Most Senate committee hearings are nothing but photo ops for the Senators who sit there and give campaign speeches for the folks back home, but this hearing was different. Only two Senators asked the questions -- Republican Senator John McCain and Democratic Senator Carl Levin -- both from the Silent Generation of World War II survivors, the generation that still has ethics and morals.
The charges are that JPMorgan's London office lost $6.2 billion, and then the NY headquarters lied to investors about it. Here are some of the things that I heard:
- JPMorgan's London Gen-X traders (with PhDs) repeatedly violated the bank's VAR (Value at Risk) rules and models, because they thought they were smarter than anyone else.
- When they started to get into trouble, the traders actually changed the VAR financial models with the purpose of hiding or minimizing their losses.
- JPMorgan stopped sending reports to the regulatory agency (the Office of the Comptroller of the Currency or OCC) in order to hide problems that arose. The reports were required by law, but JPMorgan didn't bother, and the OCC didn't do anything about it.
- JPMorgan's New York Boomer managers claimed to be just poor little victims being led like lambs to slaughter, and had no idea what was going on, despite their multi-million dollar salaries.
- In a conference call on April 13, 2012, the NY managers, including CEO Jamie Dimon, openly lied to investors, when he said he had known nothing about it. In fact, he knew about and authorized the changes in the models as early as January 2012.
In one particularly hilarious moment, McCain asked Braunstein whether anyone had been punished. Braunstein indignantly said that people had been fired. Those were traders -- were the managers punished? Yes, they had their salaries cut. Was your salary cut? Errrr, yes, by 50%. How much is that in dollars? Errr, well, my salary used to be $10 million, now it's only $5 million. McCain displayed an expression of revulsion. key headlines from GenerationalDynamics.com