What Jamie Dimon doesn’t see
Character does matter in post-crisis banking; if yours is in question, it is time to get out.
An analyst argued the other day that the press had it wrong about JPMorgan. “What the press don’t understand with all their lambasting of Jamie Dimon and the firm itself, is that JPMorgan makes a lot of money, and it makes a lot of money for investors,” was his claim.
His point was that regardless of whether Dimon is a nice person or not, or whether the bank has become known for being aggressive with clients, and even whether it lost $6.2 billion in a trading fiasco, the press needs to realize that JPMorgan is creating jobs and is making investors happy. It is an interesting point, and yes, JPMorgan has a target on its back when it comes to the press, but actually it does matter how Dimon runs JPMorgan, and what his character is like. It matters a lot because recent history has taught us that when news begins to emerge out of large financial institutions of senior managers covering up losses, asking employees to lie and being loose with risk measures, there is trouble ahead for that firm. That in turn means trouble ahead for employees, investors and ultimately taxpayers.
As a reminder, in 2005 and 2006 small lawsuits against US financial firms about mistreatment regarding mortgages and mortgage approvals rocketed. That was the red flag as to what was coming, yet all those banks were making a lot of money for shareholders and creating thousands of jobs over that period.
If a bank’s ethics are being questioned, and the character of its senior management is under fire, it’s time to get out. That is why the US Senate report into the behaviour of JPMorgan’s senior managers during the London Whale fiasco is disturbing.
Its pages of emails, testimonials, and phone transcripts show how risk limits were frequently breached – in April 2012 alone they were breached 160 times. It shows how prices were changed to indicate fewer losses. It shows how loss-making positions were covered up and how the bank misled the public and investors as to the extent of the losses.
Fortunately for Dimon, those implicated seem to be all but him – which is just plain unbelievable given that the man is control-mad. If the unbelievable is indeed true, perhaps he needs replacing with someone who would have noticed.
And for all the apologies and insistence that things have now changed at JPMorgan, we are left with this – we’ve heard it all before. We heard after the credit crisis how sorry all the banks were – yet since the crisis there have been several billion-dollar trading blunders and other high-profile screw-ups.
If those in charge of enormous financial institutions are unethical, and it is not just JPMorgan here, then inevitably investors will lose their money, people will lose their jobs and taxpayers will end up paying. So it does matter what Jamie Dimon’s character is, and it is important to analyse the ethics and culture of the firm. And at the moment, it is not looking good for JPMorgan.