One has to wonder whether anyone in a position of influence really believes what he is selling. At best, Jamie Dimon’s defense of too big to fail banks like his own JP Morgan is a vivid illustration of Upton Sinclair’s saying, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” But Dimon’s patently self-serving argument is more likely part of a broader industry push to try to win over the public it just looted.
The Financial Times took note of his salvo, which comes in his letter to shareholders:
In the current political environment, size in the business community has been demonized, but the fact is that some businesses require size in order to make necessary investments, take extraordinary risks and provide vital support globally. America’s largest companies operate around the world and employ millions
of people. This includes companies that can make huge investments – as much as $10
billion to $20 billion a year – and compete in as many as 50 to 100 countries to assure America’s long-term success. Combined, big and small businesses spend $1.5 trillion per year on capital expenditures and $300 billion on research and development. It is estimated that more than 70% of the capital expenditures are made by large companies.The productivity of our workers and the huge economies of scale of our corporations (generated from years of investing and innovating) are what ultimately drive our economy and income growth. Employees at large companies share in that productivity: Compensation and benefits for employees at large companies are substantially higher than at small firms.
It is estimated that large enterprises and large foreign multinationals active in the United
States have accounted for the majority of U.S. productivity growth since 1995.
Companies such as Ford, Boeing, Pfizer, Caterpillar, Apple, Microsoft and Google are exemplars of initiative and innovation worldwide. Cutting-edge companies like Hewlett-Packard underpin vibrant networks of small and midsize suppliers and vendors. Academic research shows that these investments abroad actually create more jobs in the United States.Large companies such as the ones mentioned above need banking partners with large
enough balance sheets to finance transactions around the world. And it’s not just multinational corporations that rely on such scale: States and municipalities also depend on the capital that a firm like JPMorgan Chase can provide.
Yves here. It goes on in this vein for a few more paragraphs, but you get the drift of the gist. The idea is 1. Big companies are key to productivity growth, ergo growth and 2. Those big companies need banks with really big balance sheets.
Let’s debunk them in order.
The choice of productivity growth is peculiar, since the US statistics have been found to be wanting (as in they used a now-disputed measure, namely, checks cashed, for financial services industry productivity growth, which appears to have greatly overstated productivity increases in the service sector). And a big chunk of the rest of the growth in productivity did come from a large company….Wal-Mart. Wal-Mart’s success in this vein cannot be extended to large companies generally (and a lot of readers no doubt will take issue with Wal-Mart serving as an example of the sort of corporate conduct that big businesses should emulate).
We then get into the next layer: is what is good for the very biggest companies necessarily good for America? That is another tacit assumption in this argument. Given that large corporations have been shedding jobs, and in the last upturn, were net savers (as in were not borrowing to invest in their business, but were rather paying down debt rather than invest in growth) that argument seems like quite a stretch. While some large companies individually are exceptions, as a group, big companies were not creating jobs, nor were they investing in growth. And numerous studies have found that large companies are not innovative (yes, there are always exceptions, but smaller enterprises have consistently been found to be the hotbed of new ideas and processes; why do you think BigCos have to resort to devices like snunkworks to elicit similar behavior?)
So…do these really big companies actually need megabanks? I find this a stretch too. In all the years I have worked in the banking industry, I never heard anyone at McKinsey in the 1980s or 1990s recommend greater size as a way to win more business with major corps (and I’ve done a fair amount of interviewing of corporate treasurers and CFOs over the years myself).
Now there is one exception here. There is a service big corps value highly. It’s a global payment system….offered by Citigroup:
As an example of what the unit allows multinationals to do, an Asian subsidiary of a European company can deposit funds with Citigroup locally and the money will instantly show up on the ledger of the parent a continent away. The system makes it easier for corporate treasurers to manage their finances, and many corporate and government clients outsource a wide range of other finance work to GTS….
Executives told officials with the Treasury Department and the Fed that GTS’s technology and presence in more than 100 countries made it too dangerous for the U.S. to let Citigroup collapse.
Yves here. But Dimon wasn’t arguing about payment systems, he was arguing about financing. It’s already worth noting that some of the companies on his Admirable Big Companies list, like Microsoft and Google, generate lots of cash flow and have comparatively modest investment needs, and hence are not capital markets junkies.
Moreover, in the stone ages of finance (the 1980s) we had companies that straddled the globe too. And guess what? They did just fine having their capital markets needs largely satisfied by investment banks, which were mainly private partnerships, getting loans and payment services from US commercial banks, and using foreign banks if they needed to issue Eurobonds or procure other local market funding services. Even now, large multinationals are not dependent on a single bank. They often seem subject to fads as to how to work with banks (I’ve seen over my career vogues for more banking relationships, as in more horses for courses, replaced by a change in conventional wisdom of favoring fewer banks, and then a reversion. I suspect these changes in fashion keep CFOs busy and therefore looking like they are earning their keep).
So why do big banks need such big balance sheets? Bank industry expert Chris Whalen has described JP Morgan as as $1.3 trillion bank appended to a $76 trillion derivatives clearing operation. And he also begs to differ with Dimon’s “fortress balance sheet” claim, contending that JPM would have gone down even faster in the crisis than some of the other major banks by virtue of its derivatives exposures. You need a really big balance sheet if you are active in the OTC derivatives markets, particularly credit default swaps.
Oh, and as witness what happened in the crisis, big banks (who are given backdoor subsidies, like Maiden Lane I) are a much easier way for the authorities to dispose of dodgy players. By contrast, a bad bank vehicle like the Resolution Trust Corporation has to get funding from Congress and is therefore under considerable scrutiny. No reason to let the public see what is going on if that can be avoided, right?
Update 4/1, 6:00 PM: I neglected to mention a wee factoid that casts considerable doubt on Dimon’s “fortress balance sheet” claim. Year end 2009 total equity was $165 billion. Per Mike Konczal’s conservative analysis, JPM’s losses on second mortgages are between $58 and $87 billion, if not higher.
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WOW, only got to “fact is that some businesses require size in order to make necessary investments, take extraordinary risks and provide vital support globally” before going through spasms, trying not to, befoul my screen with my evening ration of Glenmorangie.
Take extraordinary risks[?] with whose monies I ask, and at whose behest, and for whose benefit.
Skippy…Hay Dimon…hows the view from Olympus and with your superior optics…can you see what I’m showing you…eh.
Dimon is the epitome of the Wall Street banker.
“I’ve got it, its mine and fuck you if you think you can change any of this. I own your ass, your house, your town and your government.”
The PR department wrote that and had to beg him to sign it. I can picture a board meeting where they were begging him to lend his name to it. Shareholders? Fuck them.
This is an old argument – we need big banks because we have big companies.
If it’s true, then I don’t think the right conclusion is to have big banks. It’s more we need to break up the big companies, too.
The head on Mt. Rushmore, the one nestled in deep between Jefferson and Lincoln, nods approvingly.
You can take the little Jamie out of Queens,
but you can’t take the Queen out of little Jamie.
“fact is that some businesses require size in order to make necessary investments, take ‘extraordinary risks’ and provide vital support globally”
http://www.zerohedge.com/article/whistleblower-exposes-jp-morgans-silver-manipulation-scheme
Interesting . . .
They do Unemployment Bank Cards in Michigan also
I wrote and published an article on JP Morgan EFS’ role in the welfare system:
http://onlinejournal.com/artman/publish/article_5297.shtml
As long as JP Morgan has the monopoly on the Food Stamp distribution program, it will be TBTF.
And what’s wrong with syndicating that borrowing and not underwriting it? Seems to me it puts the syndicator in the middle where it belongs.
And he “regrets” using FDIC when all is said and done now.
http://www.bloomberg.com/apps/news?pid=20601108&sid=aPn8I4S7mr5w
Stunning.
Apparently JPMorgan Chase is in the looting business period. From http://www.fofoa.blogspot.com/
“Last night, after returning from the CFTC, GATA released these explosive emails detailing the ongoing manipulation in the silver (and gold) market, by JPMorgan Chase.”
“On March 23, 2010, GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Maguire is a metals trader in London. He has been told first-hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.
In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events …”
Big banks, like the Fortune 500 sector, like the concentration of power in fewer players. This argument has been presented since the S & L crisis, when there were 25,000 banks, S&Ls in the USA. A democratically decentralized credit system, locally based by bankers who their local markets from sea to shining sea. The argument then went something like this: we need to consolidate banking into fewer but larger scale players to compete with the Rising Sun Inc, look at them, they only have a few banks, and theirs, as well as Europe’s banks, are bigger than ours. William Seidman was a champion of fewer is better. We want our banks to be #1 in size, just like GM. Similarly, Earl Butz, the Sec of Agriculture under Nixon was the champion of the consolidation of larger scale corporate agriculture, to produce more efficient food production, so we could use food as a foreign policy weapon, much like the Arabs used their natural resource competitive advantage, oil. If you recall the Farm Aid concerts from that period, and financial ruin of many family farms due to being ensnared by investments in petro chemical inputs, equipment and more land, all fueled by bank credit, that turned out to be a bad bet. The heralded grain food export bonanza never happened like it was supposed to. We never became the Saudi Arabia of food. Today, fewer banks, fewer farmers owning more land, especially the big agricultural names, such as Dean, Tyson, ConAgra, Archers Daniel etc. Same pattern in retail, Wal-Target-Mart displacing dozens of regional players, such as Jamesway, Ames, Clover, Bradlees,Caldor etc.
Yves, it is hard to swallow the thin gruel that passes for an argument from Dimon. But I expect it will be showing up as the pillar of compelling logic at business news shows and the talking points when it surfaces for the politico talking heads week in review discussions. Your immediate punching back should serve to counter these notions, hopefully before they gain too much traction in the media.
I remember people were floating Dimon’s name as Treasury Secretary. I don’t know how serious they were about the thought at the time, but I guess this letter pretty well puts those thoughts to rest.
Yves,
I should point out that you misspelled the fellow’s name. The correct spelling of his name is:
“Jamie DEMON”
Vinny
PS — and I’m sure he’s “doin’ God’d work” too…lol
daddy, what is a financial crisis?
(phone call from elementary school)emergency?
jamie dimon here: “oh, it is something that happens every 5 to 7 years darling, i have you covered though.”
Bankers Face Pressure From Capitol Hill Panel – NYTimes.com
In a recent post I argued: Free money from the Fed, and bail-outs from various governments allowed US Bank employees to pull off a marvelous trick, thereby freeing them the normal contraints of Capitalism. They (according to FDIC aggregate data on all US Banks) paid out more in dividends than the companies made in each of the past 3 years: by $8B in 2007, $41B in 2008 and $30B in 2009. Net operating income (NOI) for the banks was $102B for 2007, $10B for 2008 and $17B for 2009. This is obviously unsustainable, and makes the crooks from the Tech Boom look like amateurs- while the Techies based their fraud on the greater fool theory, the Bankers simply paid off their owners, thereby forestalling more thorough shareholder review of operations, and gave themselves raises.
OK, I will tell you guys how it works conceptually.
Big banks are needed to manipulate (read, distort) the market. And by market manipulation big banks make money. If they were ‘small banks’ they couldn’t distort the market, you have to have an appropriate size in order to do it.
This is a conceptual idea behind ‘proprietary trading’ (remember Volcker rule?) by big banks.
The biggest non-sequitor in his argument is that the large companies he listed can all fail, but the banks are not being allowed to fail. Letting a big bank fail is not the same thing as disallowing the existence of big banks. In free enterprise, a big bank failure should mean an orderly wind down, and fire sale prices on the assets, which would then be scooped up by competitors who become the next big banks.
GM, Chrysler, DEC, Nortel, United Airlines, and a host of big companies have failed. The Dow changes over time. Why not big banks?
Your are correct. Your questioned can be answered by reading Dimon’s own thoughts. TBTF banks are supporting America the Empire. They exempted themselves from taxation but not for the American citizen. So as taxes rose, the multinationals and TBTF banks went overseas.
Very little of this kind of business trickles down to the American citizen. Here is how I feel. Since it is the American citizen that helped them survive and thrive in the financial crisis, my exectations is for JPM and GS to fund American innovators.
If they don’t want to do that, they should move overseas entirely and hand our country back to it’s citizens. JP Morgan, GS and the multinationals will soon not have customers that can afford their products here in America, and an acceleration of domestic terrorism. Revolutions are spurred by removing the opportunity to benefit and such an occurrance will be an inevitable outcome of empire-building, mercantilism and a feudal political system.
I suspect TBTF banks, while believed to be supporting the empire, are not. The number of those who see this in DC is growing. I doubt there will be a bail-out when the next crisis comes.
So the Americans let go by big banks and businesses plus all the rest of the citizens who are getting lower salaries and fewer benefits should bail out the big banks, etc. because they are good for America? What condescending hypocrisy! What a bogus claim to entitlement!
Here here! And Jamie Dimon’s new slogan for the company… “Chase what matters”…to us! Condescending manipulist elites!
JPMorgan Chase is very proud of its Meritocracy. Elitist to the core and, by the measure of Michael Young http://ow.ly/ZdPB, not to be entrusted with American values of equality and opportunity for all.
Meritocracy: “A meritocratic class that monopolizes access to merit and the symbols and markers of merit, thereby perpetuating its own power, social status, and privilege.”
The principle threat to democracy in the United States today arises from irresponsible elites seeking relative advantage at the expense of shared social values.
Another bit of misinformation (or at least misleading information) from Dimon:
Now, corporate income has grown, IIRC, in the last 30 years as we’ve seen the size of U.S. companies grow (although growth doesn’t always follow size, look at some of the disastrous mergers that have occurred). Worker income in the U.S. at least has stagnated for the last 30 years as these mega corporations and financial companies have boomed. Indeed, many of the companies have grown – and gone global – on the backs of U.S. workers by either cramming down pay and benefits or offshoring the work to cheaper labor markets.
let’s not forget that JPM and Dimon saved the FDIC and taxpayers a TON of money in knife-catching Bear and WaMu in the teeth of two painfully acute junctures in 2008 and also lent tens and tens of billion into the interbank lending market when the world got a margin call after Lehman. Somehow the Yves’s and Simon Johnsons and pitchfork crowd never like to discuss and credit stuff like that
mark,
That is the most self-serving bunch of drivel I’ve ever heard. JPM didn’t save taxpayers jack shit. That’s like asserting that by running a ponzi scheme that subsumes a smaller ponzi scheme, they have somehow saved the victims of losses.
All they’ve done is postpone the losses, to gradually be stolen from taxpayers, rather than recognized up front.
Besides, it isn’t as if JPM’s actions were somehow to benefit the people. Nobody stood to lose more from the implosion from the entire financial system than JPM. Any “benefit” to the taxpayers was purely coincidental.
Your argument falls on its face when we question the assertion that the status quo is worth saving. And by status quo, I’m referring to the continued theft of society’s wealth by a bunch of gamblers that can’t tell a productive investment from a hole in the ground.
You rather conveniently forget Maiden Lane I, a subsidy to JPM that is ultimately backstopped by the taxpayer (see Willem Buiter, a former central banker and now chief economist, for the long form explanation) and the wipeout of the sub bond holders at WaMu. John Hempton has argued at some length (with analysis to support it) that WaMu was solvent, that this in fact was an FDIC orchestrated “taking”.
Oh.My.God
“Bow down, ye peasants, and be glad of the scraps I allow you”
The government put this a-hole on third base and he thinks he hit a triple.
In a competitive environment there are upper limits to the size of any of the individuals. For animals this limit is defined by the interplay between the daily intakes of energy required taken in relation to the amount of energy needed to forage for food combined with the size of the area required to produce this food. While a business ecosystem is different than a natural one, similar limits must also apply. These limits are typically manifested during crises such as depressions/droughts or black swan credit events/meteors.
One huge difference between natural and business habitats is that while neither the dinosaurs nor the wooly mammoth had a direct line to Mother Nature through which to plead for some kind of preservation; Jamie Dimon, Rick Rubin, and Lloyd Blankfein all had easy access to the Bush/Obama elites.
But what if the mammoths had been able to plead to Mother Nature? What would they have asked for? They would have begged for protection from the short hunters who kept ambushing them as well as access to steady nourishment to compensate for their damaged grazing ranges. In short they would have demanded to be put into a zoo to survive. And why not, preservation of endangered species is surely a good thing right? Well not if it comes at the price of the extinction of smaller species. Besides, this experiment of totally domesticated businesses was already tried once in the Soviet Union; these companies quickly mutated into unsustainable freaks.
How sad zoo must be for Jamie Dimon, once the proud king of the capitalist jungle, to now be caged and protected by government bars (along with some other of his fellow giant species like GM, Citi, AIG, etc.) Sure that brief glimpse into the abyss of starvation back in 2008 still whets his appetite for that steady gruel he greedily gobbles through the Fed window. And it must give him no small amount of pleasure to see his Democratic handlers cleaning up the pungent stools he leaves behind in his cage. But in order just to survive from day to day, Dimon, and pals must delude themselves into thinking that this is all just a temporary situation. We see in what he wrote in today’s piece that he is still practising his once-intimidating roar in preparation for that day he imagines he will be set free to compete once again with the other animals in the wild. But sadly we all know that day will never come. Once taken out of the wild, a large beast quickly loses its completive edge and although hope may run high that change is possible; the sad fact is that the Wall Street mammoths will certainly live out the rest of their pathetic lives in the dull ambiance of government domestication, being laughed at and mocked daily by hoards of lesser beings on comment threads such as this.
Reminds me of ‘Island evolution’ small species transitory sea migration to virgin environment, inexorably leading to gigantism in a non predatory environment with abundant surplus, eventually leading to dwarfism or extiction w/predation or not.
Skippy…we are in the gigantism stage?
You pitchfork crowd people are so ignorant of what caused the crisis, JPM’s role in it, the “people’s” role in it, and the public good and cost/benefit of a fractional reserve banking system that you remind me of a great winston churchill quote
“the best argument against democracy is a 5 minute conversation with the average voter”
read this entry from Yves’ fellow blogger Cassandra and actually learn something
http://nihoncassandra.blogspot.com/2009/03/what-is-your-real-name.html
Spare me.
Typical elitist thinking. Dimon et al were responsible for the financial meltdown. This was staved off only by massive government intervention which players like Dimon immediately gamed to their advantage ensuring that another collapse is in our near future. So what is your takeaway from all this? That ordinary voters who footed the bill for the trillions used to save Jamie Dimon’s and JPM’s ass should just shut up and bask in the reflected glow of the great man’s presence. Seriously, what planet do you live on? Or more pertinently what bank do you work for?
I suggest you read ECONNED, which is the first integrated explanation of the crisis. Looting by major financial firms was a central factor.
Funny how we are all responsible for the mess. However, I don’t remember Dick & Jane lobbying congress to the tune of millions of dollars to be allowed to hyper-lever. Funny too how cleaning the mess has put even more millions into the bankers pockets and more misery into the general public. Like they say follow the money and you find the perpetrators. I do however agree with you that TBTF needs to be preserved. After all, buying the house the senate and the presidency ain’t cheap
Jamie Dimon needs to be in jail. This would work no great hardship on him though. He would think the bars on the windows were there to keep the peasants out.
“The productivity of our workers and the huge economies of scale…”
Productivity has got to be one of the most deceptive words in the economist’s vocabulary. What does it mean if you are producing lots of stuff and it’s all crap? Or if that productivity is not coming from “our” workers but from cheap labor in China. What does increased productivity mean as an economic indicator if it occurs in both robust economies (expansion) and also sicks ones (cutting back to the bone)?
As for economies of scale, the housing bubble and meltdown effectively debunked the concept with regard to large banks. All size did was increase moral hazard. Size meant that banks made many more bad loans because they no longer knew, or cared about, local markets. Size gave them the cred to slice, dice, and pass off these bad loans in which that magnified the underlying risks and made them systemic.
I say this a lot but our elites have failed us. Just as Dimon opening his mouth epitomizes the attitudes that led to the last collapse and are leading inexorably to the next one, can we see any greater understanding of the nation’s problems and how to fix them emanating from our political elites: Obama, the Democrats, the Republicans? We can not begin to fix what is broken in our society unless and until we figure out what to do with them.
Yves – read John Taylor’s Getting off Track
http://www.amazon.com/Getting-Off-Track-Interventions-Institution/dp/0817949712/ref=sr_1_1?ie=UTF8&s=books&qid=1270145679&sr=8-1
Govt policies were a central factor in causing the crisis from a non pitchfork crowd member and one of best economists of his generation.
I did already, I cite him in my book. His analysis is useful but woefully incomplete. And BTW the most esteemed economist of our day is Joseph Stiglitz, who hails from the other end of the ideological spectrum.
“Government policies” were what Felon Jamie Dimon bought and paid for.
How many posts are you planning on starting with that same Upton Sinclair quote? I guess the content is repetitive, might as well recycle the rhetoric too.
Cheap and inaccurate shot, which you could have answered yourself via a search. No other posts by Yves started with that quote.
As long as Dimon and his lot keep dispensing this crap, the “rhetoric”, meaning truth telling, needs to continue.
Yves – JPM was ready to walkaway from the Bear acquisition because the margin of safety didn’t exist in a collapsing market for MBS and Agencies. Maiden Lane was an enticement by current Treasury Secretary Geithner and the NY Fed to JPM to stay the course and complete the acquisition. Sure that was support, but clearly the Fed and the government thought this was the lesser of two evils.
As far as the non-secured and subordinated debt wipeout in the WaMu acquisition, this is what happens in a bankruptcy!! unsecured bondholders are wiped out and / or converted to equity to recapitalize the bankrupt firm. In fact, the best argument from the pitchfork crowd and one I fully agree with is that more subordinated, unsecured, and even secured debt writedowns and conversions to equity did NOT take place with bankrupt financial companies and banks. Did holders of Citi, BofA, and RBS debt take writedowns or convert to equity? We taxpayers are over 100bln in the hole with filling Fannie/Freddie’s capital hole and still no debt writedowns and conversions to equity have occurred!! Sadly, you never hear this complaint from the pitchfork crowd and instead hear buzzwords like, “free market failed”, “manipulation”, “vampire squid”, “failure of capitalism”, “Wall Street is evil”, bla bla bla
Where were you were during the crisis? What just passed was the greatest looting of the public purse in history. The industry is not only unreformed (and the reforms on the table are a joke, despite the industry’s posturing to the contrary), but more powerful than ever. There is no defense for this, none. The brazenness of Dimon, who should be grateful for the rescues (JPM would have been as dead as every other bank if the powers that be had not intervened in the run on the repo market) is further proof that we are now in the hands of the financial oligarchs. I suggest you read Simon Johnson, both his Quiet Coup and now his 13 Bankers, on this topic.
And you ignored the key point re WaMu, that it was suffering a liquidity crisis, NOT a solvency crisis. See Hempton, who is a respected bank analyst, then we might have an intelligent discussion.
It appears Mark’s a Dimon a cultist,
Who can’t discern symptoms from causes.
I had a front seat during the entire crisis, and I’m objective enough to realize that there were failures on many fronts, not just on Wall St with leverage, bad compensation schemes, and greed. There is plenty of culpability to go around, and people need to realize that as Cassandra states so eloquently in that post. You and the pitchfork crowd want the global financial system to change its behavior, well may I ask what has changed on these fronts:
-The government is still subsidizing housing with asinine homeownership policies with insane leverage (97% LTVs from the FHA) at the expense of the taxpayer and the young
-Fannie and Freddie continue to expand portfolios and executives like Franklin Raines and Jim Johnson aren’t indicted or under investigation.
-The Chinese Yuan is still pegged.
-The government and the US as a nation continues to vastly outspend what it earns, exacerbating the global imbalances, trade deficit, capital inflow dependency, and national debt
-How many have lost jobs at the SEC?
-Tim Geithner and Ben Bernanke, two key leaders in the buildup to the crisis, got promoted and/or reappointed after the failure of mortgage underwriting supervision, holding money easy for too long, and failing to regulate CDS trading and underwriting earlier in the decade. In my book, if you fail miserably you are out, fired and humiliated like Angelo Mozilo, Chuck Prince, Fred Goodwin, and Stan O’ Neal
What has changed here? how come you and the pitchfork crowd don’t demand change on these fronts??
–
I don’t think you will find too many defenders of Taxcheatgeithner or Bernanke around these parts.
I have read the Hempton posts, and if his scenarios and analysis were correct, then he should have raised the capital and provided financing, backstopped the Option ARM book, and injected equity capital into WaMu as JPM did at a better price. I’m sure the FDIC would have considered it. Unfortunately the world had a global margin call in Sep-Oct 2008 and few were in the position to do so, as JPM and few others like Buffett were. As the saying goes, “a financial genius is someone with cash at the end of a crisis”. Dimon is a genius
“Dimon is a genius”
You on the other hand seem to be the opposite…
Robespierre – nice of you to keep the discussion civil and substantial. Kill yourself (with a guillotine)
This coming from the guy who call differing opinion “ignorant” and that most of the “unwashed” are not worthy of the right to vote (aka democracy). Please hypocrisy anyone?
Yves is differing AND informed opinion. You and most others on this comment are differing BUT ignorant opinion. There is a significant difference. And I used the quote not to claim that ignoramuses shouldn’t have the right to vote, but that a well functioning democracy (and blogosphere for that matter) is predicated on people being well informed of facts, differing opinions and views, and history. Democracy gone mad undermined Athens as a ancient capital city of Hellenistic times; democracy gone mad killed Socrates; and democracy gone mad gave us people like Robespierre and the Reign of Terror.
You know in my book lobbying to get votes on bills to go you your way is as criminal as changing your vote for moneys received. So when people blame the financial “industry” they are mostly correct. So from some people at the IMF:
“A recent study by Mian, Sufi and Trebbi (forthcoming) shows, for example, that constituent and special interests theories explain voting on key bills, such as the American Housing Rescue and Foreclosure Prevention Act of 2008 and the Emergency Economic Stabilization Act of 2008, that were passed as policy responses to the crisis.
A number of news articles have reported anecdotal evidence that, in the run up to the crisis, large financial institutions were strongly lobbying against certain proposed legal changes and prevented a tightening of regulations that might have contained reckless lending practices. For example, the Wall Street Journal reported on 31 December 2007 that Ameriquest Mortgage and Countrywide Financial spent millions of dollars in political donations, campaign contributions, and lobbying activities from 2002 through 2006 to defeat anti-predatory-lending legislation.”
See the thing is that the crises happened because of corruption within our politicians and their enablers the bankers.
Mark,
Take a gander at Taibbi’s article of 3/31/10 over at Rolling Stone. You might want to reconsider Mr. Dimon’s business model. C-YA
mark:
>> There is plenty of culpability to go around, and people need to realize that as Cassandra states so eloquently in that post.
I just read her article and comments. It’s an interesting one.
I’m afraid that instead of contracting the US economy and decreasing the living standards of the US population, the US elite could choose starting a war.
And I don’t like that solution. So, if war is outcome of the credit boom, the latter is unwarranted in my opinion.
“13 Bankers” has only been out for a day or so & already Mr Dimon’s started the lobbying campaign against it ?
Mr. Dimon’s take on the Heroic Enterprise claptrap is not only tiresome and self-serving, but inaccurate.
Large enterprises don’t create novel technology, they buy it. And that means Mergers and Acquisitions, and guess who was named the M&A Bank of the Year by Acquisitions Monthly magazine? That’s a fact, not a sendup.
M&A destroys value. It disrupts operations, sells off productive assets for a fraction of their value, destroys morale, etc. Even the technology that’s often the object of the merger gets lost, misused, or simply held until it’s no longer any use.
It’s been 13 years since The Synergy Trap by Mark Sirower was published, and the powers that be haven’t learned M&A only benefits the dealmakers and those who finance them. The rest of us are the victims that pick up the pieces.
Dimon is a liar. Some points:
– MNC’s spread their banking and finance needs around. They do NOT use just one ‘GloboBank’ to raise capital, advise on M&A, provide trade finance, transactional banking services, etc. The selection decision is often decentralised to operating subs in individual countries. To even suggest otherwise is laughable-Dimon himself knows better (believe Simon Johnson/James Kwak covered this very point in their blog with analysis some months back in ’09)
– as Yves notes, large co’s do not drive employment-in fact, they drive profitablility by shedding workers. Look at AT&T over the last fifteen years. Employment grows at the other end of the scale-from small businesses or start ups.
– Large co’s ‘innovate’ by buying small ones/start-ups mentioned above. Many global co’s have an explicit strategy in doing this, eg, Cisco has grown to its current size by acquiring hundreds of small co’s with patented technology (including several in Australia from where I write). In fact, this is the model for innovation of the entire BigPharma industry. What is the last significant internally generated technical breakthrough of IBM?
I am surprised that the Office of the CEO of JPM would publish something this feeble.
Even if EVERYTHING Felon Dimon said were true,(and even if his bank were not insolvent), the benefits he states would be outweighed by the systemic risks inherent in large “banks”. Or, to put it a different way, perhaps his arguments make sense for a manufacturer, or even a true bank, but not for a hedge fund with 90 Trillion dollars of off-exchange derivatives, like JPM. Led by a man who assures his daughter at bedtime that financial crises are “normal and to be exploited, er, expected,every 5 years or so. Now hug your Bernanke stuffed bear and go to sleep”.
Signed,
NotJamieDimon
Lee S.
Size matters? huh Jamie? Is that why you colluded with Sheila Bair to steal Washington Mutual?