said it seems like they have fired nearly every person related to that so we have to see it's really hard to look now into the future and see if that will happen again because all the people responsible for it before are gone so it's really hard to tell what situations could occur again at j.p. morgan to convince them to take that bet again or is this a turning point are they going to back away from that strategy because at this point it's really the future that matters right well you know i want to back up a little bit because when you're talking about ok this is a hedge we talk about jamie moore j.p. or jamie diamond's explanation of what their biggest liabilities are he says loans but when you look at the numbers when you look at their loan portfolio and. thousand and i think it was seven hundred seventy four earth seven hundred forty four billion dollars its c.i.a.o. portfolio was one hundred thirteen billion dollars over the next couple years it's

scaled down its loan portfolio by about fifty billion dollars the cia you would imagine would then shrink to it triple so why would j.p. morgan be diverting cash into hedging if it was reducing its long portfolio because it's profitable that's the thing i mean they saw the profits that were coming out of that unit and they see the profits from making loans following the profits from advising companies and corporations falling and they see the cia profits rising where would you put your money right i mean that's what they saw but of course they may not have taken into account the fact that those profits probably couldn't rise forever and they put probably too much faith in the cia oh to make that kind of revenue from speaking of putting faith in the cia oh i know that jamie diamond may have taken responsibility for this error before lawmakers but former executives have come out to bloomberg and said that jamie dimon gave this kind of a free pass and didn't apply the same scrutiny to them when it came to rest

management that he did to say investment banking so do you think jamie diamond will really pay for that do you think he would ever stand to lose his job or to lose compensation going forward i mean is he really going to be ever brought to task for this one last i think it's probably dubious i would say the answer to that is no and you would also have to ask if he is gone from his job one of the positions that jamie dimon occupied was that he was not just you know the head of the most profitable bank on wall street but also a kind of moral authority j.p. morgan was the one bank that had not really screwed up big and so they didn't as we said before they didn't have those scars in those rooms teaching them don't go here don't do this don't take this risk so if you take jamie dimon who has run j.p. morgan profitably for a few years out of j.p. morgan who do you put in there ken lewis. and i'm an old. you know so that's i mean there is a reason here that people are looking at the scale of the loss the money itself j.p. morgan can handle i mean it makes us raise some questions but they can handle that

but then look at the issue of leadership into the future we are at the brink of a global economic crisis right now europe is in trouble china is in trouble if we're going to try to remove the head of a major bank let's think about who's going to do a better job and that's what's protecting them right now they're so much on certainty that who has the time for a job search. here that cleanest dirty shirt applies to bank c.e.o.'s as much as two currencies but coming up still ahead why don't we have more disclosure from anyway too big to fail banks or the mob we'll have more from my interview with capital from capitol hill heidi moore she'll answer that but first your closing market numbers.

old. technology innovation all the latest developments around russia we've got the future of harvard. welcome back lawmakers may have let jamie diamond off easy earlier today but we are not so i asked new york bureau chief and wall street correspondent for marketplace heidi and more about diamond's explanation for how. and why they got into this sponsible risky situation at j.p. morgan c iow in the first place. going back he was

talking about that when they were going to be anticipating higher capital requirements they instructed the cia to reduce its portfolio or reduce some of its risk weighted assets instead of reducing the portfolio what they did was they added to it to offset those as existing positions which made it larger more complex and riskier how are we to look at this is this just an indication that management is stupid that they didn't accept some of these positions when they could have well i think it is a lapse in management i think anyone would say that and j.p. morgan should definitely admit it seemed like they were today i mean. they have to watch what's going on in those units and they admit they were not watching what's going on there and you can see how things get out of hand the fact that these two traders could go ahead and take these bets and then what looks like double down on these bets while they were supposed to reduce them while the c.e.o. thought they were reducing them while their their managers thought these risks were

going down that's halls us that the oversight was not strong enough and it's really hard for a bank to talk their way out of that because you can say we fired the people responsible but what are the chances that those people who are really evil are planning to commit fraud that they probably weren't you know that's why we have backstops that's why we have other people watching over and when you have so many levels of. management not watching over what's happening that's how things fall through the cracks i don't think things fall through the cracks i think the follow up call up interesting and when it comes to you say that that those people are gone we can't really assess if this rest will continue to be taken are we to assume that if this is going on it j.p. morgan it's going on more broadly and this is a canary in the coal mine and if they see j.p. morgan get away with this coming out of this trade. last are more banks going to be getting the green light to do this kind of a thing well if other bank c.e.o.'s think they're jamie dimon i'd love to see that happen because he did come into this with

a five year long halo around him that he was you know the best bank c.e.o. and you know several of the more adoring senators mentioned that to him. there was there was a lot of love for jamie i can't think of other bank c.e.o.'s who could do that who could pull that off he had you know some social capital to spend going into that room but the question is are they doing it then let's try to figure out what the root causes are of what j.p. morgan was trying to do does it speak to a problem of derivatives that it's more difficult to exit existing positions it's easier to try to hedge them in an add on to offset but then you add more complexity and risk exactly and that's if you're being rational right there's also the emotional aspect of i made this giant bed i put you know hundreds of billions of dollars on it i can accept that i was wrong to the tune of one hundred billions of hundreds of billions of dollars while people can accept that their wrong about washing the dishes and something to this level so there's that emotional aspect you know there is i don't know if the problem is with derivatives or whether you know

derivatives or these complex products because they require so much intelligence bring out a lot of hubris and a lot of ego in people they set up the wrong kind of incentives you get paid a lot if you get it right everyone says how smart you are and so it's really hard to back away from that and say i was wrong i'm humble and maybe i don't deserve that big salary and so i think that lore is especially there with derivatives intrinsically there's nothing about them that you know should be necessarily evil it's how we treat them so i think that's one aspect of it and then also you know other banks have the same problems with profitability as well right why do they resort to derivatives because the basic products of banking are not as profitable as they were well let's talk about who's to blame for that you know looking back at the numbers back in one nine hundred sixty banks had sixty percent i think i need to check that number but seventy five percent. me of their access cast were cash was in treasuries you fast forward to today and they have the average bank six percent of its portfolio in u.s.

treasuries the rest is in corporate bonds and other products so who's to blame for that is that the fed. well in part treasuries are yielding less but if you really look at it you could blame the fed i mean the fed has been taking a lot of blame they can take it they can take more i think definitely those low interest rates are a problem but you know another problem is that ok so what's what's the feeling more you know what's safer and more than treasuries if treasuries were this low and you could make money and. fun you know but also try to put it in corporate bonds try to put it in high yield bonds try to put it in stocks everything's really volatile it's moving around. you know so what people are trying to do is basically break up their portfolio so that they can get like a little inch of return a little scheme of return and partially that has to do with treasuries but partially has to do with every other asset class that's really interesting and just on the two billion dollar loss i want to make sure that i'm i'm there because people have said ok this is not big really look at how big j.p.

morgan is they can handle it but does that distract from the bigger question it raises which is what kind of risky bats are taxpayer backed too big to fail banks making and does this make the case for a strong volcker rule even if jamie diamond says we don't need one well the volcker rule is particularly problematic and you'll notice that one of the senators said something like you've said you don't know what the volcker rule is we don't either jamie dimon ask or lobbyist because they probably have a good idea of what the final draft is going to look like exactly if anyone has any idea right the volcker rule no matter what side of it you're on is currently a mess it's a three hundred pages it's not really definitive and you know a lot of people are still saying we don't know what it governs so it's really hard to get behind it because of the specifics of its situation it's just a mess right now even if the idea may be sound so that's part of the. problem that . is facing this whole thing who can stand behind something that's not really strong you saw that partially in that room but also you know there was no one in

there who wanted to stand up for doc frank dodd frank is dead and gone at this point you know the for the democrats it was it seems like just a giant defeat they don't want to think about for the republicans they figure they already did the work on this two years ago why are we back here again so in many ways you know the whole issue of reconsidering this is a nuisance because people have to campaign right and speaking of campaigning these guys in the senate banking committee a lot of them have to thank j.p. morgan as their number one and number two contributors when you look at the chairman and the ranking member so obvious conflict of interest there but i do want to ask if you had to compare this to what this hearing should have been given the historical context should this have been to court hearings which which led of course to class people should this be because a nose for hearings of the one nine hundred sixty s. where we got real insight into how the mafia works or should this be two thousand and nine give the bankers a little spanking and like have them be on their way and give political theater to the public to the mafia probably has better disclosure of the banking industry. i

mean one of the problems with making this as hard hitting as they could have been and that a lot of people feel it should have been is that banks don't have to disclose anything they really don't want to i mean the baseline of s.s.e. disclosure is very low so what you can morgan's been saying is hang in there until july thirteenth when we will reveal all i would question that you know everyone if they say that you do have to hang on because what can you do you can't push for information you can't get but how much are they really going to say on july thirteenth i doubt not much because they want this to go away too and we also have to ask ourselves what do the forensics of this one trade really tell us we may get the post-mortem on what happened but the bigger question is what does this mean for j.p. morgan and was this mean for the banking industry we should be focusing on those questions now and you know two billion dollars loss i don't say by going. because it's not bygones but the mechanics of no matter how deeply we get into the details are going to tell us what we really want to know which is how to get the banks to

disclose more than the mob so i do more we're going to leave it there for today thanks so much for being with us thank you. thanks. to. our right back in the studio to wrap up with loose change because the rain years ago around two thousand employees of a certain bank were forced to take five billion dollars from the riskiest assets from the banks' balance sheet as their bonuses can you guess which bank. it's been two weeks my mom. decided to. put it swoosh russian interest in life. yes credit suisse certainly

invested in the lives of their employees with toxic assets but now they're offering the deal again why because the original toxic assets offered as the bonuses yield an eighty per cent gain for the worker that is according to reuters so this is not ok toxic assets kill everybody else but for bankers when they're given as bonuses they yield eighty then what explains this well i think when this first happened obviously they were kicking and screaming because they didn't want these right but i think what happen is you introduce this toxin into the environment as we've seen with with frogs and double tadpoles and the like that they mutated so i think what effectively happened is these bankers and this is really me dying and mutated in order to literally evolve with this new ecosystem and other evil actions swallow up these toxic assets like the leading bacteria in the goal of and they're

able to actually make profits off it so leave it up to these guys and they can generate profit from anything i think the point i think i think we should just introduce these bankers and the hostile environment that we have whether it be thrown in the gulf all right if we have iowa go a sit up the oil they they could handle it they can handle it if they can handle toxic mortgages ok and car loans and student loans we should be throwing these guys in the golf as to where is that are polluted all right join these guys up all executives and and we want to have some solution forget we're leaving bacteria we only have thirty seconds but let me pose this could this be some kind of banker bonus arbitrage where the bank reports these as toxic assets secretly knowing that really this is the good stuff you know that's an interesting point but i think what's more likely is that they are there are adopted. well there are different the genetic code is such that they can mutate banger and. these good moods really immature dimitris final wise words thank you so much for watching be sure to

come back tomorrow. and in the meantime you know you can always follow me on twitter at lauren lyster and give us feedback on this show and to describe any you misstate you tube dot com slash capital account plus you can check out our show in h.d. on hulu hulu dot com slash capital dash account from everyone here thanks for watching have a great night. julie

no songes requests to reopen his extradition case was rejected by britain's supreme court a decision to bring the world's most famous whistleblower one step closer to being sent to sweden. egypt highest court ordered the dissolution of the country its limits dominated parliament after ruling a third of m.p. years or elected in legally. was a suicide car bomb explosion injures ten in damascus with syrian officials saying terror tactics are being stepped up to pave the way for foreign military intervention. next we head back to washington this time for the latest edition of the end on the show.

welcome to the loaner show we'll get the real headlines with none of the mersey can live in washington d.c. now we've got a great show for you tonight first we're going to host a panel to discuss j.p. morgan c.e.o. jamie diamond's testimony on the hill today let's just say that this thing went so bad that you had members of congress asking the banking executive for his opinion on regulations and then was to panel with michael hastings and david serota looking at the leaking scandal that's engulfed the white house this week happens to be forty years since the watergate scandal began with the break in so we're going to bear the reactions then and now we'll have all of that and more for you tonight including a dose of happy hour but first let's take a look what the mainstream media decided to miss.