Jamie Dimon's Useless Congressional Appearance

The Senate Banking Committee soon will examine and cross-examine JP Morgan (NYSE: JPM) CEO Jamie Dimon. It will be a chance for politicians to say how irresponsible large financial firms are, how they trade for their own profits regardless of the effects on the broader credit world, and how the only antidote to these problems is substantially more regulation of risk. History suggests that Dimon will spend one day in the Senate chamber, and then his appearance and what he says will be quickly lost and forgotten.

One example of a CEO who were taken to task recently for the actions of his company was Lloyd Blankfein of Goldman Sachs (NYSE: GS), who seemed to forget everything about the operations of his investment bank for the few short hours he answered questions. Another was Akio Toyoda, whose company, Toyota Motors (NYSE: TM), built some cars with dangerous accelerator problems. Toyoda spent most the time during his testimony apologizing for the mistakes the manufacturer, founded by his grandfather, made and explaining how a new quality control program would prevent them. Toyoda must salvage the good name of his ancestors, he said.

A parade of CEOs and senior executives was called to testify about the financial meltdown that triggered the last recession. These included bankers and officers of ratings agencies, in particular, S&P and Moody’s. No criminal charges were brought against any of these executives. Many have gone on to collect the large pay packages that Congress attacked with vigor. All in all, the testimonies were an inconvenience, or perhaps a brief period of anxiety that ended quickly.

Senators will ask Dimon how JP Morgan lost $2 billion or more on risky trades. He will repeat his standard response that his traders were stupid and that the mistakes were “self-inflected.” He will describe how those who ran trading operations were fired. He will explain all of the things JP Morgan will do to better manage risk. Perhaps most importantly of all, Dimon will talk about the incident as an aberration, and not a lesson in how a few poor decisions should prompt Congress and the Administration to set more strict bank laws.

For Dimon, if history is any guide, his time before the Senate committee will be little more than a few uncomfortable hours.

Douglas A. McIntyre