JPMorgan CEO Talks About $2 Billion 'Stupid' Mistake
Jamie Dimon, chairman and CEO of JPMorgan Chase, admitted the bank made an "egregious error" by making risky investments that led to a $2 billion loss, in a Sunday interview on NBC's "Meet the Press." He did not know whether the company broke any laws in making the investments. The incident has led to a debate over the best way for government to regulate banks that are deemed "too big to fail."
"We made a terrible, egregious mistake. There's almost no excuse for it," Dimon said.
Dimon had announced last Thursday that the company lost two billion dollars on a 100 billion dollar investment in credit default swaps. When asked if the company broke any laws or Securities and Exchange Commission rules, Dimon said that different departments in the company were currently looking into that question but could not answer it at this point.
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"We know we were sloppy. We know we were stupid. We know it was bad judgment," Dimon added.
Dimon expects regulators to look into whether laws were broken and said the company is "totally open" to an investigation.
When asked to explain, in plain language, what the company did wrong, Dimon answered, "In hindsight, we took far too much risk. The strategy we had was badly vetted. It was badly monitored. It should never have happened."
While remaining humble about the episode, Dimon also said that JPMorgan is not in danger of going under or needing a government bailout.
"This is not a risk which is life threatening to JPMorgan. This was a stupid thing that we should never have done, but we're still going to earn a lot of money this quarter. So, it isn't like the company is jeopardized."
Andrew Ross Sorkin, financial columnist for The New York Times, said, though, that the JPMorgan incident highlights concerns about whether similar bad investments have been, or will be, made by other banks that are still unknown.
"Other banks could also make a mistake and they could potentially make a mistake on a much grander scale. Who gets left holding the bag, if that happens? – the taxpayers. That's what this is all about," Sorkin said on "Meet the Press."
Senator Carl Levin (D-Mich.), who helped craft the "Dodd-Frank" banking regulation after the 2008 financial crisis, said the incident highlights the need for banking regulators to write strong regulations based upon the Dodd-Frank law. The banking industry has been trying to weaken the regulations, Levin said, but this latest incident will strengthen the position of those who want stronger regulation.
"They will lose their battle in Washington to weaken the rule," Levin remarked.
Reince Priebus, chairman of the Republican National Committee, argued, on the other hand, that banks have already been over-regulated, but agreed that something should be done about banks that are deemed "too big to fail."
"We need less [regulation]," Prebius said on "Meet the Press." "The fact of the matter is Dodd-Frank didn't work. The reality is we've got five to 10 banks in this country that ... make up a huge majority of our country's GDP. Now that's an issue. I do agree that this 'too big to fail' mentality is a problem, but I don't think that Dodd-Frank fixed anything. In fact, I think it made things worse."
