Bloomberg reports that JPMorgan’s efforts to hide trading losses, outlined in a Senate report Thursday, will likely ignite debate over whether the largest U.S. bank is too big to manage and ratchet up pressure on Chief Executive Officer Jamie Dimon to surrender his role as chairman.
Dimon misled investors and dodged regulators as losses escalated on a 'monstrous' derivatives bet, according to a 301-page report by the Senate Permanent Subcommittee on Investigations.
The bank 'mischaracterized high-risk trading as hedging', and withheld key information from its primary regulator, sometimes at Dimon’s behest, investigators found. Managers manipulated risk models and pressured traders to overvalue their positions in an effort to hide growing losses.
'Too big to fail has been put back on the table - not providing risk data, misleading shareholders - this suggests that breaking up the banks is a viable idea', said Mark T. Williams, a former Federal Reserve bank examiner who teaches risk-management at Boston University. 'This big trading loss reinforces the need for independence. It’s kind of hard to argue at this point that JPM would’ve been worse if they had a separate chairman'.
After nine months of investigation, the panel concluded that JPMorgan had 'a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public', Chairman Carl Levin, a Michigan Democrat, told reporters yesterday. His team combed through 90,000 documents and interviewed dozens of current and former executives.
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