Quantcast
Connect with us

‘Inadequate’ controls led to JPMorgan loss: regulator

Published

on

WASHINGTON — A top US bank regulator told lawmakers Wednesday that “inadequate” risk controls at JPMorgan Chase led to a $2 billion derivatives loss, as senators grilled him and others over a failure to prevent the debacle.

Democratic Senator Robert Menendez used the Senate Banking Committee hearing to unleash a fierce warning to regulators in the aftermath of the bank’s derivative trade disaster reported last month that sent shudders through the still-frail financial system.

ADVERTISEMENT

“The blood will be on all of your hands if the ‘London Whale’ ultimately goes belly up next time,” Menendez told regulators, referring to the all-powerful London-based trader linked to the loss.

Menendez directed much of his frustration at Thomas Curry, who heads the Office of the Comptroller of the Currency (OCC), which is in the spotlight for its oversight of JPMorgan’s Chief Investment Office unit responsible for the loss.

Curry said “the issue at JPMorgan Chase is one of inadequate risk management” within the CIO unit in the months leading up to the bank’s announcement of the losses.

He said his agency is poring over audit reports and interviewing officials at JPMorgan and the OCC to establish “a detailed chronology of events” leading up to the fumbled trades.

ADVERTISEMENT

“Our analysis will focus on where breakdowns or failures occurred,” he said.

Curry told the packed hearing that while the massive loss affects the bank’s earnings, it “does not present a solvency issue.”

JPMorgan Chase has $1.8 trillion in assets, including $101 billion in Tier 1 common capital, he said.

ADVERTISEMENT

But amid worries that so-called “too big to fail” banks like JPMorgan were taking excessive risks that could damage the entire financial system, senators expressed concern that regulators were too lax in monitoring huge trades.

“What did the comptrollers office know, and were you on top of things?” asked Richard Shelby, the committee’s ranking Republican.

Curry responded that his concern about the bank intensified in April “as losses increased within the portfolio.”

ADVERTISEMENT

The OCC focused on “managing and monitoring the bank’s efforts to mitigate or de-risk that particular portfolio with the objective of ensuring there is a soft landing,” he said.

Curry acknowledged that the OCC was conducting “a critical self-review” to see whether there were shortcomings at the agency tasked with monitoring one of the biggest banks in the world.

The review should be completed “within the next several weeks, he said.

ADVERTISEMENT

The series of hearings — JPMorgan’s chief executive Jamie Dimon has been invited to testify twice later this month — comes amid fierce debate over the proposed Volcker Rule that would bar banks from trading for profits with their own funds in a bid to prevent them from taking dangerous risks while enjoying government guarantees.

Committee chairman Tim Johnson said he disagreed with complaints that new Wall Street reforms urge regulators “to micromanage” banks.

“To restore confidence in our financial system after the crisis, we need more, not less, scrutiny of Wall Street’s activities,” Johnson said.

Senator Patrick Toomey and other Republicans argued that the Volcker rule would merely limit banks’ abilities to manage risk, and would impede their free-market trading.

ADVERTISEMENT

“I’m very, very concerned that we have created a monster,” Toomey told the regulators.

There were “over 100 examiners on the ground full time at JPMorgan alone,” he noted, and they still failed to spot and interdict the bank’s alarming losses.

He said capital was the essential tool to reduce systemic risk and provide a buffer against banks that get in trouble.

But Menendez offered an impassioned counterpoint, insisting that while capitalism is essential to US economic vitality, he did not want to return to the fiscal calamity of 2008.

ADVERTISEMENT

That period showed the glaring consequences “of a ‘free-for-all’ market, where the decisions of large financial institutions became the collective risk of an entire country… and all of us had to pay,” he said.

“I don’t think the American people… are willing to go down that road again.”


Report typos and corrections to: [email protected].
READ COMMENTS - JOIN THE DISCUSSION
Continue Reading

Breaking Banner

‘Left wing hack’: Fox News fans lose it after anchor calls Ukraine allegations ‘a problem’ for Trump

Published

on

Fox News viewers lashed out at the network on Sunday after host Arthel Neville grilled New York Congressman Peter King (R) about President Donald Trump's alleged effort to get Ukraine to help him defeat Joe Biden.

Neville twice asked King about Trump's Ukraine scandal, and both times he evaded the question by saying that Congress does not have a right to know the details of Trump's conversations with foreign leaders.

On her third attempt, Neville got to the point by noting Trump's alleged actions are "a problem."

"We don’t know that it’s true, we hope it’s not true," the Fox News host said of the allegations against Trump. "But if there is a possibility that our president used his office to put pressure on a foreign government -- president-elect -- to dig into his possible, potential political opponent, then that’s a problem."

Continue Reading

Breaking Banner

New York Times battered on MSNBC for pushing smear of Hunter Biden in order to maintain access to Trump

Published

on

An "AM Joy" panel jumped all over the New York Times for pushing a widely debunked smear of Hunter Biden promoted by Donald Trump, saying the newspaper is more interested in maintaining their access to the Oval Office than debunking the lie.

Speaking with host Joy Reid -- who noted that her producers asked for comment from the Times but were rebuffed -- MSNBC regular Maria Teresa Kumar scorched the Times, as well as reporter Ken Vogel, for the uncritical parroting of the president's smear.

Continue Reading
 

Breaking Banner

Ukrainian journalist throws down gauntlet after Giuliani smear: ‘I express my readiness to testify’

Published

on

A Ukrainian journalist said on Sunday that he would be willing to testify to Congress against President Donald Trump's attorney, Rudy Giuliani.

After Giuliani unleashed a bizarre rant on CNN accusing Democrats of trying to get help from Ukraine in the 2016 election, Ukrainian journalist Serhiy Leshchenko wrote an op-ed exposing the accusation as a lie.

In his op-ed, Leshchenko explains:

Never in my wildest dreams did I imagine the Manafort revelations would become fodder for the U.S. elections in 2020. President Trump’s lawyer Rudolph W. Giuliani, the mouthpiece of this campaign, is not only attempting to rehabilitate Manafort but is also working to undermine U.S. relations with Ukraine, which has been confronting Russian aggression on its own for more than five years. Giuliani and his associates are trying to drag our newly elected president, Volodymyr Zelensky, into a conflict between two foreign political parties, drastically limiting Ukraine’s room for maneuver in respect to the United States, perhaps its most important international partner.

Continue Reading
 
 
Help Raw Story Investigate and Uncover Injustice. Join Raw Story Investigates for $1 and go ad-free.
close-image