As but one example of a widespread reaction, words like "too cozy" and "ridiculous" were among the adjectives applied to the testimony of Jamie Dimon, Chairman and CEO of JP Morgan Chase, before yesterday's Senate Banking Committee Hearing on CNN that evening (CNN's John King Show). Evidence of the extensive frustration felt by those who wanted hard answers to hard questions.
What we did get was a wonderful performance in contrition -- you know, losing $2 billion is human and that sort of thing. But remarkably, with little pushback from the assembled solons, Dimon would claim, straight-faced, "I don't know what the Volcker Rule is, it hasn't been written yet." This from a man who may not know his rule, but knows enough about Mr. Volcker to have been quoted saying, "Paul Volcker, by his own admission, has said he doesn't understand capital markets. He has proven that to me."
This from the head of a "bank" who seems at loss to distinguish between proprietary trading and hedging, a "bank" that has spent into the billions under Dimon's suzerainty, expanding their proprietary trading capabilities by acquiring the prop trading divisions of Bear Stearns and UBS, RBS Sempra Commodities, becoming the largest investor in the London Metals Exchange, extensively poaching traders and executives from rivals and boosting their trading work force from 125 in 2006 to some 1800 by 2010.
Ironically, the day before the Senate Hearing the "bank" announced it had hired an ex-Goldman Sachs energy trader to "expand its customer flow business amid tightening regulation over proprietary trading." Interesting language from a "bank" known to charter VLCC's tankers (very large commodity carriers of some 200,000 DWT or more), and fill them with millions of barrels crude oil (being termed 'financial transaction' or 'repurchase transaction,' but for all intents and purposes largely 'prop trades'). This means oil taken off the market when it might have had a salutary impact on reducing extortionary oil prices. Then keeping the tankers anchored at sea for months at a time. Immense cargoes paid with funds at near-zero interest rates accessible to the "bank" at the Fed window, all the while being custodian of billions of dollars in deposits guaranteed by the government through the Federal Deposit Insurance Program (FDIC). Their new hire could have been the focus of some interesting questioning at the hearings, but alas!
Oil is not the only gambit in play at Mr. Dimon's "bank." According to the Daily Telegraph, the "bank" was reputed to have speculated extensively in the copper market, purchasing over a billion dollars of the metal and pushing prices to their highest levels since the banking crisis in 2008. Being major players on the very commodity exchange where copper is traded, their investment in the London Metals Exchange must certainly have helped.
As to Mr. Dimon's assertion of "I don't know what the Volker rule is," a suggestion: When trying to look it up, start with the word 'Casino.'
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