[ by Howard Haykin ] JPMorgan Chairman and CEO Jamie Dimon, along with his firm's Regulators appeared before the House Financial Services Committee to give testimonies and answer questions pertaining to the multi-billion dollar trading loss at JPMorgan Chase.  Contrary to what one might think, it was not all fun and games. Officials from 5 federal agencies appeared on the first panel and included SEC Chairman Mary Schapiro, CFTC Chairman Gary Gensler, and FDIC Acting Chairman Martin Gruenberg.  Mr. Dimon alone followed the regulators. Strangely enough, the real show was put on by the House Representatives and not by those invited to give testimony.  From the get-go, the lawmakers sparred with each other.

• "I am a little surprised by all of the hemming and hawing by my colleagues on the other side of aisle over a private business losing private money when the federal government continues to lose billions of taxpayer dollars every day," said Rep.  Scott Garrett (R-NJ), in an opening statement.

• Michael Capuano (D-MA) hurled blame at Republicans for introducing legislation to weaken new rules for Wall Street.  In a tirade against Republican lawmakers, he argued that JPMorgan's trading blowup raises broader questions about the safety of Wall Street.  "I'm not outraged by this particular loss," he said, pushing regulators to say whether other big banks could take on similarly risky bets.

The hearing on Tuesday was the final in a string of inquiries planned for JPMorgan's loss, which has grown to at least $3 billion. It also was the 2nd opportunity for lawmakers to quiz Mr. Dimon on the losses, which were tied to credit derivative positions that went bad. Congressional committee members posed the toughest inquiries for the 2 regulators with the lowest profiles:  Comptroller of the Currency Thomas Curry, and Federal Reserve General Counsel Scott Alvarez.  Regulators are under fire for failing to catch the risky trades.

• Under questioning from Rep. Randy Neugebauer (R-TX), each of the 5 regulators acknowledged that their agencies were unaware of the losses until media reports emerged in early April.

• "I'm wondering how this was missed," said Rep. Shelley Moore Capito (R-WV).  "Even with the matrix of communication, no one was catching it.  Is the communication really working?"  Mr. Curry replied by explaining that "we were initially relying on the information available to the bank."

• Mr. Alzarez concurred, noting: "We have to rely on information we get from the organization itself. If that's flawed," he added, then regulators will have a problem.

Focus on Volcker Rule. The House panel focused mainly a series of new rules under the Dodd-Frank Reform Act that are intended to rein in Wall Street risk-taking.  It was this topic that appeared to elicit most partisan squabbles.  The Democrats, who support the overhaul, highlighted how new oversight would rein in the risky derivatives trading that prompted the blowup at JPMorgan.

• "The question is: Does this not argue against the proposal to deregulate derivatives?" said Rep. Barney Frank (D-MA), who co-authored the law and is the ranking Democrat on the committee.  "To me, this is not a hearing about JPMorgan Chase. They are an example of the larger issues."

• Rep. Frank added that, while Mr. Dimon has argued that the trading losses have only nicked the bank's "fortress balance sheet," other banks were not healthy.  "Some have a picket fence balance sheet or a chain link balance sheet."

• Mr. Frank and Republicans traded barbs over Dodd-Frank throughout the hearing, with some Republicans blaming the law for allowing trading losses like that at JPMorgan.  "You can see we're not ready to break into a 'Kumbaya'," Rep. Spencer Bachus (R-TX) and the committee's chairman, told the regulators in a moment of levity.

"Welcome to the serenity of the financial services committee." For further details, go to:  [Dealbook, 6/19/12].