Counterparties

By Ben Walsh
April 6, 2012

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Jamie Dimon’s annual letter to shareholders was released late yesterday, capping a year when the JPMorgan Chairman and CEO seamlessly transitioned from reveling in his status as the White House’sfavorite banker to a self-appointed role as a critic of both bank regulation and anti-bank rhetoric.

The letter itself is remarkable, not just for its ability to inspire Jim Cramer to break into a fit of sober rationality, but also for the precision of its hubris. The first sentences mirror the arc of the full 39 pages:

Your company earned a record $19.0 billion in 2011, up 9% from the record earnings of $17.4 billion in 2010.

Our return on tangible equity for 2011 was 15% — the same as last year. Relative to our competitors and given the prevailing economic environment, this is a good result. On an absolute and static basis, we believe that our earnings should be $23 billion – $24 billion. The main reason for the difference between what we are earning and what we should be earning continues to be high costs and losses in mortgage and mortgage-related issues.

What defines the letter is the whiplash it imparts as it moves from reciting the bank’s record financial performance (for which Dimon got paid $23 million last year) to detailing how much better things would be if the government just left JPMorgan alone:

As a result of Dodd-Frank, we now have multiple regulatory agencies with overlapping rules and oversight responsibilities. Although the [Financial Stability Oversight Council] was created, it is proving to be too weak to effectively manage the overlap and complexity. We have hundreds of rules, many of which are uncoordinated and inconsistent with each other. While legislation obviously is political, we now have allowed regulation to become politicized, which we believe will likely lead to some bad outcomes.

This paragraph precedes the defining chart of the letter, which is meant to demonstrate the “complexity and confusion” of regulatory reform and shows each of JPMorgan’s business units connected to their former regulators and new regulators. It is accurate to say that the regulation of systemically-important financial institutions is complex, but JPMorgan, America’s largest bank by assets, is facing this complexity quite profitably. As Dimon himself writes, any profit left untapped is due to the self-inflicted wounds of the mortgage crisis. — Ben Walsh

With that, on to today’s links.

Regulations
How opinions scooped the news on the JOBS Act’s problems - Reuters
Ex-Con Man Says JOBS Law Makes Guys Like Him Rich - Bloomberg

Politcking
“Friends of Traditional Banking” Super PAC wants to stop Congress from “kicking traditional banks in the teeth” - American Banker

EU Mess
Rogoff: without “profound” economic and political changes, the euro will be gone by the end of the decade - Project Syndicate

Quotable
Jamie Dimon: We had a “collective brain freeze” on housing - WSJ

Home Ec
The American Century in consumer spending - The Atlantic

Wonks
The importance of fiscal, not monetary, policy to a US recovery - New Economic Perspectives

Facebook
Facebook will not be going public on the NYSE - NYT

TBTF
Berkshire Hathaway may not be deemed “systemically important” - Bloomberg

Easing Ain’t Easy
Why QE is being mis-sold - FT Alphaville

Old Normal
“Until the early 20th century, holding a mortgage came with a stigma.” - WSJ

Your Retirement Plans
30 years after the 401(k) was created, Americans aren’t prepared to manage their money - WashPost

Takedowns
NYT journalist “totally wastes chance to live like a billionaire for a day” - Gawker

Calm Down
Ezra Klein: Why I’m not particularly worried about the budget deficit - Bloomberg

Shrinking Endowments
Whither the Yale model? - Reuters

Hackgate
Murdoch’s Sky News admits to hacking man’s emails in “the public interest” - The Guardian

Horrible
Greek protesters clash with police after protester kills himself outside of parliament - BBC

Be Afraid
Google begins testing its new “augmented reality” glasses - NYTimes

Growth Industries
America’s heavily-fortified compound business is booming  - WSJ

Remuneration
Morgan Stanley’s CEO got paid about the same as a dead lady’s cat - Marketwatch

Reuters Opinion
Statecraft via Twitter - Chrystia Freeland
For Europe, it doesn’t get better - John Lloyd

Wonks
Stiglitz: The U.S. should stop trying to control the World Bank selection process - Project Syndicate

It’s Academic
“The Book That Drove Them Crazy” – Remembering Allan Bloom’s “The Closing of the American Mind” - Weekly Standard

Housing
If asking prices are any indication, home prices are about to rise - Trulia

Comments
2 comments so far

“We need to write a letter to the next generation that says, ‘Never forget: 80% loan to value and verify appropriate income.’” (Jamie Dimon, JP Morgan boss)

Um … No, not that, Diamond Jim – We Boomers need to write a letter to the next generation in which we apologize for failing to do those things ourselves, and for sticking them with the bill to correct the consequences of our self-indulgence.

Posted by MrRFox | Report as abusive

We need to build a memorial to unbridled greed and hubris – five heads on sticks outside the NY Fed: Greenspan’s, Geithner’s, Paulson’s, Blankfein’s and Dimon’s.

Posted by Woltmann | Report as abusive
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