The JP Morgan apologists of CNBC

By Felix Salmon
September 29, 2013


I don’t know which producer at CNBC had the genius idea of asking Alex Pareene on to discuss Jamie Dimon with Dimon’s biggest cheerleaders, but the result was truly great television. What’s more, as Kevin Roose says, it illustrates “the divide between the finance media bubble and the normals” in an uncommonly stark and compelling manner.

The whole segment is well worth watching, but the tone is perfectly set at the very beginning:

Maria Bartiromo: Alex, to you first. Legal problems aside, JP Morgan remains one of the best, if not the best performing major bank in the world today. You believe the leader of that bank should step down?

Alex Pareene: I think that any time you’re looking at the greatest fine in the history of Wall Street regulation, it’s really worth asking should this guy stay in his job. In any other industry — I can’t think of another industry. If you managed a restaurant, and it got the biggest health department fine in the history of restaurants, no one would say “Yeah, but the restaurant’s making a lot of money. There’s only a little bit of poison in the food.”

This is a very strong point by Pareene — and it’s a point which was well taken by Barclays. When the UK bank was fined $450 million last year for its role in the Libor scandal, its CEO duly resigned. After all, a $450 million fine is prima facie evidence that the CEO really isn’t in control of his bank.

But $450 million is a rounding error with respect to the kind of fines that Dimon is now talking about paying — $4 billion, $11 billion, $20 billion, who knows where this will stop. Tim Fernholz has a good roundup of all the various things that JP Morgan is in trouble for; Libor manipulation is at #5 on his list of seven oustanding investigations — on top of another four settled investigations. If Libor manipulation alone was enough to mean the end of Bob Diamond, it’s hard to see how Jamie Dimon should be able to survive this tsunami of litigation.

Unless, it seems, you work for CNBC. In which case you just ignore Pareene’s question, and get straight onto the important stuff:

Duff McDonald: It’s preposterous. The stock’s touching a ten-year high. It’s a cash-generating machine.

Maria Bartiromo: Should we talk about the financial strength of JP Morgan? The company continues to churn out tens of billions of dollars in earnings and hundreds of billions of dollars in revenue. How do you criticize that?

This view — that profits cleanse all sins, and that so long as you’re making money, nothing else matters — is not normally expressed quite as explicitly as it was here. After all, there are licit and illicit ways of making money, and surely if your profits fall into the latter category, you should not be able to remain comfortably ensconced as a celebrated captain of industry. Besides, banks shouldn’t be obscenely profitable: they’re intermediaries, and in an efficient economy their profits should be quite easily competed away. When bank profits are high, that’s a sign that the bank in question is extracting rents from the economy, rather than helping it to grow.

The rest of the interview is a glorious exercise in watching CNBC anchors simply implode in disbelief when faced with the idea that JP Morgan in general, and Jamie Dimon in particular, might be anything other than a glorious icon of capitalist success. In the world of CNBC, the stock chart tells you everything you need to know, while the New York Times is a highly untrustworthy organ of dissent and disinformation.

Eventually, Bartiromo asks Pareene, with a straight face, who would be the best CEO of JP Morgan “from a shareholder perspective”. Since, clearly, the shareholder perspective is the only one that matters. Except, of course, it isn’t. JP Morgan’s balance sheet shows assets of $2.4 trillion and liabilities of $2.2 trillion, leaving $200 billion in total stockholder equity. Sure, the shareholders matter — but even in terms of the balance sheet they only matter about 8.6%. And in terms of the systemic importance of JP Morgan to the nation as a whole, its shareholders matter even less. The country was seriously damaged by JP Morgan’s lies and misrepresentations about its mortgages — much more than it would be damaged if the share price went down instead of up. And the public has every reason to want the individuals running JP Morgan to be held accountable when it gets into serious regulatory trouble over and over again.

Right now, the banks aren’t lending money to homeowners — the government remains the only game in town, when it comes to mortgages, and that isn’t healthy at all. JP Morgan’s shareholders might be happy with Jamie Dimon, but that doesn’t mean the rest of us should be. Jesse Eisinger wants the banks executives to face personal charges; whether that happens or not, it still behooves them to take responsibility for the long series of egregious errors that JP Morgan has made. Shareholders might not want to see Dimon go. But if JP Morgan does end up paying an 11-digit fine, then resignation would surely be the honorable thing to do.

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Comments
33 comments so far

Bullseye, Felix.

Now, how about Stuart Gulliver?

Posted by crocodilechuck | Report as abusive

Very good article – I’ve often thought the CNBC anchors were a little too spaced out most of the time.

This might be of further interest for those looking at ways to identify potentially rogue CEOs:
http://www.voxeu.org/article/where-uneth ical-corporate-culture-comes

Posted by FifthDecade | Report as abusive

This was absolutely spot on. This should be required reading for all MBA and financial students as well as, after punishment is meted out, put into the bank’s annual report! Especially this: “The country was seriously damaged by JP Morgan’s lies and misrepresentations about its mortgages — much more than it would be damaged if the share price went down instead of up. And the public has every reason to want the individuals running JP Morgan to be held accountable when it gets into serious regulatory trouble over and over again.”

Posted by Michael_Emmett | Report as abusive

FifthDecade:
CNBC’s whole rationale is the fluffing of Wall Street. Haven’t you been paying attention these past 15 years?

Posted by PhilPerspective | Report as abusive

Also, too, J.P. Morgan has gotten in trouble for money laundering. Is there a crime J.P. Morgan hasn’t committed?

Posted by PhilPerspective | Report as abusive

This is the most appalling bit of video I’ve seen in quite some time. Bubble indeed.

Posted by DanMitchell | Report as abusive

Agree with everyone thus far in the Comments and underscore the point of this being an excellent article on a very important point.

We’re still not so different from our medieval brethren where the Catholic Church had a term for such behaviors and means for dealing with them; Indulgences.

Posted by Twinkbait | Report as abusive

CNBC: The Buy-Side Network!

Posted by masaccio | Report as abusive

Who is the idiot? http://youtu.be/dQbTPhTMdpQ

Posted by LeeAdler | Report as abusive

Oh Felix, what did you expect? Baritiroma, a Brooklyn guttersnipe who still talks as if she has marbles in her mouth, is a notorious suck-up to Wall Street. Her “analysis” is nearly always feeble and a parroting of conventional wisdom. The other dude is a zero.

As for the poor guest who appeared on the set – I feel for him. He spoke truth and they — literally – laughed at him.

Posted by truthiskeen | Report as abusive

Why why why is anyone with two brain cells .. still watching any business shows on cable .. they all suck up to Wall Street.. they would suck up and apologize for Goebbels if he had an office in lower Manhattan with ties to JP Morgan or Goldman. These gnat brained financials or corporate creeps have ruined the system through greed and amoral .. unethical short SIGHTED behavior. Maria B.. Steve Leisman et al .. make my ears bleed .. how can anyone stand listening to them. Those morons laugh at anyone who is not an ass kissing robot for the status quo. Anyone going on their infotaintment shows… deserves to be kicked around .. stop feeding the CNBC beast and it will go away as it should.

Posted by borispastrynack | Report as abusive

Been visiting with our state legislators here….looking into putting the death penalty on the table for banker ceo, board members for fraud, and or mismanagement that results in anyone’s loss of home, or retirement or 401k.

Jamie Dimond should be on death row and all 6 major money center banks should be broken up into as many entities as needed that would make them so small they could no longer do international “deals” or any deal that would threaten the society they are “allowed” to operate in. Its a wonder some of the folks who have committed suicide over their family losses didn’t take the Dimonds of the world out with them. Kind of a package deal.

Posted by bricko12 | Report as abusive

I loved the CNBC folks, dismissing the allegations and praising Dimon for “settling the allegations as painlessly as possible”.
Alex Pareene was understandably flummoxed when they asked about the corruption charges. Sometimes, when debating folks, you gotta be prepared to go back to basics. In those times, you have to break out your high school civics lessons and talk about the simple things like “Why regulation is imporant” and “why corruption is bad”.

Posted by Garoko | Report as abusive

Just about everyone I speak with thinks I’m an idiot. Back a couple of years ago, when I finally realized that QE and ZIRP weren’t about the nations economic well being I decided to sell my equity positions because I didn’t want to own stocks on MORAL grounds.

I wonder if I’m the only person out there who has the capacity to own stocks but just refuses to participate any longer.

Posted by Missinginaction | Report as abusive

Yes yes yes. The obscene thing about the financial industry is that it JUST SO HAPPENS that the thing they’re handling is money. In a way, it’s a coincidence. These people are no more brilliant than those who handle, say, beans, but who wants to fill their pockets with beans as a perk of the job?

Posted by MrCarlin | Report as abusive

I think the Disconnect becomes clear when Pareene says that perhaps Dimon certainly “makes money for shareholders.” If he were arguing that Dimon loses money for shareholders (because his business judgement is bad, because he fosters corruption that leads for fines, or simply because he attracts negative PR that repels customers and attacts onerous regulation/fines he’d be able to answer Bartiromo inquiry. Going with his perspective (i.e. that a bigger, societal, interest is at stake), then, I’d have to ask him “by what mechanism” is he arguing that societal interest should be implemented? Should the President call the board and order them to abandon their fiduciary duty to shareholders? Should regulators systematically harrass JPM unless they change CEOs? I don’t think so. I agree with eliminating too big to fail institutions, but not with “Bills of Attainder” implicit in Pareene’s perspective.

Posted by Brynjo | Report as abusive

This is basically a clash between insider instrumentalists who think of a billion-dollar fine as no more than a great big parking ticket (pay it and forget it, as long as you can afford it), and an outsider moralist who thinks it’s evidence of massive moral turpitude. At the end, the moralist switches to instrumentalism when he points out what a PR disaster it is, but the clear implication is that PR disasters are only a problem if you’re not making money. In any case, his heart obviously isn’t in that argument, it’s in the bit about the food being only a little poisoned.

Posted by JohnCowan | Report as abusive

No, no, CNBC just doesn’t understand the lingo.

When they hear that JP Morgan must pay “fines”, CNBC thinks that this means that the authorities are saying that JP Morgan is doing “fine”!

It’s like winning medals, except you have to pay several billion dollars for the honor.

I’m sure they’ll clear that up.

Posted by En_Buenora | Report as abusive

Missinginaction

I’m right there with you, brother.
-rufus

Posted by rufusmcb | Report as abusive

“Sure they’ve had there regulatory issues” lol.

Posted by cyberprunes | Report as abusive

There is only one “morality” people like Jamie Dimon espouse, and that’s the morality of making money. If it makes money, it’s “moral.” He’ll never resign.

Posted by liberalrob | Report as abusive

It gets even better, Maria is supposedly “interviewing” Ellison on Tuesday, but this past weekend she was out in SF getting a ride on his yacht, and wined/dined, I’m sure.

CNBC is no journalism. It’s simply a PR firm for the financial industry. As long as you understand that, all else makes sense.

Larry Ellisons yacht pic.twitter.com/TMOKcxAgJO

— Maria Bartiromo (@MariaBartiromo) September 23, 2013

Posted by jtholland | Report as abusive

Maria B–what a bafoon.

Posted by mikecorso | Report as abusive

Maria (and all of CNBC) is simply a PR machine for wall street. They aren’t doing actual journalism.

Case in point: Bartiromo is giddy about her trip on Larry Ellison’s yacht, a few days prior to “interviewing” him on her show.

Larry Ellisons yacht pic.twitter.com/TMOKcxAgJO

— Maria Bartiromo (@MariaBartiromo) September 23, 2013

Posted by jtholland | Report as abusive

CNBC=Constant Nose to Butt Caressing of everything Wall Street

Posted by history10 | Report as abusive

Maria here is caught offguard, and she is misinformed, and discourteous. Hard to build a worthwhile TV bit off of that as a starting point.

Posted by SoopaBitHead | Report as abusive

Where do I begin with this one Felix.

Lets start with what this fine is for. JPMorgan made a mistake with their own money which cost them somewhere between 5 and 10 billion (I forget the exact number and am too into the baseball playoff to look it up.) As a penalty for losing 10 billion dollars due to their poor judgement/management/risk controls the government chose to fine them an additional 10 billion? Anyone who doesn’t immediately call BS on this is a commie plain and simple. In what other industry would that even begin to make sense.

Imagine the SEC calls Meg up at HP and says to her “hey ah that 8billion charge you took on that bad acquisition you made… sad news lassy we’re going to fine you another 8 billion because, well by god you owe it to the American people not to screw up like that. Maddness.

You could actually make a case for the fine if it went into the FDIC fund but it’s just getting sucked up by Treasury as if it was a tax. That’s all it is and anyone paying attention knows it.. it’s just one example of the new size tax on big banks. The market doesn’t quite know yet the rate for the new size tax… it’s variable… there is no exact formula to calculate it. The various tentacles of the government simply observe the banks behavior, their business lines, their revs, their earnings and then they decide who is to pay how much when and on what terms.

There are few better examples of how our system is devolving into a banana republic than this JPM fine or BofA getting repeatedly beaten for rescuing ML or Countrywide at the frantic pleas from the treasury and fed.

Lastly Felix ” When bank profits are high, that’s a sign that the bank in question is extracting rents from the economy” in what sector of the economy is that not true?

There is but one sector of the economy where pricing is more transparent and competition more fierce than retail banking. Can you think of an industry where every player competes exclusively on price with neon signs posted at every location in 1-2 foot high font. Thats right only big oil is more transparent than big banks… and only big oil is more vilified.

Fear not… soon these troubles will be behind us as we slowly transition to the successful models used in world leading countries like Cuba and Venesuala… I should probably look at relocating soon… you might not be able to wipe your ass down there…

http://www.cnn.com/2013/09/21/world/…/ve nezuela-toilet-paper/index.html

… but in Maine you’d freeze to death when the government screws up your heating oil delivery.

Posted by y2kurtus | Report as abusive

“Can you think of an industry where every player competes exclusively on price with neon signs posted at every location in 1-2 foot high font. ”

On line retailing. C’mon, platitudes have to be better than that

Posted by EliRabett | Report as abusive

“This is a very strong point by Pareene — and it’s a point which was well taken by Barclays. When the UK bank was fined $450 million last year for its role in the Libor scandal, its CEO duly resigned. After all, a $450 million fine is prima facie evidence that the CEO really isn’t in control of his bank.”

A Japanese bank CEO would have fallen on his sword!”

Posted by ralphdeeds | Report as abusive

I just watched the video. Shame on CNBC, Bartiromo and the rest of the crew. Disgusting. Worse suckups than Tim Russert.

Posted by ralphdeeds | Report as abusive

Where do I begin with this one, y2kurfus?
Maybe let’s start by reminding you that it was the activities of the big banks/trading houses , not HP, that was largely responsible for the shambles that was our economy in 2008.
The suggestion that the machinations of these clowns is transparent when they don’t even have proper oversight of their own activities is laughable. When HP buys a company, the investor/pension/401k/hedge fund manager can look squarely at that deal and judge whether their money should be tied up in HP. When the the boss at JP Morgan and his underlings get caught with their pants down because of the contrivances of some dick in London, I’m certainly not putting my money there. That is, unless I have no control over that money because it is tied up in a pension fund or 401k. You think the activities of John Paulson and Goldman a few years back were transparent? You think the folks on the wrong side of that ‘transparent’ asymmetry were individual investors? You’re purposely naive or think we are.
The likes of liar loans and tranches of pure shit should have put a number of these clowns in jail, but instead we the people got to bail out their sorry asses. You certainly don’t seem to mind it when the recipients of such welfare do their business on Wall Street. Communist indeed.

Posted by unwantedguest | Report as abusive

My turn, y2kurus. You said,
“JPM made a mistake with their own money which cost them $5 – 10Bil… As a penalty for losing $10 Bil due to their poor judgement/ management/ risk controls the government chose to fine them an additional $10 Bil? Anyone who [approves] is a commie…”

JPM is JP Morgan Chase Manhattan Bank. We no longer have Glass-Steagall. Are you certain of the Chinese walls between retail and investment banking? I am not. I realize that the FDIC is not making JPM whole for fail whale losses, not directly. I also realize that JPM’s business model now resembles an investment company more than a retail or merchant bank. Prop trading is the profit center, not deal flow, and certainly not retail banking.

Think for a moment about the traditional role of bankers. They are sober, responsible, reliable and risk averse. Often inflexible and self-important, but that is because they are held to high standards of trust. Cold hearts, fair dealing, long term thinking. They are bankers, not speculators. Well, they were. Under Glass-Steagall, if there were a calamity, Morgan Guaranty Trust would hold out as one of the last bastions of solvency. Not so for JPM, nor Chase.

Now look what has happened! Two months passed. JPM will be fined, no heads will roll. The same courtesy has been extended to SAC. Steve A. Cohen paid a $2 Bil criminal settlement. It is too easy to view that as an abstraction. In fact, it is $2 Bil taken from millions of Americans, causing immense harm to small business owners, family savings, university and hospital endowments. Other than paying a fine, there will be no felony charges, no incarceration, no penalties for Mr. Cohen. He MAY be willing to temporarily abstain from money management for any funds other than his own.

Felix, this was an excellent post. You are correct. CNBC is compromised. Sorkin has surpassed himself, even though the NYT tries to stay true. Thomson-Reuters’ own quarterly report was not good. I worry for the press. We need you!

Greed and deceit are rampant, unchecked. This is not a question of communism or capitalism. CNBC is immoral. JPM is worse.

Posted by EllieK | Report as abusive

The way I look at it, we have to reckon with one of two things here:

1. Dimon did not have control of the company and did not know what aspects of his business were going on with what, which makes him incompetent. I don’t personally think he is, honestly.

Or

2. Chase is such a big entity that it is, effectively, ungovernable by its own leadership. This illustrates the inherent problem with letting entities get to the size they do in our corporate hegemony.

Well, there is a third option, pay 20 billion dollars in fines and allow our limp wristed government to simply make it go away, which is going to happen.

We’re doomed.

Posted by Phunkshun | Report as abusive
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