JPMorgan Chase CEO Jamie Dimon told the Senate Banking Committee that the trades that led to billions in losses were placed by traders who didn't understand the risks they were taking, which could not have been prevented regulation. He called the bad trades an "isolated event" that won't happen again.
Jim Sinegal, director of financial services research at Morningstar, an investment firm, said the most "useful" part of the testimony was the continued discussion of the Volcker rule.
"I think the trade in question actually highlights the biggest difficulty with the rule -- classifying a bank's investment activity as prop trading, hedging, or other permissible activities," Sinegal said.
There weren't too many surprises in the testimony, Sinegal said, though "Dimon was opinionated and charasmatic as usual, which helps his cause."
Since the financial crisis, lawmakers have grappled with the difficulty in managing and regulating large banks.
On Tuesday, senators asked Dimon to comment about whether the Dodd-Frank Act's Volcker Rule, which prohibits certain proprietary trading and has yet to be finalized, could have stopped the debacle.
When pressed by Sen. David Vitter, R-La., about the Volcker Rule, Dimon called the regulation, as it is described thus far, as "vague" and "unnecessary."
Instead, Dimon said what are needed from financial firms are factors such as, proper capital, liquidity, risk measures and risk controls.
Sinegal said part of the reason this loss has captured the public's attention is because it happened at JP Morgan.
"If Jamie Dimon missed this large, complex, derivatives risk building, how can we trust that a bigger problem won't occur at another bank?" Sinegal said.
The CEO said he was "dead wrong" when he dismissed a trading loss from the London office as a "tempest in a teapot" before he learned the bank made a $2 billion bad bet. He hinted that those responsible may have pay taken back from them.
Minutes before Dimon, 56, testified before committee, one audience member delayed the hearing on Capitol Hill in Washington, D.C., calling Dimon a "criminal" and "crook," saying that small businesses can't get loans. A group of protesters chanting, "Stop foreclosures now," were escorted outside the Dirksen Office Building by Capitol Hill police.
Once the hearing began, Dimon told the committee he was misinformed about a strategy with a synthetic credit portfolio that was meant to hedge risks but "ultimately resulted in even more complex and hard-to-manage risks." This led to trades, announced by JPMorgan on May 10, that may have led to losses as high as $5 billion, according to the Wall Street Journal. A week later, the FBI said it opened a routine inquiry about the trading losses.
In a conference call on April 13, he peremptorily dismissed worries over the trades made by JPMorgan's London office as "a tempest in a teapot."
"When I had made that statement, I was dead wrong," Dimon told the committee. He said he had "the right" to rely on information from the company's chief investment officer, Ina Drew, and her office in London.
"I was assured by them they thought this was an isolated small issue and that it was not a big problem," Dimon said.
His lightning career has taken him from American Express to Citigroup (which he formed with his then-mentor, Sandy Weil, in 1998), to Banc One, where he became CEO in 2000. In 2004, when Banc One was purchased by JPMorgan, he became president of the combined company, then later CEO. On his watch, JPMorgan has grown to be the biggest U.S. bank in terms of market capitalization and assets under management.
Risky trades aren't the biggest risks JPMorgan Chase faces, Dimon told the committee. "Dramatically rising interest rates and a global type of credit crisis," he said, "those are the two biggest risks we face."
Sen. Charles Schumer, D-N.Y., asked Dimon to explain why the company's own risk committee did not catch the risky strategy that led to the loss and what other risk committees could do alternatively.
"I think it would have been hard to capture it if management didn't capture it," he said. "To the extent that we were misinformed, they were misinformed..."
Dimon said the risk committee meets with management and reviews "a lot of other issues" such as regulation requirements.
He defended his committee, saying it took the company through "the worst" financial crisis "with flying colors."
"It's hard to have the unrealistic expectation to capture things like this," he said.
Dimon said "the financial system is safer today than it was in '07," but he was hesitant to say that was due to regulations.
When Sen. Bob Corker, R-Tenn., pressed Dimon if regulatory systems have made systems safer, Dimon said, "I don't know."
In his prepared remarks, made available before the hearing, Dimon defended JPMorgan's performance, even while admitting that the bank felt "terrible" for having lost some of its shareholders' money.
"We will lose some of our shareholders' money - and for that, we feel terrible - but no client, customer or taxpayer money was impacted by this incident," he said.
Though Dimon since has castigated himself publicly for having misjudged the situation, shareholders, analysts and politicians have said they cannot understand how the normally indefatigable Dimon could have let a mistake this size occur.
Dimon insists that the full magnitude of the London trading risk was not known to him, and that he remained ignorant of key details until it was too late to prevent the loss. That surprises one of his colleagues from the 1990s, who thinks of Dimon as the ultimate detail guy: "What surprises me most in this whole debacle is that he really was a detail guy. Nothing slipped by him. My guess is he may have delegated too much and not have known. If he had, I don't see how it could have reached this level of loss."
Dimon was pressed by the Senators on a number of other issues, including mortgages and investors who have not received their money back from bankrupt MF Global.
Sen. Jon Tester, D-Mont., said about 100 of his constituents are farmers who have not received their hedged money back from MF Global, which inappropriately transferred client funds through JPMorgan.
Tester said "there were a lot of farmers that hedged to protect themselves from bad outcomes."
"I hope they get all their money back," Dimon said of Tester's constituents. "I still believe they will by the way."
ABC News' Alan Farnham and Sunlen Miller contributed to this report.