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March 17, 2013

Jamie Dimon: Out of Control

We asked last May if Jamie Dimon was culpable or incompetent in connection with the so-called London Whale trade of more than $100 billion of federally insured depositors’ money in a high risk, complex, leveraged proprietary derivatives trade that JP Morgan claims has so far lost more than $6 billion, but could be as much as $9 billion (& if the facts were truly known could be much more).  We also pointed out that Jamie Dimon personally benefited from the initial early April 2012 misrepresentation that the media reports about this huge trade were nothing but a “tempest in a teapot” and his disclosure almost 30 days later that those reports were true:  by the time some of the truth was disclosed, the proxies were in and Jamie Dimon “won” the 2 key shareholder questions he cared about the most:  his pay and taking the Chairman of the Board position away from him.  

Even without knowing the truth, more than 40% of shareholders voted against Jamie Dimon last May.  Imagine what the vote would have been if he had disclosed the truth on April 13, 2012, more than 30 days before the annual meeting and vote, rather than just 2 business days, which is all shareholders got by the time Jamie Dimon saw fit to finally inform the “owners” of JP Morgan Chase some — but still not all — of what really happened.  Imagine if shareholders lost more than $20 billion in market capitalization in early April rather than in early May, which is what happened after just some of the facts were disclosed?  

Now, almost a year later, after an extensive investigation by its first rate staff, the Senate Permanent Subcommittee on Investigations (PSI), lead by Senator Levin with Senator McCain now the senior Republican, has answered that question:  best case, culpable; worst case, knowing illegal conduct, although there is still much we don’t know.  This is true not only because 4 of the key JP Morgan people involved in the trading and apparent cover up live in London and refused to cooperate with the investigation, but also because even those individuals questioned left key points unclear.  For example, when Ina Drew says that the trades were cleared at the highest levels of the bank, who precisely was she referring to?  Is it possible that Jamie Dimon, the supposed detail fanatic, didn’t immediately dig into the details after specific allegations of egregious misconduct at his London office were prominently reported in early April 2012 in the Wall Street Journal and Bloomberg News?  

There is still much that we don’t know, but what we know is damning and should not only be referred to the SEC and DOJ, but should cause private litigants and shareholders to hold Jamie Dimon and his entire leadership team accountable.  For example, there is now no doubt that a massive, extensive cover up of billions in trading losses lasting months was engaged in.  Regardless of what else is learned, this means that numerous public reports and filings were false and misleading and apparently intentionally so.  Exactly who knew what when and who should have know what when is still unclear, but isn’t this precisely what the best risk manager in the world prides himself on knowing at all times? 

Don’t take anyone’s word for for any of this.  Judge for yourself.  Although long, you should read the 301 page Report if possible. 

However, if you don’t have the time, Gretchen Morgenson’s column in the New York Times today is a brilliant summary of the key points and implications.  Anyone who cares about what too-bit-to-fail banks have done to this country and what threat the continue to pose to this country, this is a must read column.  

PSI, Sen. Levin, Sen. McCain, the PSI staff and Gretchen Morgenson have done a great public service and their work should be a catalyst that breaks the Wall Street lobby headlock on sensible regulation and accountability. 

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