NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) CEO Jamie Dimon stuck largely to his script in his testimony before the House Financial Services Committee on Tuesday, admitting lapses in the bank's risk management but highlighting that the incident was isolated, passionately defending his stand on bank regulations and trumpeting the "widest, deepest and best capital markets" of the United States. Bottomline, shareholders did not walk away with any new information from this testimony.
Granted, the tone of the session was decidedly more aggressive tone than that of the Senate Banking Committee last week and there were points when the normally self-assured CEO looked a little flustered and weary. Dimon faced some pointed questions on the bank's disclosure of changes to its risk model, after SEC Chairwoman Mary Schapiro said the regulator was investigating whether JPMorgan misled investors by failing to disclose a change in the Value at Risk model the firm had adopted for its CIO unit. The change in the model understated the amount of money at risk by half, the bank said when it disclosed the loss in early May. Dimon has since defended the bank's change to the models, saying that JPMorgan employs hundreds of trading models and makes changes all the time with the intention of improving the way the firm captures risk. He, however, admitted that the recent change to the CIO VaR model, implemented in January, may have allowed the unit to take more risk than it should have and may have "aggravated" the trading losses. But the changes were not the cause of the problem, he said. Once the bank determined that the new model was not capturing risk accurately, it switched back to the old model and then disclosed what it believed was actually at risk. "We disclosed what we knew when we knew it," Dimon told the House Financial Services Committee. Rep. Brad Miller of North Carolina noted that Dimon himself had been critical of the bank's risk controls, calling the trading strategy poorly managed, poorly reviewed and poorly executed.
|JPMorgan Chase CEO Jamie Dimon testifies before the House Financial Services Committee on Capitol Hill on Tuesday.|
Yet, he pointed out, the CEO on Feb.29 filed a certification required by law that the bank had adequate risk controls in place and that management's assessment of the firm determined there were no material weaknesses in its internal controls or financial reporting as of Dec. 31, 2011. "I know you are entitled to rely on your subordinates in making that certification, but was that certification correct?," Miller asked Dimon. "It was to my knowledge at the time," Dimon replied. When pressed on whether he believed it was still true based on his information now, the CEO was a little more evasive. " We try to disclose what we are supposed to disclose," he said and later added " I believed at the time that the risk controls at CIO
Chief Investment Office were properly being done." Dimon faced plenty of questions on regulation of foreign subsidiaries, the Volcker rule and too big to fail and the CEO rattled off many of his favorite talking points. He even added a new zinger when asked whether the bank could conceivably lose $50 billion. "Not unless the moon strikes the earth," Dimon said. But he steered clear of being sucked into the politics of budget cuts. "I have enough problems" Dimon said, declining to comment on whether there should be staff cuts at the CFTC. Shares of JPMorgan were up by 2.5% on Tuesday. JPMorgan Chase shareholders will have to wait till July 13 to get the answer to the one question that really matters- the size of the trading loss. The bank has scheduled a two-hour conference call on the day it reports to shed more light on the second quarter and CIO unit. -- Written by Shanthi Bharatwaj in New York