Felix Salmon

How Jamie Dimon sees himself

Felix Salmon
Jul 22, 2010 16:27 UTC


Well done to Jessica Pressler for picking up on this astonishing photo from the house that Jamie Dimon is still trying to sell in Chicago; it’s now listed at $9.5 million, down from an original asking price of $13.5 million. That’s less than $1.2 million per bedroom: a bargain!

I’m trying to work out why Dimon would force his house guests to look at this picture every time they descend the stairs. The rest of the photos reveal Dimon to be decidedly conservative when it comes to his living style, in a high-plutocrat sort of way: lots of grand columns and overstuffed armchairs, that sort of thing. And, of course, a heavy bag in the gym.

But the portrait in the stairwell — that’s something else. This is the polar opposite of the smiling vacation photo on the mantlepiece: in fact, there’s no face at all, just sheer power and authority, presented as iconically as possible.

Dimon is rich and powerful, of course, but he’s careful with his public image, which is human and collegial. He’s not a bully. Weirdly, his private face seems to be more humorless and forbidding than his public face. Which just goes to reinforce the general impression that Joe Evangelisti, Dimon’s PR head, is doing a very good job.


In all likelihood, this isn’t Dimon’s stuff. Houses in this price tier will always be “staged” by a professional, who goes out and finds loaner art and furniture likely to appeal to prospective buyers.)

Posted by AEinCH | Report as abusive

Uncle Sam spends $3.5 billion buying a subprime lender

Felix Salmon
Jul 22, 2010 15:37 UTC

Quite aside from the costs of rescuing GM itself, the U.S. government spent a whopping $17.2 billion bailing out GM’s subprime lender, GMAC. It’s never going to get repaid in full: at the moment estimates of total losses on that deal are running at about the $6 billion mark.

So the government knows full well how dangerous and costly it can be for GM to own a subprime lender. What’s more, the government currently controls GM, holding an equity stake of about 61% of the company.

So what on earth is GM doing spending $3.5 billion on buying a subprime lender? It’s not enough to simply bail them out, it seems: the government is now using taxpayer money to buy out AmeriCredit’s shareholders at a 24% premium to Wednesday’s closing price.

I do appreciate that GM needs to be able to sell cars to people with bad credit. But there’s no indication that GM is a good owner of subprime lenders — quite the opposite. AmeriCredit is already working with thousands of GM dealers, and the two could easily start rolling out GM-branded products across GM’s dealer network even without an acquisition.

I’m suspicious at the speed with which GM is moving back into the world of financial services: I’m not sure it bodes well for the company, which really should be sticking to building cars, keeping its credit operations outsourced.

If GM wants to build a strategic relationship with AmeriCredit, that’s fine, and anybody who’s bullish on GM would be more than welcome to buy AmeriCredit shares at the same time. But I see no great upside — and lots of danger — in bundling the two. And in any case the last person who should spend $3.5 billion on a subprime lender is anybody at the Treasury.


GMAC got bailed out because of its mortgage business.

Posted by topofeatureAM | Report as abusive

Don’t worry yet about credit card fees

Felix Salmon
Jul 22, 2010 14:53 UTC

It stands to reason that, just as overdraft fees are likely to be replaced with checking fees, something similar is going to happen with credit cards. But Ylan Mui overstretches, today, in her story saying that it’s already happening:

The new rules are estimated to cost the industry at least $12 billion annually, according to law firm Morrison & Foerster, and issuers have long warned that customers in good standing could wind up paying the bill.

“A lot of people thought they were blowing smoke, but they were spot on,” said John Ulzheimer, head of consumer education for Credit.com. “Now something has to give.”

The story is pegged to (but doesn’t link to) a new survey from the Pew Charitable Trusts, which says right there on its first page that “predictions that legal reform would stimulate the growth of new fees have so far not materialized”. Yet somehow the WaPo headline becomes “As credit card holders play it safe, issuers increase non-penalty service fees”.

The fact is that some fees are rapidly disappearing entirely: Pew notes that “less than 25 percent of all cards examined had an overlimit fee, which is down from more than 80 percent of cards in July 2009.

As for the standard penalty fee for late payment, it’s currently $39 (unchanged), but will drop to $25 in August, thanks to the CARD act.

I’m going to trust the Pew survey, here, rather than the quote from the guy from Credit.com, who in any case is quoted later on in the story saying that thanks to “a major competitive dynamic”, card companies won’t be able to charge new fees to strong customers.

And I don’t like the way that the story includes things like this:

About 14 percent of bank credit cards have annual fees, about the same as last year. But the median annual fee for the 12 largest banks’ cards rose 18 percent, to $59, over the past year.

The median annual fee for the 12 largest banks’ credit cards was zero last year, it’s zero this year, and it will be zero next year. If you take the 14% of cards which do charge a fee, then that fee has risen from $50 to $59. But it’s clearly very easy to avoid that fee, if you’re so inclined: just switch to one of the 86% of cards which don’t charge a fee.

My feeling is that the WaPo piece is simply wrong, and that we’re not going to see increased fees on credit cards. Instead, we’re much more likely to see decreased rewards. High spenders who pay their balance in full every month are still profitable for card companies, especially if those card companies don’t pay them back a lot in the form of rebates, miles, and the like. It’s true that people with bad credit aren’t going to be as profitable for the banks as they were before. But it’s not at all obvious that the banks are going to be able to make up those profits with higher fees on people with good credit.


A debit card works like a check. You better have the money in your checking account when you use it because it will (in most cases) be debited within that banking day or the next day. Money in your savings will not be the account your debit card is linked to and is a separate account. A credit card is just that-credit. You pay on that usually monthly and unless you pay the entire amount due, will accrue interest on the amount due. How much interest depends on the agreement you have with the credit card company.


Felix Salmon
Jul 22, 2010 05:20 UTC

Chittum on Kneale — CJR

Litton/Goldman do the right thing — Shame the Banks

“Keep your Big Apple… We’ll have a tangerine” Ymerodraeth State of Mind — YouTube

I love ProPublica’s new “Republish” button — ProPublica


Shame the Banks comments are very interesting if true.

Congrats for helping one family.

Posted by hsvkitty | Report as abusive

Kneale, craven

Felix Salmon
Jul 21, 2010 23:39 UTC

You won’t find many defenders of Dennis Kneale’s philosophy of journalism on Twitter or even among his colleagues in the CNBC studio.

I spent a large chunk of this afternoon debating Kneale on Twitter, and for a while afterwards I thought that time was wasted, since no one had evinced any sympathy for his position at all. But on thinking about it I’ve decided that actually Kneale is being reasonably brave and transparent here, and coming out and saying in public things which many journalists are loathe even to admit in private.

The proximate cause of the discussion was the publication by Peter Lauria of a voicemail that Sumner Redstone, the owner of Viacom, left for him. Redstone wanted to know who had leaked a story to Lauria about Redstone and “a sexy but talentless all-girl band;” he told Lauria, on the voicemail, that “you will be well-rewarded and well-protected” for giving up the source.

There are basically four options that a journalist has on getting a voicemail like that:

  1. Flattered by the personal attention from a billionaire mogul, you can phone him back, give him exactly what he wants, and get some kind of quid pro quo down the line.
  2. Embarrassed for an aging billionaire, you can let the message slide, and give the mogul a pass.
  3. Realizing you have a minor scoop on your hands, you can publish the voicemail.
  4. Realizing you have a potential major scoop on your hands, you can play along, phone Redstone back, and ask him how much he’s willing to pay for the name of the source, taping your conversation all the while.

Lauria is, in Kneale’s words, a “beast” (which is also the name of the site he works for), but Lauria didn’t go all the way: he stopped short of #4 and went with #3 instead.

But that was still far too much for Kneale, who assumes that Redstone considered the message to be off the record, and on those grounds reckons that Lauria is at fault for publishing it. “He may never again be able to have lunch at Michael’s, the midtown Manhattan media mecca,” he writes, rather bathetically.

Of course Lauria violated no confidences here, and really just did his job: if you leave a voicemail for a journalist with no indication that it’s in confidence, and that voicemail is newsworthy, then the journalist is pretty much obliged to publish it.

But Kneale looks at things a different way, and even admits to covering up for Redstone himself, in the past, when Redstone violated SEC rules in an interview at Forbes. “We knew he was off-the-reservation when he did it, so we gave him a pass, didn’t use it,” he tweeted, before backtracking a little on his original statement.

Kneale reveals himself to be a consummate player of the game, saying that it’s “unwise” to “burn sources” (by which he means the likes of Redstone, not the likes of Lauria’s original source). “Sumner will NEVER again give Lauria a free scoop now,” tweets Kneale, who has internalized the idea that if you’re nice to moguls, then moguls will be nice to you. It’s an integral part of the CNBC formula, which regularly gets CEOs onto TV so that it can flatter them by throwing them softball questions and making it seem as though the markets really care what they say. He writes that companies “all the time ‘reward’ us–help me out on this one, i’ll give you a scoop on that one. commonplace.” And he’s fine with that.

But in the era of the Daily Beast and Gawker and even FT Alphaville, not everybody plays that game any more, and the public is much better served for it. Kneale might be happy to reveal that he has frequently been asked by CEOs to burn his own sources, but he’s not going to tell us who they are: he feels it’s his job to keep such juicy information from the public, rather than reveal it to them. And the fact is that he’s in pretty illustrious company.

Once you start working your way up the masthead, and hanging out with moguls at places like Davos and Aspen, this tends to happen to you: you get more comfortable, and less hungry; you think that access is more important than actual stories. Clearly Kneale has reached that place, and in a way I’m impressed that he’s happy to admit it. Most of the swanning-around class of journalists are delusional enough that they’d never do that.

So let’s give three cheers for Peter Lauria, and his colleagues in the blogosphere, who are happy to break unspoken rules which don’t benefit the public if they know there’s a story worth telling. There will always be lots of journalists who are expert at playing the game, and schmoozing important sources. That’s all well and good. But we need feistier hacks as well. And where Kneale goes wrong, with his greybeard act, is by pretending that we don’t, and that the world would be a better place if everybody played the game. It wouldn’t. We need the likes of Lauria; in fact, we need them much more than we need a dozen Dennis Kneales.

Kneale wants to ask what counts as necessary and what counts as gratuitous. Necessary is journalists serving their readers with scoops; gratuitous is 99% of what appears on CNBC, and 100% of what appears when Kneale is on screen. (I’m on the gratuitous side of the line as well.) Good journalists can be found on both sides of the line, but it’s the hungry newsbreakers who are important. The rest of us might be interesting, or entertaining, but we should never be the real soul of any news organization.


Still, it can come back to bite you. I am still persona non grata at a few Bermuda firms after writing this:

http://alephblog.com/2007/05/16/back-fro m-bermuda/

My blog had maybe 10% of the reach that it has today, but when one or two in Bermuda read it, it was passed around like wildfire on the Rock. It embarrassed my sponsor, a genuinely good guy, immensely. For his sake, I wish I hadn’t written it. That said, everything written there was true.

With great power comes great responsibility. I learned a lot that day.

Posted by DavidMerkel | Report as abusive

Summer book giveaway

Felix Salmon
Jul 21, 2010 19:11 UTC

Update: All gone. Lippman’s a machine!

Some of you might remember my holiday book giveaway from last December, which was a great success. So I’m taking advantage of the presence here in the office of Daniel Lippman, who is going to help distribute the books that have accumulated around my desk since then. Some I’ve read, some are duplicates, some I just know I’ll never read, and all of them will I’m sure find much better homes elsewhere than gathering dust at 3 Times Square.

If you want one of these books, email Dan on felixsalmonbooks@gmail.com, and make sure to include your mailing address. I suspect it’s going to be first-come-first-served, but that’s ultimately up to Dan. Happy summer reading! I’ll just note that pretty much all of these books have subtitles. Well done to Roger Lowenstein, John Stephenson, and David Harvey for avoiding them. And Adam Smith, too.

Reading Minds and Markets: Minimizing Risk and Maximizing Returns in a Volatile Global Marketplace by Jack Ablin

Bonds Now!: Making Money in the New Fixed Income Landscape by Marilyn Cohen and Chris Malburg

Accelerating out of the Great Recession: How to Win in a Slow-Growth Economy by David Rhodes and Daniel Stelter

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone by David Carey and John E. Morris

The Plundered Planet: Why We Must–and How We Can–Manage Nature for Global Prosperity by Paul Collier

The End of the Free Market: Who Wins the War Between States and Corporations? by Ian Bremmer

Confidence Game: How a Hedge Fund Manager Called Wall Street’s Bluff by Christine S. Richard

ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism by Yves Smith

The Theory of Moral Sentiments (Penguin Classics) by Adam Smith

The End of Wall Street by Roger Lowenstein

Superconnect: The Power of Networks and the Strength of Weak Links by Richard Koch and Greg Lockwood

Fixing Failed States: A Framework for Rebuilding a Fractured World by Ashraf Ghani and Clare Lockhart

3 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson and James Kwak

Profiting from the World’s Economic Crisis: Finding Investment Opportunities by Tracking Global Market Trends by Bud Conrad

Buy, Close, Move In!: How to Navigate the New World of Real Estate–Safely and Profitably–and End Up with the Home of Your Dreams by Ilyce Glink

The Wisdom of Bees: What the Hive Can Teach Business about Leadership, Efficiency, and Growth by Michael O’Malley

Big Brown: The Untold Story of UPS by Greg Niemann

The Little Book of Commodity Investing by John Stephenson

The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments by Charles Goyette

Information and Learning in Markets: The Impact of Market Microstructure by Xavier Vives

Half the Sky: Turning Oppression into Opportunity for Women Worldwide by Nicholas D. Kristof and Sheryl WuDunn

How the Economy Works: Confidence, Crashes and Self-Fulfilling Prophecies by Robert E.A. Farmer

The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History by Gregory Zuckerman

The Company of Strangers: A Natural History of Economic Life by Paul Seabright

The 1% Windfall: How Successful Companies Use Price to Profit and Grow by Rafi Mohammed

The Way We’re Working Isn’t Working: The Four Forgotten Needs That Energize Great Performance by Tony Schwartz

Staying Power: Six Enduring Principles for Managing Strategy and Innovation in an Uncertain World by Michael A. Cusumano

The Last of the Imperious Rich: Lehman Brothers, 1844-2008 by Peter Chapman

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

The Squam Lake Report: Fixing the Financial System by various authors

The Fat Tail: The Power of Political Knowledge for Strategic Investing by Ian Bremmer and Preston Keat

The Betrayal of American Prosperity: Free Market Delusions, America’s Decline, and How We Must Compete in the Post-Dollar Era by Clyde Prestowitz

Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown by David Wiedemer, Robert A. Wiedemer and Cindy Spitzer

The Enigma of Capital and the Crises of Capitalism by David Harvey

The Making of a Market Guru: Forbes Presents 25 Years of Ken Fisher edited by Aaron Anderson

Chasing Stars: The Myth of Talent and the Portability of Performance by Boris Groysberg

Banking on the Future: The Fall and Rise of Central Banking by Howard Davies and David Green

Balancing the Banks: Global Lessons from the Financial Crisis by Mathias Dewatripont, Jean-Charles Rochet and Jean Tirole


Book arrived today. Thanks again!

Posted by awt | Report as abusive

Linkrot at the AP

Felix Salmon
Jul 21, 2010 18:25 UTC

Tom Laskawy found something rather ominous today: whenever he looked for an AP article more than 30 days old, it had disappeared!

I did a quick search on old blog entries of my own which cited the AP. There was the famous tally of Tim Geithner’s phone calls — follow that link, and you get this:


Or there was the FOIA request on cash-for-clunkers:


But the articles do still exist online: the former is here, for instance, and the latter is here. And my link to an AP report in this post still works. Interestingly, all three of those links are at television stations (KIDK, MSNBC, and ABC, respectively.)

I’m not sure what’s going on here, but I can assure you that if you link to an article at Reuters.com which is freely available today, it will always be freely available in the future. We don’t believe in linkrot, or suddenly putting up paywalls on content which used to be free. I’m thinking that it’s worth drawing up a list of other news organizations willing to make a similar pledge. For most news stories, bloggers have a choice of whom to link to. And it would be nice, in such circumstances, to know which sites are reliable, and which ones aren’t.


ive had both hyperlinked headlines and quoted content changed as well…

Posted by rjs0 | Report as abusive

Loan-modification failure of the day

Felix Salmon
Jul 21, 2010 13:56 UTC

As of today, Treasury has started releasing a new set of datapoints with respect to its Making Home Affordable program. Look at page 5 of the monthly report on how the program is doing, and you’ll see a page detailing what they call the “disposition path” of the 194,056 trial mortgages which have been cancelled through April. Here’s the chart:


The first thing to note is that the enormous number of failed trials — to put the number in context, there were only 299,092 permanent modifications started through April — is not a sign of good news, where the borrowers have exited the trial by paying off their mortgage. That only happened 1.1% of the time.

Instead, depressingly, by far the most common reason for abandoning the HAMP trial is “Alternative Modification” (48.9%). Cue desperate Treasury spinning, in a press release entitled “Impact of Administration Efforts Seen in Signs Of House Price Stabilization and Increased Affordability”:

Nearly half of homeowners unable to enter a HAMP permanent modification enter an alternative modification with their servicer, and fewer than 10 percent of cancelled trials move to foreclosure sale.

Remember that in these cases the HAMP modification is not only subsidized by the government: it was also entered into, after enormous amounts of paperwork, by both the borrower and the servicer. It’s hardly credible that after going through that laborious process, both of them would happily tear up the agreed-upon modification and enter into something more mutually beneficial instead.

Rather, I see here evidence that the HAMP modifications are so weak and so unhelpful that there’s far too little incentive for borrowers and lenders to stay in them. And of course we know why that would be: such modifications almost never make a significant dent in the principal amount outstanding, and as a result homeowners who are underwater on their mortgage simply remain underwater on their mortgage, with the concomitant enormous probability of redefault.

As Ryan Avent put it on Monday, in the wake of atrocious numbers from the National Association of Home Builders,

A durable solution to the crisis in housing needed to involve an answer to the epidemic of negative equity and a meaningful labour market recovery. America has neither. And so the outlook for housing will be a bleak one for the foreseeable future.

Does Treasury grok this? There’s no indication that it does.


Grok it? They like it. Aristotle: You are what you repeatedly do. So with policy.

Posted by lambertstrether | Report as abusive


Felix Salmon
Jul 21, 2010 06:20 UTC

Flipboard is pretty amazing — All Things D, iTunes

How internet access is a license to print money for Time Warner Cable — Ars Technica

“I’ve learned to accept that I cannot be an A+ at everything every day… but I’ve also learned that I CAN be an A” — HuffPo

Chinese land values have increased by nearly 800% since 2003, with half that rise occurring over the past two years — Alphaville

A whole book demolishing dubious statistics? Cool! — Slate

Collier on what needs to happen in Afghanistan. Problem is, it won’t happen — NYT


“I’ve learned to accept that I cannot be an A+ at everything every day… but I’ve also learned that I CAN be an A”

This the inevitable result of Grade Inflation in some of our universities.

Posted by DonthelibertDem | Report as abusive