Counterparties: The knives come out for Jamie Dimon
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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:
Wonks
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
TBTF
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
JPMorgan
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
Demographics
Brooklyn is getting way whiter – Daily Intel
Awesome
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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What I would like to know is why they decided to realize their losses and begin to unwind them rather than double down. It would be interesting to know what to look for in other situations that would lead to worse results.
I forget, was there mention of the Pew survey in March?
http://www.pewsocialtrends.org/2012/03/1 5/the-boomerang-generation/1/
What I find most intriguing is the rise of multi-generational households, with 22% of younger adults (25-34) adopting that lifestyle compared with 11% in the early 1980s.
While the decision may be driven by economic necessity, the concept that adults should be “independent” rather than “mutually supportive” is perhaps misguided?
Imagine a young couple with one or two children, and a grandmother living on her own. Living independently, they rent/own two properties, pay $10k/child for day care, eat comparatively expensive “convenience” meals regularly rather than cooking from scratch… The young couple can feed and house Grandma in exchange for child care and help around the house — and possibly save money in the process. And Grandma certainly saves money by that arrangement.
Perhaps we are once again moving in the right direction?
Should Damon get a pass on Madoff?
Johnny Damon got taken to the cleaners by Madoff. Had all of his lifetime savings invested in the Ponzi scheme. Not wise, but he doesn’t merit additional criticism for it.