Jamie Dimon, chairman and CEO of JPMorgan Chase, will testify before the Senate Banking Committee on Wednesday on the now infamous trading loss that has reached about $3 billion. A preview of the testimony reveals that he will again apologize for letting "a lot of people down" but will say that traders in Chief Investment Unit "did not have the requisite understanding of the risks they took."

He will defend the bank's multibillion-dollar loss saying:

• The Chief Investment Unit, where the loss happened, did something it shouldn't have done and, "as a result, we have let a lot of people down, and we are sorry for it."

• We have a new team handling things differently, reducing "the probability and magnitude of future losses."

• "While we can never say we won't make mistakes - in fact, we know we will - we do believe this to be an isolated event."

• Further … "our fortress balance sheet remains intact."

In his prepared remarks, Dimon also will answer, in his own words, questions about what happened and what went wrong.

What Happened? In December 2011, as part of a firmwide effort in anticipation of new Basel capital requirements, we instructed CIO to reduce risk-weighted assets and associated risk. To achieve this in the synthetic credit portfolio, the CIO could have simply reduced its existing positions; instead, starting in mid-January, it embarked on a complex strategy that entailed adding positions that it believed would offset the existing ones. This strategy, however, ended up creating a portfolio that was larger and ultimately resulted in even more complex and hard-to-manage risks. This portfolio morphed into something that, rather than protect the Firm, created new and potentially larger risks. As a result, we have let a lot of people down, and we are sorry for it.

What Went Wrong? We believe now that a series of events led to the difficulties in the synthetic credit portfolio. Among them: CIO's strategy for reducing the synthetic credit portfolio was poorly conceived and vetted. The strategy was not carefully analyzed or subjected to rigorous stress testing within CIO and was not reviewed outside CIO. In hindsight, CIO's traders did not have the requisite understanding of the risks they took. When the positions began to experience losses in March and early April, they incorrectly concluded that those losses were the result of anomalous and temporary market movements, and therefore were likely to reverse themselves. The risk limits for the synthetic credit portfolio should have been specific to the portfolio and much more granular, i.e., only allowing lower limits on each specific risk being taken. Personnel in key control roles in CIO were in transition and risk control functions were generally ineffective in challenging the judgment of CIO's trading personnel. Risk committee structures and processes in CIO were not as formal or robust as they should have been. CIO, particularly the synthetic credit portfolio, should have gotten more scrutiny from both senior management and the firm wide risk control function.

It's sure to be an interesting day for Dimon, who will be the sole witness at the hearing.

Here is an excerpt of Chairman Tim Johnson's (D-S.D.) prepared remarks for the hearing, titled, "A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?"

"Today marks the two-month anniversary of Mr. Dimon's 'tempest in a teapot' comments where he downplayed concerns from initial media reports of the company's Chief Investment Office trades. We later learned, however, it was an out-of-control trading strategy with little to no risk controls that cost the company billions of dollars.

"I have said before, no financial institution is immune from bad judgment. In Mr. Dimon's own words, he later explained, 'We made a terrible egregious mistake. There's almost no excuse for it…. We know we were sloppy. We know we were stupid. We know there was bad judgment…. [I]n hindsight, we took far too much risk. The strategy we had was badly vetted. It was badly monitored. It should never have happened.'

"So what went wrong? For a bank renowned for its risk management, where were the risk controls? How can a bank take on 'far too much risk' if the point of the trades was to reduce risk in the first place? Or was the goal really to make money? Should any hedge result in billions of dollars of net gains or losses, or should it be focused solely on reducing a bank's risks? As the saying goes, you can't have your cake and eat it too.

"Again it has been two months since he first publicly acknowledged the trades, so I expect Mr. Dimon to be able to answer tough, but fair questions. A full accounting of these events will help this Committee better understand the policy implications for a safer and stronger financial system going forward."