JPMorgan CEO Jamie Dimon will testify before Congress on Wednesday.
NEW YORK (CNNMoney) — JPMorgan Chase CEO Jamie Dimon will tell Congress Wednesday that the bank’s massive loss can be blamed on insufficient risk controls and a failure by traders to understand the bets they were placing.
Dimon’s prepared testimony, provided by the bank, indicates that the CEO will sound a note of contrition before members of the Senate Banking Committee.
“We have let a lot of people down,” Dimon will say, “and we are sorry for it.”
JPMorgan (Fortune 500) announced last month that it had suffered a multi-billion dollar loss on trades built around contracts tied to corporate bonds that were originally intended to hedge the bank’s exposure.,
Losses appear to be mounting, and regulators have started asking questions about the bank’s risk management controls and hedging strategies.
Dimon’s opening statement will provide a brief sketch of what the company now believes went wrong, starting with a trading strategy within the firm’s chief investment office that was “not carefully analyzed.”
Some of the blame will also fall on the traders themselves, who Dimon now says “did not have the requisite understanding of the risks they took.”
As trading losses started to mount in March and early April, Dimon will say, the traders attributed the losses to temporary market movements, and not a flawed strategy.
Dimon, the only scheduled witness on Wednesday, will also say that the unit’s risk managers fell short, and that personnel in key roles “were generally ineffective in challenging the judgment of CIO’s trading personnel.”
While most of the blame falls on the personnel and activities of the chief investment office, Dimon will allow that senior managers should have more closely scrutinized the group.
“CIO, particularly the synthetic credit portfolio, should have gotten more scrutiny from both senior management and the firmwide risk control function,” Dimon will say.
Investors will be watching his testimony for clues as to how large the bank’s losses have grown, as well as what Dimon knew about the trades — and when.
Dimon recently said he wouldn’t provide a running tally to the public so it’s unlikely that anyone will know the extent of JPMorgan’s losses before the bank reports second-quarter results in mid-July.
Since Dimon first announced the losing trades on May 10, JPMorgan has lost roughly $30 billion of its market value. Shares of JPMorgan have dropped nearly 20% during that same time period.
Dimon will return to Capitol Hill next week to field questions from members of the House of Representatives.