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US senators Friday blasted banking giant JP Morgan over its mammoth trading losses on complex derivatives last year and called for tougher regulatory scrutiny of the banking industry.
Senator Carl Levin, opening a hearing on JP Morgan's ill-fated "whale" trades, slammed the banking giant's trading operation that lost $6.2 billion over just a few months in 2012 as a "runaway train barreling through every risk limit."
"Derivative values that can't be trusted are a serious risk to our financial system," Levin said.
The incident is a "reminder you just can't rely on a major bank... without a strong regulator looking over," Levin added.
Senator John McCain also had sharp words for key parties in the scandal. McCain said regulators "fell asleep at the switch," but added that US officials were "stonewalled" by the banking giant.
"This investigation reveals systemic problems in our financial system," McCain said.
The comments came as the Senate subcommittee on investigations opened a hearing on the bank's 2012 trading losses of at least $6.2 billion, following the release of a 300-page committee report on the matter.
Current and former JP Morgan officials, along with regulators from the Office of the Comptroller of the Currency, were due to testify.
The whale scandal cast a pall over JP Morgan, the US' largest bank, which was hailed during the financial crisis for its comparatively strong risk management practices.
JP Morgan in January slashed in half the bonus of JP Morgan chief executive Jamie Dimon, who initially downplayed the whale scandal as a "tempest in a teapot." The bank has also dismissed several employees involved in the debacle.
The investigation concluded that the losses were the result of a bank that kept adding more risky bets, hid losses, disregarded its own rules for risk limits, avoided oversight by its regulator and "misinformed" investors, regulators and the public.
In the weeks before the losses became public, one JP Morgan official warned the trading problems were a "big fiasco." But the bank did not immediately disclose the problems and Dimon downplayed the matter on an April 2012 earnings conference call.