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March 19, 2013

Jamie Dimon's Motive to Lie

While it hasn’t been proven that JP Morgan Chase CEO and Chairman of the Board Jamie Dimon lied, the Report by the Senate PSI on the London Whale trading losses of $6-$9 billion lays out devastating facts that seem pretty clear that lots of people did lie.  

Some reasons people might lie are obvious and some less so.  The obvious ones have all been talked about, but the less obvious reasons haven’t been.

First, the obvious: hide trading losses, maybe thinking they’d just be temporary because “everyone” knows/believes they’ll come back, as so many have wished for so long, often blowing up their bank along the way (i.e., Barings Bank, UBS, Societe General, etc.).  Then they lie not to get caught, lose their jobs, go to jail, etc. 

But why would senior executives lie?  Actually, there’s lots of reasons:  reputations, jobs, status, pay, bonuses and sundry other pedestrian but overwhelmingly powerful reasons.  That’s why there’s supposed to be lots of checks and balances and controls, internal and external, which all failed miserably in the London Whale debacle, again all as detailed in the PSI Report.  

OK, but why would Jamie Dimon lie when he learned what was going on at the CIO trading desk?  

One reason may be that he didn’t just learn what was going on at the CIO trading desk because it was doing big high risk proprietary trading just as he personally set it up to do, as we’ve discussed before.

But another more immediate and compelling motive may be because — at that very moment — he was personally fighting two very powerful shareholder proposals aimed directly at him:  one targeted his pay and the other other sought to take away the position of Chairman of the Board, leaving him as “just” the CEO position.  While this might not seem like a big deal to mere mortals, to Jamie Dimon it would be an intolerable slap in the face.  

In fact, this is such a big deal to Dimon that he told Bank One when it was recruiting him that he wouldn’t take the job if he wasn’t give both positions, as he recently disclosed on Fox Business News: “I wouldn’t have gone to Bank One if I had a separate chairman.  I mean, life’s too short….  it would be too hard … looking over my shoulder, maybe wanting my job.”  Or, maybe just having anyone looking over his shoulder was just too much.  Regardless, the Report lays out what are at best numerous incomplete, inaccurate and misleading statements on an April 13, 2012 teleconference that Dimon was on, when he dismissed all the questions about the London Whale as nothing but a “tempest in a teapot.” 

That call was merely one month from the annual JP Morgan shareholders meeting when those two key shareholder proposals would be voted on.  Jamie Dimon and JP Morgan thus put a lid on the truth on April 13, which lasted for almost an entire month, until Dimon disclosed on May 10th some additional information (which the Report also details was still inaccurate, incomplete and misleading).  Without knowing the truth and without yet suffering the more than $20 billion in market cap losses, the 2 shareholder proposals failed, but still received a remarkably high 40% of votes.

Imagine what the vote would have been if the full truth has been disclosed on April 13, 2012?  I don’t mean what Dimon disclosed on May 10 or in his subsequent Congressional testimony or even the company’s January 2013 report on its investigation of the trading losses (which now appears may have been part of the ongoing cover up given how much information it failed to disclose), but what the PSI Report has now finally disclosed in all its gory detail.

We may never know who lied or why because no one — not banking regulators, not prosecutors, not the SEC — seems particularly interested in truly investigating and prosecuting the rich, powerful and well connected biggest too-big-to-fail banks on Wall Street and that means, most of all, not JP Morgan Chase and its Chairman of the Board and CEO. 



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