Senator: JPMorgan strategy like a 'runaway train'March 15, 2013: 2:00 PM ET
Current and former JPMorgan Chase executives, including ex-chief investment officer Ina Drew, are in Washington to testify about the bank's $6 billion London Whale losses before the Senate's Permanent Subcommittee on Investigations, led by Democrat Carl Levin and Republican John McCain.
Drew's testimony marks her first public comments on the bungled trades. Ex-head of market risk in JPMorgan's chief invesment office Peter Wieland and acting risk offer Ashely Bacon also testified.
Levin and McCain, who led a nine-month investigation into the trades, said JPMorgan (JPM) manipulated results to mask the depth of the losses, actively shielding them from both regulators and investors in a scathing report released Thursday.
Levin kicked of the hearing, calling the trading loss a "disaster" and likening JPMorgan's trading strategy to "a "runaway train."
Throughout Levin's comments, Drew appeared to be less than pleased.
McCain also railed on the bank during his opening statement.
Drew was the first among the panelists to speak. After she was sworn in, Drew began by talking about her career. Speaking softly, she said she was "proud of the amount of success we had protecting the bank." While she called her decision to resign last May "devastating," Drew also took "responsibility" for the mistakes that happened on her watch.
But she added that her ability to limit risks and losses was undermined. She said that while her oversight was "reasonable and diligent," she has since learned "that valuations for many of the book's positions were inflated and not calculated or reported in good faith."
As senators pressed the panelists about the losses and their communication with bang regulators at the Office the Comptroller of the Currency (OCC), criticism and jokes were plentiful in the Twittersphere:
Following a short break, former CFO Doug Braunstein and Michael Cavanaugh, the JPMorgan exuecutive who led the internal investigation of the London Whale Losses, joined the witness panel.
During his questioning, Levin asked the panelists about the the daily profit and loss statements provided to the OCC as the bank's losses were adding up. He noted that a report dated mid-April to regulators showed that the trading losses were about $580 million, while an internal report revealed a $1.2 billion loss.
Drew said "to the best of my knowledge, the OCC was given daily reports of the CIO's mark-to-market activities." Levin was clearly dumbfounded by her response, repeating "to the best of her knowledge."
Braunstein and Cavanaugh said its was JPMorgan CEO Jamie Dimon's decision to temporarily withhold the data. Dimon testified before the Senate last June, and was not at Friday's hearing.
Braunstein added that he does "regret" his role, and admitted that his pay in 2012 was almost cut in half.
Levin also asked about how traders disguised the depth of the losses. After some poking and prodding, Levin got Cavanaugh to admit that trades were marked differently to reduce the amount of losses, and then made the last word on the matter:
Levin continued to grill the witnesses, and thanked them for coming without a subpoena.