By Peter Schroeder - 06/13/12 07:50 PM EDT
JPMorgan Chase CEO Jamie Dimon accepted blame Wednesday for the billions of dollars his bank lost on a bad trade while standing firmly behind his criticism of the Wall Street reform law.
Appearing before the Senate Banking Committee, Dimon admitted he was “dead wrong” about the complex bet on corporate debt that damaged his bank’s bottom line and reputation.
"Under any name, what you call it, I will not defend it," he said. "It violated common sense."
"I'm absolutely responsible; the buck stops with me," he added later.
The pool of assets that drove the more than $2 billion in losses was structured to earn large amounts of revenue during a systemic event such as a financial crisis, according to Dimon, who said it performed as advertised during the last meltdown.
But the bank lost sight of the risks in the portfolio, he said, and now has lessons to learn.
"No matter who you are, how competent people are, never, ever get complacent about risk," Dimon said. "Challenge everything."
Beyond the bad trade, however, Dimon was resolute in defending his bank, its practices and the financial system at large from criticism, and clashed with Democrats over their calls for heightened regulation.
"We have the widest, deepest, best capital markets in the world,” he said. “It would be a shame to end that out of anger over something like that.”
A key question surrounding the JPMorgan trades is whether they were meant to hedge the bank or seek profits. The financial-services industry has strongly opposed the “Volcker Rule,” a regulation from the Dodd-Frank reform law intended to prevent banks from hunting for profits while allowing legitimate hedging.
Dimon maintained the trades that cost JPMorgan would have been permitted under Volcker, and said he thinks it will be nearly impossible for regulators to properly implement the rule.
"It will be very hard to make a bright-line distinction between proprietary trading and hedging," he said. "You can look at almost everything we do and call it one or the other."
Several Democrats took issue with Dimon's claim the trades would have been permitted. Sen. Jack Reed (D-R.I.) described the trades as a "bet on the direction of the market … which looks to be designed to generate profit."
Under questioning by Reed, Dimon conceded that it was possible the rule, which is still being implemented by regulators, could have averted some of the losses suffered under the trade.
The bank chief also got into a spat with Sen. Jeff Merkley (D-Ore.) after the senator said JPMorgan would have collapsed during the financial crisis without assistance from the federal government. Dimon told him he was "misinformed," and maintained that the bank only took bailout money at the request of the government, which needed all large banks to participate to make the program legitimate.
"I don't believe everything I read; I hope you don't either," he said.
Later, Merkley rebuked Dimon after he interrupted him several times.
"Sir, this is not your hearing," he said.
Republicans at the hearing heaped praise on Dimon and encouraged him to continue his critique of Dodd-Frank.
"We can hardly sit in judgment of you losing $2 billion," said Sen. Jim DeMint (R-S.C.). "We lose twice that every day here in Washington."
"We're here quizzing you," said Sen. Bob Corker (R-Tenn.). "If you were sitting on this side of the dais, what would you do to make our system safer and still meet the needs of our global economy? "
Dimon maintained that regulators could not have prevented the losses, and argued Dodd-Frank has turned the regulatory system into a muddled mess.
"We don't actually know who has jurisdiction over many issues we deal with anymore," he said. "I would prefer a simple, clean regulatory system with real intelligent design, and that's not what we did."
Dimon stumbled the most in the hearing when asked by Corker if Dodd-Frank made the financial system safer. After waffling, noting that he supported some elements of the law, he said he didn't know.
However, he said that changes have been made to ensure that if a bank, including JPMorgan, fails in the future, it does not pose a threat to the entire financial system.
"We have to allow big institutions to fail; it's part of the health of the system," he said.
Dimon's hearing got off to a raucous start when a group of protesters began yelling in the hearing room as he took his seat.
"This man is a crook and needs to go to jail!" yelled one man, reportedly associated with Code Pink. "These men are predators on the American taxpayers' money."
A small group chanted, "Stop foreclosures now!" as they were led out of the hearing room.
— This story was originally posted at 12:31 p.m. and has been updated.