Tag Archives: Jamie Dimon

Anti-American Bankers

Posted on September 28, 2011 by | 70 Comments

By Simon Johnson.  An edited version of this short post appeared today on the NYT.com’s Room for Debate: “Are Global Banking Rules Anti-American?”

Jamie Dimon claims that the new rules on bank capital “anti-American” because they somehow discriminate against American banks and American bankers.  This framing of the issues is misleading at best.

The term “bank capital” is often poorly explained in the debate on this issue.  It is just a synonym for equity – meaning the amount of a bank’s activities that are financed with shareholder equity, rather than debt.  The advantage of equity is that it is “loss absorbing,” meaning that it takes losses and must be wiped out in full before any losses fall on creditors.

More capital means that a bank is safer, both from the perspective of shareholders and for creditors.  Bankruptcy has become less likely. Continue reading →

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Jamie Dimon’s New Math

Posted on June 10, 2011 by | 59 Comments

By Simon Johnson

On Tuesday, June 7, Jamie Dimon (CEO of JPMorgan Chase) pressed Fed Chair Ben Bernanke on the costs of bank regulation after the financial crisis of 2008.  Could this be what is slowing the economic recovery?  Bernanke was very polite in his response, but the question – as posed – made no sense at all.  (The full tape of his question is here,)

Most of what Jamie Dimon lists under the heading of changes are just symptoms of the crisis itself, e.g., badly run firms and crazy products disappeared.  His substantive issue appears – from his question – to be just about capital requirements. 

But the implication of Dimon’s question – that higher capital requirements will slow growth – is simply wrong.  I explain this in a column now running on Bloomberg.  Here’s the link: http://www.bloomberg.com/news/2011-06-09/the-missing-math-in-dimon-s-economic-argument-simon-johnson.html.

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What Jamie Dimon Won’t Tell You: His Big Bank Would Be Dangerously Leveraged

Posted on December 4, 2010 by | 92 Comments

By Anat Admati, Professor of Finance and Economics at Stanford Graduate School of Business.  To see her explain these issues in person, watch this Bloomberg interview.  This is a long post, about 3,500 words.

The debate is raging about banks and their size, financial regulation, and the international capital standards known as “Basel”.  Jamie Dimon of JP Morgan Chase, in his New York Times magazine profile, expresses admiration for the Basel committee and says,

“… they are asking the questions that, in theory, bankers ask of themselves: how much capital do banks need to withstand the inevitable downturn, and what is an acceptable level of risk?”

There is one problem, however. Basel may have asked the right question, but it did not come up with the right answers, mainly because it allows banks to remain dangerously leveraged, setting equity requirements way too low. This fact is not understood because the debate on capital regulation has been mired with a cloud of confusion, and filled with un-substantiated assertions by bankers and others. As a result, the issues appear much more mysterious and complicated than they actually are.

After a massive and incredibly costly financial crisis, we seem to have financial system that is a more consolidated, more powerful, more profitable and, yes, as fragile and dangerous as we had before the crisis. How did this happen and what can we do?

Here are some questions on which the confusion is staggering. Continue reading →

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Jamie Dimon: Becoming Too Big To Save – Creating Fiscal Disaster

Posted on December 3, 2010 by | 64 Comments

By Simon Johnson

In Sunday’s New York Times magazine, Roger Lowenstein profiles Jamie Dimon, head of JP Morgan Chase.  The piece, titled “Jamie Dimon: America’s Least-Hated Banker,” is generally sympathetic, but in every significant detail it confirms that Mr. Dimon is now – without question – our most dangerous banker.

Mr. Dimon is not dangerous because he is in any narrow sense incompetent.  On the contrary, Mr. Dimon is very good at getting what he wants.  And now he wants to run a bigger, more interconnected, and more global bank that – if it were to fail – would cause great chaos around the world.  Lowenstein writes,

“Dimon has always been unusually blunt, and he told me that not only are big banks like JP Morgan (it has $2 trillion in assets) not too big, but that they should be allowed to grow bigger.” Continue reading →

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JP Morgan Responds To Financial Reform: The Poison Pill Strategy

Posted on June 26, 2010 by | 154 Comments

By Simon Johnson

While the financial reform negotiation process grinds to its meaningless conclusion, the real action lies elsewhere – in Jamie Dimon’s executive suite. 

Dimon, the head of JP Morgan Chase, is apparently seeking to (a) become more global, (b) move further into emerging markets, and (c) become more like Citigroup. 

This is terrific corporate strategy – and very dangerous for the rest of us. Continue reading →

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Jamie Dimon Has Another Good Year

Posted on December 10, 2009 by | 42 Comments

In May, Jamie Dimon, the head of JP Morgan Chase, told his shareholders that the bank just had probably “our finest year ever.”  Despite being close to the epicenter of the worst financial crisis since the Great Depression, Dimon’s bank was able to make a great deal of money, obtain government support when needed, and reduce that support level quickly when the overall situation stabilized – thus freeing the bank of constraints on its pay packages (and other activities).

It looks like the full year 2009 may turn out even better than Mr. Dimon expected in May.  Speaking at the Goldman Sachs US Financial Services Conference on Tuesday (December 8), Jamie Dimon presented JP Morgan Chase’s third quarter results (year-to-date).  His slides are informative, but if you want to pick up the nuances in his message, listen to the audio webcast (you have to register, but it’s free; here are back-up/alternative links). Continue reading →

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Why Didn’t The Major Bank CEOs Show Up On Monday?

Posted on September 17, 2009 by | 78 Comments

Speaking on Wall Street at noon Monday, President Obama laid blame for the crisis and recession of 2008-09 squarely at the feet of the financial sector.  The diagnosis was sound but the rest of his speech was disappointing – the administration’s draft regulatory reforms look lame, banks are fully mobilized against the only proposal with any teeth (a consumer protection agency for financial products), and the President’s call to “please don’t do it again” surely fell on deaf ears.

In fact, were any of the most relevant ears even listening?  The real news from Monday was not the substance of the speech or the stony silence of the financial elite in the audience, but rather that not a single chief executive officer (CEO) of a major bank was in attendance. Continue reading →

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The Rise and Rise of Jamie Dimon

Posted on July 19, 2009 by | 26 Comments

As Simon pointed out earlier, Jamie Dimon has been getting a lot of good press recently. The New York Times portrayed his recent rise to prominence as not only the CEO of American’s number one bank (at least, the number one bank that has not recently been compared to a vampire squid), but as a player in Washington and, according to at least one quip, the man Barack Obama turns to on financial questions:

Now that Mr. Obama is in the White House, Mr. Dimon has been prominent when the president wants to talk to big business.

During one such meeting in late March, as Citigroup’s chairman, Richard D. Parsons, was trying to explain banks and lending, the president interrupted with a quip: “All right, I’ll talk to Jamie.”

Continue reading →

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Jamie Dimon v. Larry Summers

Posted on July 19, 2009 by | 37 Comments

Jamie Dimon has won big.  JP Morgan Chase now stands alone, both in financial position and political clout – including special access to the White House and, as explained in today’s NYT, Rahm Emanuel’s likely attendance at his next board meeting tomorrow. 

Dimon’s semiotics have been brilliant throughout the crisis – it wasn’t his fault, he was forced to take TARP money, and – in phrasing that will make the history books – bankers should not be “vilified”.  But now he has a problem.

Larry Summers forcefully stated Friday that high recent profit levels for big banks (i.e., JPMorgan and Goldman) are based on the support they received and still receive from the government (listen to his answer to the second question, from about the 6:10 to 10:30 mark).  At that level of generality, in a period of financial stabilization and consequent reduction in executive branch discretion, this statement does not threaten Dimon or anyone else.

And Summers’ statement on the dangers of “too big to fail” was “too vague to succeed”.  Dimon saw this one coming and is very much aligned with Tim Geithner on the technocratic fixes that will supposedly take care of this – the mythical “resolution authority”, which will not actually achieve anything because it has no cross-border component, so the next time a major multinational bank (e.g., JP Morgan) fails, the choice again will be “collapse or bailout” (as Summers put it in the same Q&A Friday).  Yes, I know the G20 is supposedly working on this; no, I don’t think they are making progress.

But Summers also drew a line in the sand on consumer protection. Continue reading →

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Small Bank Big Trouble?

Posted on June 8, 2009 by | 17 Comments

One of the more interesting counter-arguments against the idea that big banks should be broken up comes from people who play close attention to the behavior of small banks.  They point out that small banks are a powerful political lobby, a point nicely illustrated by the NYT’s explanation of how changes to bankruptcy law were recently derailed.

The big banks, in this view, are no more oligarchic in their tendencies than small banks.

It is definitely the case that small banks can get together and demand political favors.  You need transparency and a strong open debate to offset that – and, according to leading congressional figures, you also need the Obama administration to show up, help out, and resist capture: Continue reading →

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Political Will: Bernanke On The True Cost Of Banking

Posted on March 17, 2009 by | 50 Comments

Stabilization programs in emerging markets often come down to this: the government needs to do something unpopular, e.g., reduce some subsidies, privatize an industry, or eliminate the crazy credit that goes to oligarchs – no one likes oligarchs, but their factories employ a lot of people.  There is naturally resistance - pushback from legislators, riots in the streets, or oligarchs calling their friends in the US foreign policy establishment.  The question becomes: does the government have the ”political will” to get the job done?

In fall 1997, a key issue for Indonesia’s IMF program was whether the government could close the banking operations belonging to one of President Suharto’s sons.  There was an epic and fascinating struggle and, in the end, the government did not have sufficient political will or power.  The subsequent loss of US support, and further currency and economic collapse is (messy and painful for many) history.

It is striking that Ben Bernanke now asks whether the United States today has sufficient political will. Continue reading →

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