Nomi Prins, former investment banker who worked on Wall Street as a managing director at Goldman Sachs and ran the international analytics group at Bear Stearns in London, author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street and Other People’s Money: The Corporate Mugging of America. Her latest book is Black Tuesday, a novel about corruption and romance surrounding the 1929 stock market crash.
Protesters confronted JPMorgan Chase CEO Jamie Dimon on Wednesday as he testified on Capitol Hill about how his bank lost up to $3 billion in risky bets. Lawmakers, however, gave a warmer greeting to the man described as Washington’s favorite banker. JPMorgan spent $7.6 million on lobbying last year, and Dimon has a long record of contributing campaign donations to lawmakers on the Senate Banking Committee. We speak to former investment banker Nomi Prins, author of "Black Tuesday." Prins calls Dimon’s appearance "the tamest — and there have been very tame ones — hearing for any of the bank leaders since the [financial] crisis began in 2008." She adds that "what we saw yesterday was a glimpse of how lobbying money, as well as additional campaign money ... have a tremendous impact on regulations and ... the power that [the financial industry has] within the Senate and, therefore, with respect to regulation of their own industry. ... This is why there’s no line between legislators and bankers." [includes rush transcript]
This is a rush transcript. Copy may not be in its final form.
JUAN GONZÁLEZ: JPMorgan Chase CEO Jamie Dimon testified on Capitol Hill Wednesday for the first time since his bank lost up to $3 billion in a risky speculative bet. Dimon apologized for the loss but failed to explain how the money was actually lost. He also continued his voice his opposition to new banking regulations. During the hearing, Dimon was repeatedly confronted by protesters.
PROTESTER: This man is a criminal, and people need to shout out about this man and 18 other cronies that have been stealing near-zero-interest loans from the people, when the small businesses can’t get the same loans, when the people are deprived loans to get into their—to keep their houses, when people are being thrown out on the streets.
JUAN GONZÁLEZ: While protesters attempted to confront Dimon, many lawmakers on the Senate Banking Committee warmly welcomed him and repeatedly praised the bank. This is Senator Jim DeMint of South Carolina.
SEN. JIM DEMINT: Thank you, Mr. Dimon. I really appreciate you voluntarily coming in to talk with us. It is important that we talk about things happening in the industry. It will, I think, advise us, help us and—as we look forward, and hopefully it will contribute to best practice scenario in the industry, and I appreciate your emphasis on a continuous quality improvement. We can hardly sit in judgment of your losing $2 billion. We lose twice that every day here in Washington and plan to continue to do that every day. And it’s comforting to know that even with the $2 million—$2 billion loss in a trade last year, your company still, I think, had a $19 billion profit. During that same period, we lost over a trillion dollars. So if we had a clawback provision, none of us would be getting paid here. So the intent today is really not to sit in judgment, but to maybe understand better what happened.
AMY GOODMAN: Jamie Dimon’s warm welcome did not come as a surprise to many on Capitol Hill. JPMorgan spent $7.6 million on lobbying last year. According to the watchdog group Open Secrets, Dimon has a long record of contributing campaign donations to lawmakers on the Senate Banking Committee. Recipients have included committee chair Tim Johnson; Democrat Mark Warner; the top Republican on the committee, Richard Shelby; and Bob Corker. Meanwhile, at least one current staffer on the Senate Banking Committee is a former lobbyist for JPMorgan Chase, and at least five former committee staffers now work at JPMorgan.
While JPMorgan CEO Jamie Dimon apologized for the bank’s recent $3 billion loss, he failed to say how the money was lost.
JAMIE DIMON: I think that, no matter how good you are, how competent people are, never, ever get complacent in risk. Challenge everything. Make sure people on risk committees are always asking questions, that’s sharing information, and that you have very, very granular limits when you’re taking risk. A granular limit says you could take no more than x risk in y, no more this risk in a name nor this risk in a market, including things like liquidity risks, so that you’re controlled. In the rest of the company, we have those disciplines in place. We didn’t have it here, and that’s what caused the problem.
AMY GOODMAN: To talk more about JPMorgan, we’re joined by financial journalist Nomi Prins. She formerly worked on Wall Street as a managing director at Goldman Sachs and ran the international analytics group at Bear Stearns in London. Her latest book is called Black Tuesday, which is a novel about corruption and romance surrounding the 1929 stock market crash. She’s also the author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street as well as Other People’s Money: The Corporate Mugging of America.
Nomi Prins, you tweeted all through yesterday’s hearing. Why was Jamie Dimon called to speak before, testify before the Senate Banking Committee?
NOMI PRINS: Well, as we just heard, apparently, from one senator, he wasn’t called to sit there and be judged for the loss, how it was created, how he felt sorry but unaccountable for its creation. So that didn’t seem to be the purpose for a lot of the senators there. What did seem to be an overriding purpose for this hearing was a judgment on regulation of the industry, where Jamie Dimon was sort of used as the pin for the senators that were talking about the need to not further regulate or more harshly regulate the banking industry, to which he of course falls very neatly in line, and the ones that sort of were talking about regulating it, but not so much. You know, as you mentioned in the read-up, there really wasn’t a lot of grilling in this particular hearing. I thought it was the tamest—and there have been very tame ones—hearing for any of the bank leaders since the crisis began in 2008.
JUAN GONZÁLEZ: Well, I’d like to play a clip of Senator Sherrod Brown, Democrat of Ohio, asking Dimon how much regulators at the OCC, the Office of Comptroller of the Currency, knew about the risky investments that led to JPMorgan Chase’s loss.
SEN. SHERROD BROWN: Was the OCC told about the trades taking place in your CIO office prior to the April 6 media reports?
JAMIE DIMON: We are—we try to be very open kimono with regulators. We give them reports. They did—they do get some reports. We give them what they want. We give them the information they want. In this particular case, I think that we—since we were a little misinformed, we probably had them misinformed. The mistake we made, we passed on to them, and we—but the second we found out, the first people we got on the phone with was our regulators to explain: "We have a problem. We want to describe it to you." And, of course, they’ve been deeply been engaged since then.
JUAN GONZÁLEZ: Nomi Prins, your reaction to this relationship’s explanation of how they were dealing with the regulators?
NOMI PRINS: Yeah, well, when I was tweeting about it, I think my reaction was to laugh. But I know it’s not really funny. It’s really quite sad. What he—to interpret what he just said there, it’s something like: "We didn’t really tell the regulators what was going on, because they didn’t ask. And when we knew what was going on, which we weren’t really watching, we told them, and then they sort of looked into it, and then all this happened." It’s this chicken-and-egg thing with regulators. And actually, throughout his testimony, he was very admissive of regulators doing anything. But he basically said, "Look, we misinformed them because we were misinformed." And the use of the word "we" kind of indicates a general "we." You know, on the one hand, he’s sorry. You know, "I am sorry." Jamie Dimon is sorry. On the other hand, "we sort of collectively didn’t really know, and then we did know, and when we did know, we told the regulators," and so forth. First of all, it’s the regulators’ job. This was 20 percent of the firm’s assets. Twenty percent of the largest bank in the world’s assets were tied up in these trades. You’re not allowed to, as a regulator, not know, not ask every single day, hour, whatever, what is going on in that trade. So that was definitely a fault of the regulators.
But on the side of Chase, yes, we don’t know—and that’s sort of what he admitted, without wanting to admit it—what was really going on as that trade was going wrong. And again, the trade was a substantial portion of the assets of the firm. It was not a little trade that blew up. It was not something that, you know, he calls a mistake. It was a dedicated transaction, which he did not explain yesterday, for which, in a derivative’s way, in something called a synthetic derivative’s way, which is the most risky way of putting on the trade they were putting on, the position that they were taking, as we are seeing, they basically lost money by betting that North American corporate credits were going to improve over that period of time, and they did not. And the way that they bet that was a very expensive and risky way to do it. So, for Jamie Dimon to indicate that he kind of didn’t know until he did know is not—it cannot be true.
AMY GOODMAN: I want to play, Nomi Prins, one of the few tense exchanges from yesterday’s hearing, and it’s quite something that there were only a few. This is Oregon Democrat, Senator Jeff Merkley, questioning JPMorgan Chase’s CEO, Jamie Dimon.
SEN. JEFF MERKLEY: In 2008, 2009, your company benefited from half-a-trillion dollars in low-cost federal loans, $25 billion in TARP loans, of TARP funds, untold billions indirectly through the bailout of AIG that helped address your massive exposure in repurchase agreements and derivatives. With all of that in mind, wouldn’t JPMorgan have gone down without the massive federal intervention, both directly and indirectly, in 2008 or 2009?
JAMIE DIMON: I think you were misinformed. And I think that misinformation is leading to a lot of the problems we’re having today. JPMorgan took TARP because we were asked to by the Secretary of Treasury of the United States of America, with the FDIC in the room, head of the New York Fed, Tim Geithner, chairman of the Federal Reserve, Ben Bernanke. We did not, at that point, need TARP. We were asked to, because we were told—I think correctly so—that if the nine banks there—and some may have needed it—take this TARP, we can get it to the—all these other banks and stop the system from going down. We did not—
SEN. JEFF MERKLEY: I’m going to cut you—
JAMIE DIMON: We did not borrow from the Federal Reserve, except when they asked us to. They said, "Please use these facilities, because it makes it easier for other" —
SEN. JEFF MERKLEY: We would all like to be asking—
JAMIE DIMON: And we were not bailed out by AIG, OK? If AIG itself would have—we would have had a direct loss of maybe a billion or $2 billion if AIG went down, and we would have been OK.
SEN. JEFF MERKLEY: Then you have a difference of opinion with many analysts of the situation who felt the AIG bailout did benefit you enormously. And I’m not going to carry that argument with you now.
JAMIE DIMON: Well, but they’re factually—
SEN. JEFF MERKLEY: Sir—
JAMIE DIMON: They’re factually wrong.
SEN. JEFF MERKLEY: Sir, this is not your hearing. I’m asking you to respond to questions. And I also only have five minutes.
AMY GOODMAN: Oregon Democrat, Senator Jeff Merkley, questioning JPMorgan Chase’s Jamie Dimon before the Senate Banking Committee, testifying yesterday. Your response, Nomi Prins?
NOMI PRINS: Well, first of all, it should be noted that Senator Merkley is not one of the recipients of JPMorgan Chase’s campaign contributions, so that gave him, I think, the latitude, which we need from our senators, in asking these kind of questions, number one.
Number two, this has been the myth that Jamie Dimon has perpetuated from the get-go, that JPMorgan Chase was the only bank that was somehow isolated from the interrelationship of all of the subprime assets that were basically toxically created and fraudulently distributed through the global investor community on the backs of subprime loans that were basically extracted from individuals throughout the country and that somehow they were the only bank that was clean on this. In other words, it would not have suffered any losses, any negativity, had there not been any form of bailout or guarantees from the United States government.
The—two points on that. First of all, he wasn’t separate from the New York Fed. You know, Tim Geithner was not someone kind of separate from him. Jamie Dimon, then and now, was and is a Class A director of the New York Fed, so he is the New York Fed in a lot of instances.
But on a wider point, JPMorgan Chase benefited from two very big things that Senator Merkley didn’t even mention, which was that they achieved an acquisition of Bear Stearns, for which the government is still backing to the tune of $29 billion of guarantees for the assets in that acquisition, and it received some very favorable terms, and in negotiations, to acquire Washington Mutual. So, the result of that entire period was for JPMorgan to have emerged, by the help of so many things that Merkley mentioned as well as the two things I have just mentioned, to become the largest bank in the United States. So for him to sit there and say, "You know what? No, this was all just because I was really good, and it was—I was taking one for the team on Wall Street; otherwise—you know, they arm-twisted me. You know, they had a gun to my head. I couldn’t help it; I had to take the money," is absolutely ridiculous.
JUAN GONZÁLEZ: Nomi Prins, I’d like to ask you about this whole issue of this incestuous relationship between people connected to JPMorgan Chase and these Senate and House committees. For instance, Kate Childress, a JPMorgan lobbyist since 2008, was also a former aide to Chuck Schumer, who sits on the Banking Committee. You’ve got Mel Martinez, who was a senator in the United States, is now the JPMorgan Chase executive in charge of Florida, Central America and the Caribbean. You’ve got P. Michael Nielsen, a lobbyist with a firm run by former Senator Bob Bennett, who was also on the Banking Committee. He’s been retained by JPMorgan for help with federal probes. And it goes on and on.
NOMI PRINS: Yeah. What we saw yesterday was a glimpse of how that lobbying money, as well as additional campaign money, and in many meetings and phone calls throughout the entire process, which we don’t even really quantify in those terms but have a tremendous impact on regulations and on how the industry is viewed and how particular members of it, certainly the larger ones like JPMorgan Chase, are viewed and the power that they have within the Senate and, therefore, with respect to regulation of their own industry. And the fact that there is a revolving door is very much intrinsic to the problem there. You’ve got an industry where—before, JPMorgan was talking about effectively policing himself, you know, regulators not knowing until we told them, and when we did, you know, and all of that. You know, we have a Senate Banking Committee that’s comprised, except for six members, actually, of people who have gotten contributions in some manner from JPMorgan Chase. You know, we have lobbyists who are going back and forth. Chuck Schumer is an example of someone who asked incredibly tepid questions yesterday. One of the things he said, I think, was, "Well, you know, shareholders lost some money, but taxpayers didn’t." And then he kind of proceeded to tag a question onto that, which was very, very light-handed. And so, these people really protect, on the side of Washington, the relationships with JPMorgan Chase. They go and work there, or they come from there—
AMY GOODMAN: Nomi Prins, so, let—
NOMI PRINS: —and work within the Senate Banking Committee.
AMY GOODMAN: Let’s talk more—
NOMI PRINS: And they write their own rules. And that’s partly why we have—
AMY GOODMAN: Let’s talk more about the amounts of money.
NOMI PRINS: —no real structural regulation of the industry. We have detailed regulation. We have reports that have to be filled out by the bank, when they want to fill out and with the information they choose to provide. You have regulators running around the offices of these banks. But in terms of real structural change and regulation to make these banks smaller, to make them more accountable, to separate, you know, the deposits and loans of individuals from these types of trades that can go on in a chief investment office and lose billions of dollars, or even make billions of dollars, but have that kind of risk swing, is all because of the relationships, the monetary relationships and revolving door between the banking industry and the banking regulations.
AMY GOODMAN: Nomi Prins, I want to go to that issue of the money the Senate Banking Committee members have received—in fact, millions of dollars from the financial industry. This is some of the figures: Michael Bennet, the Democrat from Colorado, received $2.5 million; Robert Menendez, Democrat from New Jersey, $2.3 million; Charles Schumer, Democrat of New York, who you were just talking about, $5.6 million; Richard Shelby, Republican of Alabama, $2.5 million; Bob Corker, Republican of Tennessee, $3.4 million; Roger Wicker, Republican in Mississippi, $1.5 million. And we could go on.
NOMI PRINS: Yeah, I mean, this is—this is why there’s no line between legislators and bankers. And beyond the millions of dollars that they are getting to run their campaigns and to stay in office or to get elected into office and so forth, there’s also all the sort of additional value that is received by the fact that JPMorgan Chase actually is giving them money, because if one bank is giving them money, it’s not the only bank giving them money, it’s the entire industry. And we’re looking at a piece of it through, you know, the largest and most powerful commercial bank in the United States, but this is the way it works. And these people know that partially why they are sitting there in those seats is, unfortunately, not because they were simply voted in, but because they had the money to basically market themselves and stay in and connect to their real friends, which are the banking community they’re supposed to be legislating against.
AMY GOODMAN: Well, we want to thank you very much for being with us, Nomi Prins. Nomi Prins is author of a number of books, It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street, Other People’s Money: The Corporate Mugging of America, formerly walked on—worked on Wall Street as a managing director at Goldman Sachs and was with Bear Stearns in London. And her latest book is a novel called Black Tuesday, a novel about corruption and romance surrounding the 1929 stock market crash.
This is Democracy Now!, democracynow.org, The War and Peace Report. When we come back, Lori Wallach of Public Citizen on President Obama’s secretive trade deal, how it empowers corporations and, well, disempowers the rest of us. Stay with us.
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