CNBC Live Blog

The loan-to-deposit ratio line of questioning demonstrates a profound misunderstanding of modern banking.

RT @brianstelter: CNN is ending @JohnKingUSA, the channel's 6pm political news show: nyti.ms Situation Room will replace it.

Dimon: Important part of the Volcker rule is not portfolio hedging, it's making markets for clients #DimonHearing

I've seen Dimon do this before. It often comes up when he meets with groups of people. Someone mentions having a problem with JP Morgan Chase in some area, and Dimon instructs a member of his entourage to make sure it is investigated. It's part of his "I'm Jamie Dimon" act.

Incidentally, it looks like Jamie Dimon was right about his "anti-American remarks." Menendez wrong. Link here.

"I've already confessed to the sins on the synthetic credit side. We will not do something like that again," Dimon says. Insists the CIOs current strategy is relatively safe and relatively liquid.

Dimon says his critique of Basel III is not primarily about higher capital requirements for SIFI banks but about the details. This is what he's talking about:

Basel III involves complex risk weighting that is easily open to manipulation and regulatory arbitrage. Covered bonds, a structured finance arrangement popular in Europe, get a much lower risk weighting than other debt securities — which means banks that already own them (the Europeans) will have an advantage over those that don’t (the Americans).

Even worse, the regulatory view that covered bonds are much less risky is likely to spur a buying spree, and therefore a bubble in covered bonds. Instead of demand for covered bonds being driven for their perceived risk and return profiles, there will be regulation-driven demand. Banks will crowd into the trade to buy bonds on which global regulators have stamped their approval in the form of lower reserve requirements.

The main driver of this privileged status of covered bonds has been lobbying by European banks and European financial regulators who want to give their own banks a leg up in global competitiveness. It is, in effect, a back-door lowering of capital requirements for European banks. It’s just protectionism for European bankers.

More here.

Dimon on Volcker Rule: I think it's unncessary.

Senator Hagan asks about the size of the trades. How big was the position? How could it be so large without coming to the attention of management and regulators? Dimon refuses to answer the question on the grounds that it would hurt the company. So far we've learned very little about the trade at all, which is disappointing.

Nice work @carney on the @cnbc live blog + twitter reaction to #dimon hearing. campl.us

Last question, BIG smile from Jamie. #DimonHearing

RT @LoriSpechler: Last question, BIG smile from Jamie. #DimonHearing

Dimon: Europe has serious issues. cnb.cx

Dimon: If we had done something remotely like Simpson-Bowles, you would've increased confidence in America.

Dimon warns Senators that its not okay to wait until after the election to address the fiscal cliff. The markets, he says, "may not wait." Turns to advocating Simpson-Bowles.

Senator Shelby's remarks are absurd. Of course well-capitalized banks have failed.

In fact, as Andrew Kuritzkes and Hal Scott explained in the FT, "The five largest US financial institutions subject to Basel capital rules that either failed or were forced into government-assisted mergers in 2008 – Bear Stearns, Washington Mutual, Lehman Brothers, Wachovia and Merrill Lynch – had regulatory capital ratios ranging from 12.3 per cent to 16.1 per cent as of their last quarterly disclosures before they were effectively shut down."