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JPMorgan says bad trade has ballooned to $5.8B
Question of the Day
The Swiss bank UBS clawed back pay from executives after a rogue trader in London caused a $2 billion loss last year. The JPMorgan clawback was the most prominent in the United States since the financial crisis in the fall of 2008.
JPMorgan said it had revoked pay from other employees in other cases, but did not provide details.
The Obama administration’s financial overhaul law, passed in 2010, required banks to draft policies for recapturing pay from executives whose actions lead to false financial statements.
John Liu, the comptroller of New York City, which has $340 million of its pension fund invested in JPMorgan stock, said he was pleased with the clawback announcement.
While the growing loss was disheartening, he said, revoking pay sends a message that “there are no rewards for wild and excessive gambling with investors’ money.”
The chairman of the Senate Banking Committee, Tim Johnson of South Dakota, said, “It shouldn’t take a congressional hearing for JPMorgan to realize that bank employees should not be rewarded for excessively risky behavior.”
Dimon, who originally dismissed concerns about the bank’s trading as a “tempest in a teapot,” appeared before Congress twice to apologize and explain himself, and several government agencies have launched investigations.
Under questioning from lawmakers in June about his own role in setting up the investment division responsible for the mess, Dimon declared: “We made a mistake. I’m absolutely responsible. The buck stops with me.”
The trading loss has raised concerns that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis erupted in the fall of 2008.
While JPMorgan has proved more than able to absorb the shock from the bad trade, some lawmakers have questioned what would happen if a weaker bank, or one with poor management, were stricken.
Daniel Wagner reported from Washington.
By Andrew P. Napolitano
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