Jamie Dimon May Come Out Swinging Tomorrow, But His Fast Ball Isn’t What It Was
“Which Jamie Dimon will appear before the Senate Banking Committee in Washington on Wednesday?” asks Reuters BreakingViews columnist Rob Cox in a Slate piece. “The self-effacing JPMorgan boss offering apologies for his bank losing at least $2 billion on bum trades?,” he asks? “Or the combative JPMorgan leader who just a year ago publicly challenged the chairman of the Federal Reserve over regulation?”
Cox recommends the latter, which is why the piece is titled “Jamie Dimon Should Come Out Swinging in the Senate.” He worries that “a mealy submission from Dimon may help effectively nationalize the American banking industry for good.” He asks us to “[c]onsider the implicit message the senators who called Dimon before them are sending: that banks must answer to the nation for any losses they incur – and that watchdogs and regulations should somehow be able to prevent them.”
I did. This required me to consider his claim that a mealy submission from Dimon may help effectively nationalize the American banking industry for good (meaning “permanently,” not “beneficially”). He’s saying that the reinstatement of the Glass-Steagall statute or a meaningful implementation of the Volker Rule—separating investment banking from retail banking and barring federally-insured banks from speculating with depositors’ money (which is what JPMorgan did)—would amount to nationalization of the American banking industry. And he’s saying that a law capping the size of federally-insured banks would do that.
After all, the reason for the Senate Banking Committee hearing tomorrow is that Congress is considering enacting laws that would do those very things—laws that would return the banking industry to some semblance of what it was for the period between 1933 and the 1990s, before bank-merger mania and the repeal of the relevant parts of the Glass-Steagall Act so changed the nature of the American banking industry. You know, to the way banks were during that long postwar period of economic stagnation caused by the nationalized banking system we had back then, until de-nationalization returned the industry to the free-enterprise system. In recognition of the fall of Communism, I guess.
I also considered the horrors of a return to that Commie banking system of the postwar era, when watchdogs and regulations somehow were, in fact, able to prevent most large banks from failing and their depositors from needing that FDIC insurance. I shuttered. No, sir! Wouldn’t want to see that!
An effective Volcker Rule and the reenactment of Glass-Steagall might,of course, cause banks to start using those deposits to lend money to businesses, since credit-default-swap speculation no longer would be an option for them. But we wouldn’t want banks to start acting like banks rather than hedge funds again, would we?
Dimon may come out swinging, but I expect that it will be the Democratic senators who will hit it out of the park. Dimon’s fast ball isn’t what it was.
To him it matters not.
He knows that he has Obama in his corner.
Come hell or high water.
O and our bought and paid for congress will give him a pass.
They work for him, not us.
Richard Durbin: “tbey own this place”. We’ll see but my guess is that the Democratic senators can’t hit a curve. They’re certainly not going to get anything straight out of Jamie.
This is rich.
Jamie Dimon must appear for a public flogging, be repentant, donate to Obama, for $2B dollar loss (which entailed no public bailout, no downgrade, does not even put the 2Q into negative), whilst the Congress-managed Fannie Mae/Freddie Mac cost 200X the Chase loss ($400 B).
If I were Jamie Dimon, I wouild say “If this is so easy why did you genius’ loose $400 B?” and step down from the podium.
This is rich.
Jamie Dimon must appear for a public flogging, be repentant, donate to Obama, for $2B dollar loss (which entailed no public bailout, no downgrade, does not even put the 2Q into negative), whilst the Congress-managed Fannie Mae/Freddie Mac cost 200X the Chase loss ($400 B).
If I were Jamie Dimon, I wouild say “If this is so easy why did you geniuses lose $400 B?” and then step down from the podium.
Guess you’re not a customer of Jamie’s bank.
Ah. I debated whether to use the curve ball or the fast ball. Went with the fast ball, but I should have added that his curve ball might be a different story; the Dems may not hit his curve ball.
I do think, though, that because this will be a public, high-profile hearing—as opposed to a private meeting with Dimon or his lobbyists—the Dems will do a decent job. What actually comes of it may, of course, be another story.
Oh, I get it. The government shouldn’t limit speculative trading by FDIC-insured banks, using depositors as their “venture capitalists,” because Fannie Mae and Freddie Mac, like a slew of banks and mortgage companies, made of a zillion subprime mortgages during the last decade. Makes sense, if you can’t distinguish between retail banks that take and hold deposits from private depositors and federally-backed mortgage companies, and think that the FDIC should insure private banks’ casino games funded un wittingly by private depositors. I guess.
Oh, I get it, sammy. The government shouldn’t limit speculative trading by FDIC-insured banks, using depositors as their “venture capitalists,” because Fannie Mae and Freddie Mac, like a slew of banks and mortgage companies, made of a zillion subprime mortgages during the last decade. Makes sense, if you can’t distinguish between retail banks that take and hold deposits from private depositors and federally-backed mortgage companies, and think that the FDIC should insure private banks’ casino games funded un wittingly by private depositors. I guess.
“If I were Jamie Dimon, I wouild say “If this is so easy why did you geniuses lose $400 B?” and then step down from the podium.”
Heh. Which would be equating his failure with Fannie Mai/Freddie Mac, and essentially making a plea for re-regulation. Yeah, Sammy, I hope he does something that abjectly stupid, too!
It’s too bad that Dimon isn’t self-employed. If he were, he’d work a lot harder and pay closer attention to how his business really works. You know, got any idea what your VPs talk about when they’re yuckin’ it up in emails to their buddies? What about the particulars of specific trades? Doing any business with banks that do business with Spain, Greece, and Italy? Know anything about your outfit’s cyber- security software? How much do your subordinates pay their subordinates, anyway? And who’s makin’ time with your personal assistant’s assistant? Etc…etc…etc.
Dimon doesn’t look like a man who worries much. The Senate ought to give him something to worry about, but I don’t think that will happen. They’re worried about their bonuses this Christmas. NancyO
Make that, “unwittingly.”
I do, too. After all, the government has completely restructured Fannie and Freddie to ensure that what happened before won’t happen again.
Make that, “unwittingly.”
Oh, and as I said below, the government has completely restructured Fannie and Freddie to ensure that what happened before won’t happen again. So I’m with Joel.
Bev,
In the 1st Q Chase made $5.4B, so the $2B is roughly 1 months profit. JP Morgan Chase market value of equity is $125B, so the $2B loss is >2% of equity.
Nothing was endangered except the traders who lost their jobs and the stockholders who took a hit. This is the way it is supposed to work.
That’s the way it’s supposed to work at hedge funds, not at retail banks when the bank is using depositors’ money to hedge, sammy. The issue is what federal statutes and regulations are needed to prevent such losses that do imperil a bank’s solvency. JPMorgan still made a profit during that time period. But if it didn’t? And what if the next bank to do that doesn’t?
A big reason for JPMorgan’s profits, not incidentally, is its use of virtually free loans from the Fed, as I understand it. What will happen when interest rates go up substantially?
No, jerko, That’s you Sammy.
Federally chartered banks were, at a not too long past time, supposed to make loans to businesses and individuals. They were not supposed to play risk arbitrage because they were using funds left on deposit. Arbitragers risked their own funds, and those of associates who were well aware of the greater risks And most of the arbitrage trading was futures contracts for real assets which assisted the financial markets with increased fluidity. Now the betting is on arcane derivations of financial instruments. Stuff that doesn’t actually exist other than as an idea to bet on.
Note to Sammy: There’s an old saying among crack heads. When the pipe gets hot, put it down.
You can’t be serious. Then again, from your consistency in the comments here, I suppose I could be wrong.
Make that, “unwittingly.”
Oh, and as I said below, the government has completely restructured Fannie and Freddie to ensure that what happened before won’t happen again. So I’m with Joel.
You were right, Jack. Apparently, all the senators except Merkley (OR), Menendez (NJ) and Johnson (SD) just fawned over him. Bennet (CO), who is my least favorite Dem senator, was downright nauseating; some mainstream liberal bloggers are mocking him as much as they are the Repub senators.