JPMorgan sees pay 'clawbacks' for exercising bad judgement
Source: Agencies |
June 14, 2012, Thursday
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JPMORGAN Chase CEO Jamie Dimon told US Congress yesterday that senior bank executives responsible for a US$2 billion trading loss will probably have some of their pay taken back by the company.
"It's likely that there will be clawbacks," Dimon told the Senate Banking Committee.
Under bank policy, Dimon said, stock and bonuses can be recovered from executives, even for exercising bad judgement. The policy has never been invoked, he said.
The start of the hearing was delayed by demonstrators in the room who shouted about stopping foreclosures. Another demonstrator shouted: "Jamie Dimon's a crook." At least a dozen people were escorted from the hearing room.
Dimon appeared serene during the outbursts, which lasted several minutes. At another point before the questioning began, he gave a broad smile.
Dimon said the trading loss, disclosed on May 10 in a surprise conference call with reporters and banking analysts, was meant to hedge risk to the firm and to protect in case "things got really bad."
Two Democrats on the committee, Senators Charles Schumer and Robert Menendez, expressed concern about what would have happened if the trading loss had occurred at a weaker bank.
JPMorgan Chase is the largest bank in the US by assets and is considered among the strongest. Dimon often makes note of the bank's "fortress balance sheet."
Menendez hypothesized about a larger loss, perhaps US$50 billion, that creates a run on the bank "and that ultimately becomes the collective responsibility of each and every American."
The bank's stock price was flat at the start of trading, but began climbing when the hearing began. It was up 2 percent later, the best performer among the 30 stocks in the Dow Jones industrial average.
JPMorgan's trading loss has raised concerns the biggest banks still pose risks to the US financial system, less than four years after the financial crisis in the fall of 2008.
The so-called Volcker rule, which goes into effect in July, will prevent banks from making certain trades for their own profit. Banks won an exemption to trade to protect their broad portfolios, as Dimon has said JPMorgan was doing in this case.
However, Dimon said: "I have a hard time distinguishing it." He allowed that "it's possible" the Volcker rule may have prevented the debacle at JPMorgan but said he didn't know.
"It's likely that there will be clawbacks," Dimon told the Senate Banking Committee.
Under bank policy, Dimon said, stock and bonuses can be recovered from executives, even for exercising bad judgement. The policy has never been invoked, he said.
The start of the hearing was delayed by demonstrators in the room who shouted about stopping foreclosures. Another demonstrator shouted: "Jamie Dimon's a crook." At least a dozen people were escorted from the hearing room.
Dimon appeared serene during the outbursts, which lasted several minutes. At another point before the questioning began, he gave a broad smile.
Dimon said the trading loss, disclosed on May 10 in a surprise conference call with reporters and banking analysts, was meant to hedge risk to the firm and to protect in case "things got really bad."
Two Democrats on the committee, Senators Charles Schumer and Robert Menendez, expressed concern about what would have happened if the trading loss had occurred at a weaker bank.
JPMorgan Chase is the largest bank in the US by assets and is considered among the strongest. Dimon often makes note of the bank's "fortress balance sheet."
Menendez hypothesized about a larger loss, perhaps US$50 billion, that creates a run on the bank "and that ultimately becomes the collective responsibility of each and every American."
The bank's stock price was flat at the start of trading, but began climbing when the hearing began. It was up 2 percent later, the best performer among the 30 stocks in the Dow Jones industrial average.
JPMorgan's trading loss has raised concerns the biggest banks still pose risks to the US financial system, less than four years after the financial crisis in the fall of 2008.
The so-called Volcker rule, which goes into effect in July, will prevent banks from making certain trades for their own profit. Banks won an exemption to trade to protect their broad portfolios, as Dimon has said JPMorgan was doing in this case.
However, Dimon said: "I have a hard time distinguishing it." He allowed that "it's possible" the Volcker rule may have prevented the debacle at JPMorgan but said he didn't know.
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