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Former Chase executives grilled by senators over massive trading losses

WASHINGTON — Two former high-ranking executives at JPMorgan Chase faced tough questions from senators Friday about why the bank played down risks and hid losses from regulators when it was losing billions of dollars.

The hearing was held a day after the Senate Permanent Subcommittee on Investigations issued a scathing report that ascribed widespread blame for $6.2 billion in trading losses to key executives at the nation's biggest bank.

Douglas Braunstein, the former chief financial officer, and Ina Drew, the former chief investment officer overseeing trading strategy, were pressed to explain why bank executives last April gave federal examiners information that significantly understated losses for the first quarter of 2012.

"The number I reported (to the regulators) was the number that was given to me," said Drew, who resigned last spring after the losses became public.

Drew blamed the losses on executives under her watch who failed to control risks out of the London office. She said that undermined her oversight and kept her from preventing the losses.

The report also suggested that CEO Jamie Dimon was aware of the losses in April, even while he played them down publicly. And Sen. Carl Levin, the chairman of the panel, implied that Dimon set a precedent at the bank for withholding information.

Dimon acknowledged in May 2012 that the firm had lost $2 billion on risky trades out of its London office. The losses have since been revised to more than $6 billion.

The "trading culture at JPMorgan … piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight and misinformed the public," Levin said Friday at the hearing.

JPMorgan said in a statement Friday, "We have made regrettable errors and overhauled our risk policies to correct these mistakes, but senior executives always provided information to regulators and the public that they believed to be accurate."

Dimon was not a witness at Friday's hearing.

Braunstein acknowledged that risk models for the trading operation were changed in a way that was improper early last year. The changes made the bank's trading losses appear smaller than they were.

The loss came less than four years after the 2008 financial crisis and hurt the reputation of a bank that had come through the crisis known for taking fewer risks than its competitors.

Former Chase executives grilled by senators over massive trading losses 03/15/13 [Last modified: Friday, March 15, 2013 8:00pm]
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