WASHINGTON—Senator Scott Brown of Massachusetts called on the top executive of JPMorgan to take back the bonuses and any other financial incentives reaped by those responsible for the trading debacle that led to the company’s $3 billion loss.
JPMorgan’s chief executive officer, Jamie Dimon, was grilled Wednesday morning by the Senate Banking Committee as part of Capitol Hill’s inquiries into the huge losses disclosed about a month ago by the investment and banking giant.
“The way for Jamie Dimon to demonstrate his seriousness about the mistakes that led to JPMorgan’s $2 billion trading loss is to take back the bonuses and incentive compensation from those who were involved in the failed London trades, including himself as CEO,” Brown said in a statement distributed by his Washington office. The loss has reportedly since been revised upward to $3 billion.
“The only way to change the culture on Wall Street is to hit people where it hurts – in the wallet. Perhaps then the big banks will think twice about taking unnecessary risks that undermine public confidence in our financial system.”
Dimon was heckled by protestors as the Senate hearing began. In his opening statement, Dimon was contrite. “We’ve let a lot of people down and we are very sorry for it,” Dimon said. He acknowledged that mistakes were made.
“We will not make light of these losses, but they should be put into perspective,” he told the committee. “We will lose some of our shareholders’ money – and for that, we feel terrible – but no client, customer or taxpayer money was impacted by this incident.”
During the hearing, even before Brown issued his statement, Dimon had expressed the possibility of “clawbacks” or other “corrective action” that suggests the company was looking into recouping bonuses and other compensatory incentives.
Dimon is expected to get intense questioning next Tuesday from the House Financial Services Committee, whose ranking member, Representative Barney Frank of Massachusetts, cowrote the landmark financial overhaul law.
The revelation of JPMorgan’s loss has intensified debate in Washington over the extent to which the government should rein in banks as regulators draft rules under the Dodd-Frank law, which has yet to be fully implemented.
Republicans who opposed passage of Dodd-Frank have sought to change some of the law’s provisions or delay implementation, arguing that some of the regulations would be too burdensome and expensive for companies.
Brown is facing a strong challenge by Elizabeth Warren, who had a hand in drafting some of the key provisions of the 2010 Dodd-Frank Wall Street overhaul law. Warren, who has championed herself as a Wall Street reformist, has criticized Brown for being too chummy with Wall Street and noted the large sums of money his campaign has gotten from Wall Street backers.
He has received about $2 million from the securities and investments industry, according to the latest tally from the OpenSecrets.org, which monitors campaign finances. In comparison Warren recieved $228,000.
On Wednesday, Warren renewed her call for Dimon to step down from the New York Federal Reserve Bank’s board of directors.
“If there is one thing we learned at today’s hearing, it’s that Wall Street still doesn’t get it,” Warren said.
“Banking should be boring again, with ordinary banking separated from high-risk gambling. ... The giant banks that nearly broke our economy have cost millions of people their jobs, their homes, and their retirement savings, but those banks still haven’t been held accountable.”
Brown has pointed to his deciding vote in 2010 for the Wall Street overhaul, but a Boston Globe report last week recounted how the Massachusetts Republican tried to shield banks and other financial institutions from some of the law’s toughest provisions.
Frank, while appreciative of Brown’s vote for the overall bill, has criticized Brown for strong-arming the legislative process by seeking—and getting—concessions that shifted the $19 billion cost of the legislation from large financial institutions to taxpayers.