Dimon: JPMorgan traders didn't understand risks

JPMorgan CEO Jamie Dimon testified before Congress on Wednesday.

NEW YORK (CNNMoney) -- JPMorgan Chase CEO Jamie Dimon told Congress Wednesday that the bank's massive loss can be blamed on insufficient risk controls and a failure by traders to understand the bets they were placing.

Dimon both defended the bank, which he says will still be "solidly profitable" in the second quarter, and sounded a note of contrition before members of the Senate Banking Committee.

"We have let a lot of people down," Dimon said, "and we are sorry for it."

JPMorgan (JPM, Fortune 500) announced last month that it had suffered a multi-billion dollar loss on trades built around contracts tied to corporate bonds that were originally intended to hedge the bank's exposure.

Regulators have started asking questions about the bank's risk management controls and hedging strategies. And lawmakers have resumed a fight over the Dodd-Frank Wall Street reform law passed in response to the financial crisis.

Sen. Tim Johnson, the committee's chairman and top Democrat, asked Dimon, who months ago dismissed controversy over the trades as a "tempest in a teapot," what the bank's motives were.

"How can a bank take on 'far too much risk' if the point of the trades was to reduce risk in the first place?" Johnson asked. "Or was the goal really to make money?"

Dimon's opening statement provided a brief sketch of what the company now believes went wrong, starting with a trading strategy within the firm's chief investment office that was "not carefully analyzed."

Some of the blame also fell on the traders themselves, who Dimon said "did not have the requisite understanding of the risks they took."

As trading losses started to mount in March and early April, Dimon said, the traders attributed the losses to temporary market movements, and not a flawed strategy.

Dimon, the only scheduled witness on Wednesday, also said that the unit's risk managers fell short, and that personnel in key roles "were generally ineffective in challenging the judgment of CIO's trading personnel."

While most of the blame falls on the personnel and activities of the chief investment office, Dimon allowed that senior managers should have more closely scrutinized the group.

"CIO, particularly the synthetic credit portfolio, should have gotten more scrutiny from both senior management and the firmwide risk control function," Dimon said.

Investors are watching his testimony for clues as to how large the bank's losses have grown, as well as what Dimon knew about the trades -- and when.

Dimon recently said he wouldn't provide a running tally to the public, so it's unlikely that the extent of JPMorgan's losses will become public before the bank reports second-quarter results in mid-July.

Since Dimon first announced the losing trades on May 10, JPMorgan has lost roughly $30 billion of its market value. Shares of JPMorgan have dropped nearly 20% during that same time period.

Dimon will return to Capitol Hill next week to field questions from members of the House of Representatives.