WASHINGTON — The reviews of the Senate Banking Committee's performance at last week's hearing with Jamie Dimon were unkind, to say the least.
Pundit after pundit blasted the panel for kow-towing to the chief executive of JPMorgan Chase.
If House Financial Services Committee members, who will hear from Dimon on Tuesday, want to avoid a similar fate, they can do so by not making the following mistakes:
5. Don't tell Dimon how awesome he is — he already knows
One of the most mocked parts of last week's hearing was the effusive praise heaped on a man who had just admitted he had made a mistake that cost his company more than $2 billion. Sen. Bob Corker, R-Tenn., called Dimon "one of the best CEOs in the country," and several other members went out of their way to talk about how well-managed JPMorgan is.
Maybe they wanted to buck up Dimon, who started off the hearing by apologizing and later acknowledged the "buck stops with me" in admitting fault for not stopping the risky trades. But Dimon doesn't need a pep talk, least of all from members of the U.S. Congress. If last week was any indication, his self-confidence and ego remain undiminished by the trading losses.
4. Don't solicit JPM's business
Sen. Mike Johanns, R-Nebraska, left observers scratching their heads by appearing to ask Dimon to expand into his state. "You're not located in my state and I doubt that you're probably considering locating in my state, although it'd be a great place for you to do business," Johanns said.
Whether that was Johanns' actual intent or not, I don't know. But House members should avoid any suggestion that they are using the hearing to drum up business for their states.
3. Don't suggest over-regulation is to blame
I recognize that Republicans do not support the Dodd-Frank Act, but it's wrong, and more than a little weird, to suggest overregulation caused JPMorgan to lose $2 billion. Sen. Mike Crapo, R-Idaho, kicked this theme off by raising concerns about "regulators running our private sector institutions." Several other GOP senators then picked up that theme, worrying about the effect of Dodd-Frank on JPMorgan and hinting that regulatory burden helped cause the errant trades.
Dimon, for his part, wasn't biting. He seemed more than a little perplexed that anyone would seriously make the argument—for good reason. Whether regulators should have caught the disastrous trades before they happened is a reasonable question. But no analysis of what occurred in JPMorgan's London office would indicate that the burden of regulatory reform somehow caused the bank's Chief Investment Office to act as it did.
2. Don't take too long to get to the question
Sen. Sherrod Brown had one of the best questions of the hearing, asking if the trading incident signaled that JPMorgan was "too big to manage." The Ohio Democrat made a fairly convincing case, detailing JPMorgan's $2.3 trillion of assets, as well as its 559 subsidiaries in 37 countries.
Unfortunately for Brown—and everyone watching the hearing—Dimon never had to answer the question. Brown had already used up most of his allotted 5 minutes by focusing on other issues.
Here's hoping some House lawmaker asks it again—and leaves plenty of time for Dimon to respond.
1. Don't ask Dimon for advice
Far and away, the most widely criticized part of last week's hearing was lawmakers' repeated questions asking Dimon how the regulatory system should work. Sen. Jim DeMint, R-S.C., asked Dimon what Congress should do "to allow the industry to operate better," while Sen. Charles Schumer, D-N.Y., wondered if Dimon could evaluate the health of other big banks. Other senators questioned whether Dimon thought community banks would be harmed by Dodd-Frank.
The most ironic questions, however, were about implementation of the Volcker Rule, which is meant to stop proprietary trading. A key question remains whether JPMorgan was really hedging, as it claims, or if it was in fact making large, risky bets through proprietary trading.
Rather than focusing on that issue, however, many senators asked him to opine on the value of the Volcker Rule in the first place.
"Is there a true, real version of the Volcker Rule that you think makes sense and should be implemented?" asked Sen. David Vitter, R-Louisiana.
As Rolling Stone's Matt Taibbi wrote on his blog, this line of inquiry was just bizarre.
"Can you imagine senators asking the captain of the Exxon Valdez what his ideas are for new shipping safety regulations — and taking him seriously when he says he doesn't think they're a good idea?" Taibbi wrote.
JPMorgan, like any other bank or interested party, has the right to offer its views on policy debates, but a hearing to probe how and why the bank lost so much money so quickly is not the time to seek them.
Rob Blackwell is American Banker's Washington Bureau Chief.