John McCain, the senior Republican on the US Senate panel investigating on London Whale episode, has accused JPMorgan Chase of lying about its $6bn trading losses.
The Senate subcommittee published a 300-page report after examining the bank’s trading, risk management failures and subsequent disclosures.
According to Senate investigators JPMorgan manipulated internal risk models in an attempt to intentionally reduce the risk-weightings of its assets.
Dimon had initially played down the significance of credit derivatives trading activity in the bank’s London chief investment office during an earnings call in April 2012, saying it was a tempest in a teapot.
The Senate report, however, found that Dimon was “already in possession of information about the . . . complex and sizeable portfolio, its sustained losses for three straight months, the exponential increase in those losses during March and the difficulty of exiting the . . . positions”.
The report describes disclosures of Braunstein inaccurate at best, and deceptive at worst. The panel said that Braunstein may have misled investors and, overall, “the written and verbal representations made by the bank were incomplete, contained numerous inaccuracies, and misinformed investors, regulators, and the public”.
JPMorgan said: “While we have repeatedly acknowledged significant mistakes, our senior management acted in good faith and never had any intent to mislead anyone.”
Meanwhile, the Securities and Exchange Commission is examining the accuracy of disclosures the bank made about the portfolio.
Over the question of whether the bank had mismarked its books to hide the extent of losses, JPMorgan had lied to and deceived the agency, quotes the report citing an examiner at the Office of Comptroller of the Currency (OCC), JPMorgan’s regulator. The investigation panel also criticised the OCC for insufficient oversight.
The report also reveals that the OCC lowered its CAMELS measure of bank strength, a key and usually secret metric, due to concerns over management and internal oversight deficiencies, reported FT.
The panel will now put pressure on JPMorgan to admit its mistakes. Senators argue that Volcker rule that restricts US banks from proprietary trading should be implemented.
Carl Levin, the panel’s Democratic chairman, said that there’s a lot of evidence that JPMorgan may be too big to manage or too big to regulate.