Jamie Dimon, the CEO of JPMorgan Chase, made headlines this week for an interview at the Council on Foreign Relations in which he said that buying Bear Stearns in March, 2008 was a “favor” to the Federal Reserve, and that JPMorgan had lost money on the deal. But there was another part of his interview where he talked about lending to states that caught my attention:
DIMON: OK, so — (laughs) — this company, JP Morgan and Chase — (inaudible) — went through ’06, ’07, ’08, ’09, 2010, 2011, 2012, never lost money in a quarter, didn’t need TARP and was there for a lot of people when others weren’t. California, New Jersey, Illinois, hospitals, schools, businesses.
I think that Mr. Dimon is inferring that California, New Jersey and Illinois, which have had severe cash flow problems, had had to rely on JPMorgan to tide them over until they completed their next bond offerings. I remember all these financings; there was very little data available about the borrowing costs and terms. Although these loans are for public entities, the current MSRB rules exempt bank loans from disclosure. This is mind-bending when you consider that JPMorgan’s purchase of Bear Stearns required voluminous public disclosure to protect shareholders. There are no such rules to protect taxpayers.
It turns out that JPMorgan did exceptionally well when it helped finance a bridge loan for California in October, 2010. Bloomberg reported the details (emphasis mine):
California used a $6.7 billion bridge loan from JPMorgan Chase & Co. and five other banks in October, when a record 100-day budget impasse prevented Lockyer from issuing RANs. The notes are commonly used for cash flow.