JPMorgan Chase, the nation’s biggest bank, ignored internal controls and manipulated documents as it racked up trading losses last year, while its influential chief executive, Jamie Dimon, briefly withheld some information from regulators, a new Senate report says.
The findings by the investigators shed new light on the multibillion-dollar trading blunder, which has claimed the jobs of several top executives and prompted an inquiry by the FBI.
The 300-page report, released a day before a Senate subcommittee plans to question bank executives and regulators at a hearing, will escalate the debate over how to police complex risk-taking on Wall Street. It may also foreshadow a criminal case against employees at the heart of the troubled wager.
A spokeswoman for the bank said on Thursday, “While we have repeatedly acknowledged significant mistakes, our senior management acted in good faith and never had any intent to mislead anyone.”
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Dimon, whose reputation as an astute manager of risk has been only dented by the trading losses, comes under the harshest criticism yet from the Senate investigators.
The chief executive blessed changes to an internal alarm system that underestimated losses, seemingly contradicting his earlier statements to lawmakers, according to the report.
He is also accused of withholding from regulators details about the investment bank’s daily losses — and then raising “his voice in anger” at a deputy who later turned over the information.
While people close to the matter dispute whether the outburst actually happened, it illustrates a broader problem at JPMorgan: After emerging from the financial crisis in far better shape than rivals, the bank saw itself as being above its regulators.
The report, citing some of the same private documents that FBI agents are now poring over, highlighted how JPMorgan managers “pressured” traders to lowball losses by $660 million, a previously undisclosed figure, and then played down the problems to authorities.
After examining hundreds of emails and hours of taped phone calls, the people said, federal investigators also plan to interview top JPMorgan executives in the coming weeks, including Dimon.
While authorities do not suspect the chief executive of wrongdoing, the meetings signal that the case is at an advanced stage.
The breakdowns at both the bank and at its regulators could galvanize support for new curbs on Wall Street trading.
Calling the bank’s trading strategy a “runaway train that barreled through every risk warning,” Sen. Carl Levin, D-Mich., who runs the Senate Permanent Subcommittee on Investigations, said that the bank “exposed daunting vulnerabilities” in the financial system.