Dimon says JPMorgan failed to rein in traders

Tue Jun 12, 2012 8:10pm EDT
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By Dave Clarke and David Henry

WASHINGTON (Reuters) - JPMorgan Chief Executive Jamie Dimon will tell lawmakers that the bank's recent multibillion-dollar trading loss occurred because poorly managed traders embarked in January on a misguided hedging strategy they did not fully understand.

His written testimony prepared for a hearing on Wednesday gives a few more details about what went wrong, and what the nation's largest bank by assets plans to do about it.

Dimon does not, however, give an update on whether the losses have grown beyond last month's $2 billion estimate.

Known for smoothly navigating JPMorgan Chase & Co (JPM.N: Quote) through the recent financial crisis, Dimon will appear before the Senate Banking Committee to tell lawmakers that the trading loss is an isolated incident and that the bank is in solid shape.

"Our fortress balance sheet remains intact," he said. "While there are still two weeks left in our second quarter, we expect our quarter to be solidly profitable."

Dimon is contrite in his testimony, saying that "we feel terrible" that the bank has lost some of shareholders' money.

But he makes clear his view that the bank's size was not the core problem but an asset, a rebuttal to some critics who have seized upon the incident as evidence that some banks are too big to manage.

"In short, our strong capital position and diversified business model did what they were supposed to do: cushion us against an unexpected loss in one area of our business," he said.   Continued...

Commuters are reflected in stone as they walk past the JP Morgan headquarters in New York, May 17, 2012. REUTERS/Eduardo Munoz