The New York Times’ Andrew Ross Sorkin recently lauded JP Morgan’s CEO Jamie Dimon for what he called Dimon’s “Leadership Lesson” in how he claims to have handled the $6 to $9 billion London Whale loss (not including the more than $20 billion in shareholders losses it caused). He directly addressed Dimon in his faux awards column, saying “But you did something most executives would not have done: you admitted to the mistake. In an age when it’s almost de rigueur on Wall Street to hide problems, obfuscate and shade the truth, you told it how it was: ‘We have egg on our face, and we deserve any criticism we get.'”
In fairness, Sorkin did go on to say “That’s not to say the situation was handled perfectly; the lack of details about the loss and your continued pushback against regulations raised more questions than answers. But your insistence that ‘We made a terrible, egregious mistake’ is a lesson in leadership for your peers.”
That can only be said if all one did was listen to Jamie Dimon. However, that would be perilous to do to anyone claiming to discuss publicly a huge, expensive, embarrassing and possibly criminal act involving billions of dollars. Before coming to any conclusion, much less praise, for such a person, gathering information, if not evidence, from many sources before bestowing kudos would seem to be the minimum appropriate actions.
In truth, if there is a lesson at all from JP Morgan’s CEO’s statements about the London Whale losses, it is a lesson in public relations and spin. Indeed, this appears to be just another example of the Wall Street reflex to, in Sorkin’s words, “hide problems, obfuscate and shade the truth.” What is remarkable is how Dimon talked a lot about the London Whale loss, but actually said very little and disclosed even less. (A quick read of his testimony before the House or the Senate will confirm that.) By the incredibly low standards of Wall Street, admitting a “mistake” and accepting “criticism” may be laudable, but not so much when complete disclosure is lacking.
Remember that Jamie Dimon for years has been lauded as a detail, hands-on executive who knew virtually everything going on in his bank. He was, many said, the best risk manager in all of banking. Indeed, he was often referred to as the best banker in the country, if not the world.
He was happy to ride those unrestrained compliments when things were going well, but when something went wrong, as they did when the London Whale trades and losses were reported, Jamie Dimon denied them and then, when he finally had to admit them, claimed he didn’t know anything about it. Remarkably, this most detail-oriented, hands-on, risk-focused manager claimed he didn’t know any of the details and was hands-off on what was a massive, highly complex, high risk, illiquid derivatives proprietary trade, a bet, of some $100 billion of the bank’s federally insured deposits, all designed to generate a huge profit for the bank. In the end, others were blamed.
While I won’t detail all the reporting showing Jamie Dimon’s direct and personal involvement in sowing the seeds of, if not directing, the conduct that lead to the London Whale losses (much of which can be found here and here), it is worth reviewing a recently filed amended complaint in the class action filed against JP Morgan and Jamie Dimon personally. It is attached below.
It is true that the attached amended complaint is mostly allegations, including specific allegations relating to claims against Jamie Dimon personally for fraud violations of SEC Rule 10b5. So the allegations may not be true, but the complaint and a great deal of reporting by other reporters (including that Jamie Dimon personally ignored “red flags” that things were very wrong with the London trading operation) should be carefully considered and weighed before heaping yet more unrestrained praise on him.