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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.