Business As Usual

If you think that the power of the banking industry may be in decline, or that its leaders are humbled, or that any kind of major change is underway, please review carefully Jamie Dimon’s speech from Wednesday, March 11 (available on Bloomberg.com).


Mr. Dimon, who runs JP Morgan Chase, makes it clear that he has great respect and appreciation for all that Hank Paulson did for the financial sector.  He also strongly implies that it is time for the government to stop worrying about what approach to adopt; as far as he is concerned, the time for wrangling and figuring out what went wrong is over and the time for really big transfers of taxpayer value is now.

There is no sense here that anything much has changed.  Sure, we’ve lost some banks, we’re in a big recession, and everything we thought sensible for banks in terms of regulation/risk management/corporate governance lies in tatters.  But it is obvious, from the words, tone, and body language of Mr. Dimon that he thinks his side has won and it is back to business as usual, albeit now with a somewhat larger market share.  On all of this, he probably has inside information.

33 responses to “Business As Usual

  1. a response that a bank gave to me sound like the one I received 17 years a go from another bank when I ask help because I was in trouble. It sound like this:”the arrerage in your mortgage will be place at the end of last payment and from the time of the restarting of your payments we will raise your installment to make up for the additional credit” I was shoked and I had to pick up my jaw because it fell on the floor. The names of the banks I will give if requested.

  2. I did not mark the notification box

  3. I noticed Dimon display the same swagger in an interview he gave during Davos.

    I thought, “My God, he thinks it’s game over, and he won”.

    So thanks for confirming my fears.

    Not much of an economy, that exists solely to pay a banker’s interest.

  4. Time to quit my job and put my entire net worth into JPM call options, I guess. It is really hard to motivate myself to work when my earnings are going to be taxed and given to people like this.

    Truly sickening.

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  6. I hope you’re wrong. I fear you are right.

  7. Dimon, Parsons and Pandit do of course have inside information about the state of their own banks’ balance sheets.

    What I found interesting this week was that all three of them appear to have chosen to engage in strenuous attempts to get out in front of what they presumably believe will be a fierce argument for nationalizing their banks when the stress test results come in.

    Hmm, I wonder why they feel that’s so necessary?

  8. Simon,

    A very disturbing post.

    Also disturbing to me is that we face a Irving Fisher/Hyman Minsky event which we are “fixing” by incurring more debt. Government policy is clearly to inflate asset values ASAP and not allow a debt work-out at the consumer, business, or Government level. Unlike 1930 when the U.S. had a current account surplus and manageable levels of Government debt, even the Government is over-leveraged in 2009. I fear that Willem Buiter is right – the U.S. can’t afford massive fiscal stimulus. The “cure” we are pursuing may prove to be more dangerous than the disease 5 years hence.

  9. Simon,

    A very disturbing post.

    Also disturbing to me is that we face a Irving Fisher/Hyman Minsky event which we are “fixing” by incurring more debt. Government policy is clearly to inflate asset values ASAP and not allow a debt work-out at the consumer, business, or Government level. Unlike 1930 when the U.S. had a current account surplus and manageable levels of Government debt, even the Government is over-leveraged in 2009. I fear that Willem Buiter is right – the U.S. can’t afford massive fiscal stimulus. The “cure” we are pursuing may prove to be more dangerous than the disease 5 years hence.
    OH! You’re my new favorite blogger fyi

  10. Dimon said the U.S. can rescue its banking system by the end of the year if officials start cooperating and stop the “vilification” of corporate America.

    Which of course translates to shut up and give us the money.

    What’s the point in rescuing this banking system? And what a preposterous suggestion that we put the Federal Reserve in charge of all regulation.

    The Fed is nothing more than the banker’s private clubhouse; right down to its secret meetings.

    Any meaningful reformation of our banking system must start with taking control of the money supply away from the bankers and putting it back in the hands of the public.

    For that matter, the first step might be eliminating the Federal Reserve and gradually moving away from fractional reserve banking and Federal Reserve notes and towards Treasury notes and a full reserve system.

    How long will it take to learn that central banking and the self interest of private bankers is inimical to the public interest and economic stability?

  11. Why so bitter? I heard the whole talk and I thought it was reasonable. Perhaps a different view point.

  12. inflation will make someone’s debt smaller over time. it is good for the borrower.

    on the other hand, I don’t think inflation is a concern for 2 reasons.

    1. the money from a loose lending in the last few years complete overwhelms the fed money being spent now. now tha that credit is tight, it won’t go back to loose any time soon.

    2. historically, known big problems tend not to happy. people tend to correct for it a head of time. it is the unknown suprise that hurts. along this line, I am positive once we are out the woods, the fed will suck up all the extra money. The fed knows something so obvious about money supply.

  13. Simon —

    I would interested to know what you think of Obama’s role in this tragic scenario. He is obviously co-opted, so he has internalized the Too-Big-To-Fail Finance culture which we see in his appointments. But he is capable of changing his view?

    As the recession drags on and on, he will be opening the door for a Republican comeback in the mid-term elections. These hypocrites will take a “populist” stance against the Bankers, which should be quite effective in getting them elected. Surely Obama knows this. The President may be tossing us under the bus, but he wouldn’t do the same to his party, his policies in other areas and himself.

    Perhaps there is an outside chance he will actually “wake up” (not through a political calculation) and see that he has betrayed the principles that guide him.

  14. Throughout this crisis and the never-ending bail-outs, everyday people have been torn between “doing the responsible thing” and being played for a sucker. AIG, Dimon, Lewis, Pandit, etc. are no fools. They know that by having done the second large enough, they can use the first to further more of the second. Scrub, rinse, repeat.

  15. Hi Simon – great post. Love the comment from Mr Dimon, when he says JPM did not need the bailout money (in Oct), but thought it was the right thing to do to “stabilise the system”.

    Now that they are a ‘TARP bank’ – could we suggest that their bonus payments be audited?

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  17. markets.aurelius

    Spot on, as usual, Simon. There should be another shoe to drop tho: Shareholder suits vs the managements, and Congressional hearings on the reckless fiduciary malfeasance at the banks and former investment banks, vis-a-vis the absurd risk piled on with AIG et al.

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  19. ‘We did not need the money (bailout $ from Oct. 2008) but we took it anyway to show our support for the idea’ [paraphrasing]. Horrifyingly unbelievable!

  20. It is interesting to see the sudden resurgence of rhetoric coming from the big bankers like Dimon. I suppose the fix is in.

    I also hate to say it, but I don’t think Americans are desperate enough yet. It took multiple bank runs from the crash of 29 till Roosevelt was elected in 32.

    What will it take now?

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  22. As an insider and a member in good standing of the establishment himself I simply do not believe that Mr Simon is surprised by any of this.

    The US Government is a bought and paid for subsidiary of corporate America. This has been the case foe decades now, at least since the Republicans took over the Democratic Party through an organization called the DLC.

    I’m not surprised it’s business as usual. I won’t be surprised when they never seem to find the time to “re-regulate” the financial markets. And I won’t be surprised when “too big to fail” becomes “way, way too big to fail”. Disgusted yes, but surprised? No.

  23. Sorry, I like baseline scenario but I think you’re a bit off the mark on this one.

  24. Watch the question and response incl body language, etc starting at 27:27. He first completely dodges the question by going back to previous unrelated topic. Then he has to be re-asked the question, and still isn’t really answering.

    I’ll grant him this: He is the CEO of the largest and likely strongest bank left standing. From his vantage point, he certainly wouldn’t *want* to be nationalized, and it’s also bad for him to speak too candidly about the state of the system especially if too many of his his smaller banking brethren are really that weak.

    Watching him struggle to respond to this – when he had to figure someone, somewhere along the line would ask him what he thought of smaller banks out there was a crack in the confidence.

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  26. The guy’s pretty impressive in his sense of righteousness and lack of introspection(somewhat frightening though).
    To sum up his tone, I would parody him thusly:

    Financial deregulation? I had nothing to do with it! We never lobbied for the repeal of Glass-Steagal. As a matter of fact, we were constantly lobbying for the regulation of derivatives, and laws prohibiting predatory lending, and fought bitterly and very publicly against the repeal of Glass-Steagal. We were constantly sounding warnings in Washington, with our clients, customers and the public both privately and in the press, very publicly and strongly, about the dangers of derivatives and the housing and other asset bubbles of the last ten years. We also for example, lobbied strongly, publicly and continuously for a small, penny-a-trade tax on all transactions on the NYSE in order to limit financial speculation. We publicly and privately, and continuously ridiculed Greenspan whenever he talked during the last ten to fifteen years about how financial markets are self-regulating.
    To paraphrase Samuel Beckett:

    I could go on, but I won’t.

    Sincerely,
    Ed Beaugard

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  28. Pessimism has gone far more than enought.

    It is time to face the future instead of just keep on looking at the rear-view mirror.

    We have done a lot of damage to the economy already beating ourselves to death.

    If we don’t care enough about ourselves, we have to think of the future of the next generation if we keep on destroying ourselves instead of doing constructive ways and means to better our lives despite of the many problems still unsolved at the present.

    Let time be able to solve present crises. There are many things that cannot be solved with haste and wastage. More time needed to think through the mirriade of cause and consequences. Time in many cases is the best arbiter.

    In the meantime there are many things that we can do to improve our lot without tying our hands with the past. One very important item is for us to ask our leaders to provide a credible blueprint to re-construct our shattered economy most if not everybody can believe in. Ask them to show us leadership instead of rhetoric. Ask them to provide the nation with a starting point by which we can build a roadmap to recovery instead of a roadmap with no starting point.

  29. To continute my parody of Dimon:

    ‘We(JP Morgan and the banking industry) are really innocent victims of incompetent regulators in Washington D.C. who, through no fault or effort on our part, placed temptation in our way. I was able to resist some of these temptations, but not all of them. And it doesn’t matter that we(JP Morgan and the banking industry) employ hundreds, if not thousands of lobbyists working year-round in D.C. to influence laws that affect us, the blame still lies with the regulators for creating loopholes and removing safeguards that we were helpless(and much against our will, protesting vehemently all the way), not to exploit. So, we really are blameless after all.’

    Sincerely,
    Ed Beaugard

  30. “Mr. Dimon that he thinks his side has won”

    Maybe not, but based on historical experience, you have to admit that it is the smart way to bet.

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