Counterparties: The knives come out for Jamie Dimon

June 12, 2012

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If Jamie Dimon is worried about being attacked by Congress tomorrow over JPMorgan’s spectacularly failed hedges, he should be equally concerned about his relationship with current and former bank employees. Bloomberg and the WSJ both have pieces this morning that detail how the bank spent years dismissing internal warnings about the riskiness of its risk management division.

Bloomberg’s sources are so critical of Dimon that the piece can either be read as palace intrigue, with JPM’ers gunning for Dimon, or as post hoc ass-covering. Dimon received warnings about the chief investment office’s increasingly risky behavior from “some of his most senior advisers, including the heads of the investment bank.”

Bloomberg buries the names, but the “We warned you, Jamie” camp now reportedly includes: Bill Winters and Steven Black, the former co-heads of the investment bank; James “Jes” Staley, who ran asset management and now leads the investment bank; and the current chief risk officer, John Hogan. (JPMorgan denied that any of them complained about specific CIO risks.)

While Jamie Dimon tackles apparent dissent from inside his own company, David Cay Johnston laments JPMorgan’s “hedginess”. Reuters suggests the SEC could build its case around the bank’s failure to disclose changes to its risk-measuring methods. And Daniel Indiviglio has a solution: JPMorgan bonuses should be tied to a synthetic bond “linked to the fate of the bad hedges.”

Here’s Jamie Dimon’s full prepared remarks for tomorrow’s testimony. For everything else you need to know about the JPMorgan scandal, check out our JPMorgan link collection. – Ryan McCarthy

On to today’s links:

A “short-time” work-sharing program for the unemployed could pay for itself – Barry Eichengreen
Data shows “profound uncertainty” of the death penalty’s effect on murder rates – Bloomberg View
The size of the Nobel Prize is shrinking – Nobel
Milton Friedman, master of the aphorism – Conversable Economist

Have we arrived at a financial singularity? – Finance Addict

Financial Arcana
Insured intangible collateral: How banks can reduce capital requirements for loans backed by patents, logos and recipes – FT Alphaville

11 wonky questions for Dimon – Occupy the SEC
Once a favorite of the Obama White House, Jamie Dimon is now reliant on Republican goodwill – Bloomberg

Brooklyn is getting way whiter – Daily Intel

The Wire: The Musical – Funny or Die

EU Mess
German bonds are risk-free, but its CDS are riskier than Verizon and Pfizer – Sober Look


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