By Nela Richardson and Chris Payne
A BGOV Insight, “Questions for Jamie Dimon,” by Bloomberg Government economists Nela Richardson and Christopher Payne, offers 10 questions that members of Congress can ask the chairman and CEO of JPMorgan Chase & Co. when he appears before the Senate Committee on Banking, Housing and Urban Affairs this morning.
Dimon is scheduled to testify about the bank’s announced $2 billion pretax loss on derivatives trading.
10 QUESTIONS FOR JAMIE DIMON
1. Can you describe the trading positions that led to the $2 billion loss? Does JPMorgan regularly set up such positions?
2. Why would you consider this a hedge, and why did the bank consider it necessary to take such a big position in an illiquid market?
3. Do you think other banks engage in similar types of dynamic macro-hedging activity?
4. Are the risk management practices in JPMorgan’s Chief Investment Office different than in other parts of the bank?
5. What have you done, and what more will you do, to improve risk management practices in light of this loss?
6. Why did the bank change the Value-at-Risk model that the CIO was using? Has it been adjusted since the loss came to light?
7. Will you be clawing back bonuses from those that were responsible for the loss? Did the compensation structure at your bank set up dangerous and risky incentives?
8. Has the loss led you to change your mind about some aspects of regulation? For instance, do you accept that the capital surcharge for systemically important financial institutions is reasonable?
9. Should the Volcker Rule be extended to macro-hedging activity? If not, why not?
10. JPMorgan is one of two clearing banks that service the approximately $2 trillion tri-party repo market. Do you think that this role, combined with JPMorgan’s position in the financial system, makes it too big or too important to fail?
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Nela Richardson is an economic analyst with Bloomberg Government. She was a research economist at the Commodity Futures Trading Commission before joining Bloomberg. Richardson was also a senior economist at Freddie Mac, a researcher at Harvard’s Joint Center for Housing Studies, and an adjunct professor of finance at John Hopkins. Richardson has a Ph.D. in economics from the University of Maryland, a M.A. from the University of Pennsylvania, and a B.A. from Indiana University.
Christopher Payne is an economic analyst with Bloomberg Government. Payne worked as a CPA at PricewaterhouseCoopers and was a vice president at JPMorgan Securities covering Asian emerging markets. Before joining Bloomberg, he worked as a research fellow at Duke University. Payne earned his master’s and Ph.D. at the London School of Economics, and has a B.A. from Cambridge University.