Comments on: Jamie Dimon’s failure

By: Andujar

Andujar — Wed, 16 May 2012 05:12:21 +0000

What I want to know is who was on the other side of the $2billion in trades. Every article, including this one, focuses on the $2billion as a trading loss, but their is a flip side of that coin. Someone or some company is $2billion richer and who are they? The money just didn’t disappear. So how about some reporting about that? Who made out like a bandit?!

By: FifthDecade

FifthDecade — Wed, 16 May 2012 00:35:06 +0000

@Curmudgeon Isn’t it true that most of the proxy votes (that usually decide these things) had already been sent in before the loss was announced?

By: Bernanke

Bernanke — Tue, 15 May 2012 22:05:49 +0000

+1 to Ajax420.

By: Curmudgeon

Curmudgeon — Tue, 15 May 2012 18:30:17 +0000

Is it appropriate at this point in the discussion to note that shareholders approved Dimon’s retaining both chair and CEO titles, along with his $23m pay package?

By: GregHao

GregHao — Tue, 15 May 2012 02:42:07 +0000

@KenG – Ah, I see what you’re saying there. Ya, I guess she probably is largely responsible for executing Dimon’s directions so she’s not blameless but certainly she fell on the sword that was meant for Dimon.

By: melior

melior — Tue, 15 May 2012 01:44:01 +0000

@JayCM: “Seriously, when was the last time you heard of someone who couldn’t get a loan, who had a reasonable chance of repaying the loan?”

How about this month and every month since late 2008?
Here in the USA (on the planet I live on, anyway) commercial lending to small- and medium-sized businesses was the first casualty of the Bush recession. Alex420′s comment above reflects the same experience that I and every other (non-Fortune 500) business owner I know has been facing.

By: JayCM

JayCM — Tue, 15 May 2012 00:52:51 +0000

Chase didn’t loan the money out because they can’t. There are far more lendable funds than there are profitable investments, which is why the treasury rate is so low. Banks are making every prudent loan they can, and (still) more than a few stupid loans. Seriously, when was the last time you heard of someone who couldn’t get a loan, who had a reasonable chance of repaying the loan?

One root cause is the Boomers’ retirement funds. They have to put the money somewhere. Banks could just put it all on deposit at the Fed, but bankers don’t stay employed if they do that. Instead you get schemes like this.

Did anyone else notice how small the profit was? 5 billion profit on 200 billion capital is only 2.5%; not long ago T-bills paid better than this.

By: KenG_CA

KenG_CA — Mon, 14 May 2012 22:47:31 +0000

GregHao, I think that definition is for somebody who is being set up as the fall guy, and not totally responsible. If Drew hid any details of the bet (it wasn’t a hedge), or how it was implemented, then she’s not being thrown under the bus, but being held accountable (shocking, and somewhat unprecedented, but maybe Dimon’s different). If Dimon knew what was going on all the time (I don’t think that’s necessarily true), then yeah, he threw her under the bus. If Dimon is hiding his involvement in the mess, it will come out, and I’ll be shocked if he isn’t canned also – boards love to pretend they’re not rubber stamps.

I’m just glad somebody got fired for this, without Mitt Romney or Donald Trump being involved.

By: GregHao

GregHao — Mon, 14 May 2012 22:13:21 +0000

@KenG & FifthDecade – that’s the very definition of being thrown under the bus. I quite agree with both about WHY she was thrown under the bus but the fact remains that as of this morning, Dimon still had a job while Drew is “retired”.

@MrRFox & FifthDecade – Hopefully, you’re both right. But specifically, MrR, my implication was that no grand jury would be convened. That’s just how cynical I am.

By: MrRFox

MrRFox — Mon, 14 May 2012 20:04:54 +0000

@5thD – Dimon already has a scheduled retirement date, not all that far away, as I understand it. Maybe he’ll accelerate the timing. And hey, even John (‘What $800 million?’) Corzine hasn’t been charged with anything, nor has anyone at the firm.

@GregH – a grand jury could be formed to investigate the affair and they could compel her testimony – without counsel present – and no confidentiality agreement is going to stop them.

By: FifthDecade

FifthDecade — Mon, 14 May 2012 19:43:16 +0000

@GregHao The meltdown from 2008 is going to be bringing bodies to the surface for a long while yet, methinks. So many of these positions take a long time to unravel, and there’s clearly been an attempt by banks to mitigate the risks – but they will come out eventually. I don’t know if there have been any prosecutions for the crash, but if not, there should have been and there certainly shouldn’t be a time limit on how long cases can be prosecuted for either, since the lead times from action to final effects can be so long.

@KenG_CA I suspect what her ‘crime’ in Dimon’s eyes this time was in not being able to protect him from his own over-adventurousness: previously she had fixed things (like his poor strategies) for him but this was one ask too far. It will be interesting to see how long he stays in the job now, with no wingman/woman to pass the buck to… and perhaps an incredible ego that makes him think he was responsible for everything that worked, and everything that didn’t was someone else’s fault.

Whatever happened to people with ultimate power taking ultimate responsibility?

By: GregHao

GregHao — Mon, 14 May 2012 18:51:39 +0000

@MrRFox – I’m sure Drew’s got an iron-clad non-disclosure, non-disparaging clause as part of her severance (er.. I mean retirement) package. The thing is, as the Volcker Rule is still largely unimplemented, what parties might compel her to testify. And really, for me, that’s the issue here, what JPM’s CIO group has done should obviously be illegal but is not.

And if we’ve mostly closed the books on the 2008 financial meltdown without anybody going to jail, neither will this issue.

By: KenG_CA

KenG_CA — Mon, 14 May 2012 18:34:00 +0000

GregHao, I don’t know if it’s fair to say Drew was thrown under the bus. I don’t think she was fired for losing money, but more for the political damage she caused. Dimon whines about regulations, saying they are unnecesary, and now he has to eat $hit because he apparently didn’t know what was going on. I doubt that he would have made the statements he did had he fully understood what was happening. She made him look foolish, and that’s why she got the boot.

By: MrRFox

MrRFox — Mon, 14 May 2012 18:16:21 +0000

@GregH – OK, if she got a big enough going-away present to take the fall and keep her mouth shut, it might work. In my line of work we sometimes refer to this kind of thing as “obstruction of justice”, but doing it quick, before there is any mention of criminal investigation improves the odds of staying out of a cell. So does being from the right tribe and being a big political donor.

Have to wonder if any board can rein-in a superstar CEO of Dimon’s sort. They get the run of things until they step on a big-enough landmine.

By: GregHao

GregHao — Mon, 14 May 2012 17:36:38 +0000

@MrRFox – Felix speculates in the piece already, Dimon is secure enough in his position (possibly with his “Fortress Balance Sheet”) that he can afford to throw Drew under the bus and draw a line. He can point to lines about how Drew never met a risk she didn’t like, etc etc.

But I do have a question for those much learned than me, isn’t the job of the Board of Directors to keep CEOs in check? I know expecting BoDs to exert any modicum of control is a quaint and outdated idea but surely that is the answer to Felix’s question of who the CEO’s risk managers ought to be?