The embarrassing losses at megabank JPMorgan Chase reverberated in Washington, Wall Street and on the campaign trail Sunday, with JPMorgan Chase chief executive Jamie Dimon acknowledging that the bank “made a terrible, egregious mistake” by dismissing worrisome signs earlier this year about the bank’s trading strategy.
The embarrassing losses at megabank JPMorgan Chase reverberated in Washington, Wall Street and on the campaign trail Sunday, with JPMorgan Chase chief executive Jamie Dimon acknowledging that the bank “made a terrible, egregious mistake” by dismissing worrisome signs earlier this year about the bank’s trading strategy.
JPMorgan, the largest U.S. bank, was poised on Sunday to accept the resignations of three executives involved in the botched strategy, which has caused losses of at least $2 billion at the bank, according to news accounts.
In addition, Elizabeth Warren, a Democratic Senate candidate in Massachusetts and former senior financial regulatory official in the Obama administration, called on Dimon to resign from the board of directors of the Federal Reserve Bank of New York, a critical interlocutor between Wall Street and Washington.
“We need to stop the cycle of bankers taking on risky activities, getting bailed out by the taxpayers, then using their army of lobbyists to water down regulations,” Warren said.
JPMorgan’s loss did not pose any threat to the bank — which is set to make around $4 billion this quarter despite the setback — but it was already having an outsized effect on the debate over financial regulation in Washington, where regulators are still working to draft the rules that were put in place by the Dodd-Frank Act of 2010.
Dimon said Sunday that JPMorgan’s mistakes were likely to boost efforts to more tightly regulate the biggest banks. Dimon and JPMorgan, in particular, have led the charge against many of the proposals in the Dodd-Frank Act, marshaling the credibility they built by successfully navigating the financial crisis.
At particular issue is the drafting of the Volcker Rule, a prohibition on banks engaging in speculative bets, whose supporters say might have prevented JPMorgan’s bad trades had it been in effect. JPMorgan has fought to keep the rule as narrow as possible.
“This is a very unfortunate and inopportune time to have this kind of mistake,” Dimon said.
JPMorgan disclosed the trading losses — which occurred in London, ostensibly as part of the bank’s efforts to reduce risk in its operations — on Thursday in a hastily arranged and apologetic conference call. Earlier this year, Dimon dismissed concerns about massive bets being assembled by a trader called “the London Whale” because of the size of the investments.
“I was dead wrong when I said that,” he said Sunday.
Beyond Washington, three executives involved in the trading strategy seemed in line to lose their jobs this week. These executives include, according to the Wall Street Journal, Ina Drew, who oversaw the unit responsible for the losses, as well as London-based executives Achilles Macris and Javier Martin-Artajo.
A JPMorgan spokesman declined to comment on the departures.
Although Dimon was a big Democratic donor who once had a close relationship with President Barack Obama, the banker said Sunday that a lack of collaboration between business and government has hurt the country’s business climate.
“It’s true to say we haven’t had true, common collaboration,” he said, answering a question on whether the Obama administration has created an anti-business environment. “To me, it’s not Democrat or Republican.”
But, he said, “Democrats were so tough on Republicans that you’re seeing a little bit of that giveback at this point.” He urged the parties to “put their knives down and get back to work for the American public.”
Dimon said that JPMorgan is ready to answer questions from regulators on the trading that led to the $2 billion loss and that it supports giving the government the authority to dismantle a failing bank. He promised to get to the bottom of the mistake and learn from it.
Senior Democrats repeated their call for stricter regulations.
Sen. Carl Levin, D-Mich., said Sunday that the JPMorgan loss only confirms that banks’ pushback against new rules passed after the financial crisis will backfire.
“This was not a risk-reducing activity that they engaged in. This increased their risk,” Levin said on “Meet the Press.”
“So we’ve got to be very, very careful that the regulators here are not undermined by this huge effort to weaken the rule by putting in a huge loophole” that includes the trading that caused the JPMorgan loss, he said.