Regulators, including the Federal Reserve and the Securities and Exchange Commission, “are going to take a very careful look at this incident,” Geithner said at an event today in Washington held by the Peter G. Peterson Foundation.
JPMorgan Chief Executive Officer Jamie Dimon, 56, announced the loss May 10, assailing his firm’s handling of trading in synthetic credit positions as “flawed, complex, poorly reviewed, poorly executed and poorly monitored.” JPMorgan, the biggest U.S. bank, will consider reclaiming incentive pay from employees, including former Chief Investment Officer Ina Drew, after her unit’s trading loss, said two senior executives who declined to be identified.
Geithner said the administration’s overhaul of financial regulations isn’t meant “to prevent the unpreventable in terms of mistakes in judgment, but to make sure when those mistakes happen -- and they’re inevitable -- that they’re modest enough in size, and the system as a whole can handle them.” The loss “points out how important it is that these reforms are strong enough and effective enough,” he said.
Geithner said he hadn’t talked to Dimon since the loss was reported.
The Treasury secretary also said the executive branch has “tools” that can push back the deadline for raising the debt limit until early 2013, even though the government will hit the ceiling before the end of the year.
Geithner has said last year’s months-long debate between the Obama administration and Congress over raising the debt limit hurt the U.S. economy and was avoidable.
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