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The 0.1% Circles the Wagons: Buffett Pumps for Dimon as Treasury Secretary

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Well, given that our current Treasury secretary was forgiven for being a tax cheat (Turbo Timmy never did settle up for his underpaid taxes that were beyond the IRS statute of limitations), there is a certain logic in upping the ante with his replacement. Having a Treasury secretary who is a slam-dunk case for criminal Sarbanes-Oxley violations (see here and here) as well as running a bank where the auditors signaled the worst level of accounting failure short of signaling “going concern” worries is par for the course for the ever-risinng level of corruption among what passes for our elites.

So what is Buffett’s angle in recommending Dimon? Is it simply that he’s the least tainted looking bank exec around (well, least tainted only if you put on super thick rose colored glasses?). Wells Fargo, a long-standing Buffett investment, is piling on mortgage exposures, even more so that the other major player in the residential mortgage space, JP Morgan. Dimon has such a monster ego if he were in the Treasury, he’d make sure to protect JPM from any “unforeseen” events. And while JPM remains too complex and international to fail, Wells a largely domestic bank could in theory be resolved (although its size makes that a stretch; Continental Illinois was taken over in 1984 and was under government operation for a full seven years). Of course, the idea that these banks would ever get in trouble again is dismissed by Dimon and his peers as ridiculous; they even deny they were in trouble in 2008. But if AIG had failed, it’s pretty likely no one would have been spared. And while some elements of systemic risk have been reduced in the wake of the crisis, such as inadequate capital levels, many, like interconnectedness and weak risk management, remain, and some, like size and complexity of individual firms, are in many cases worse. (The big exceptions to the latter are where regulators got really tough: for instance, the Swiss in imposing 19% capital requirements, which have led to restructurings of UBS and Credit Suisse, and Citigroup, which the FDIC forced to downsize and streamline in a meaningful manner).

But the real reason for Buffett’s enthusiasm is really simple. Dimon is the loudest mouthpiece of the utterly shameless banking industry bullshit. He’s rejected the idea of international capital rules, calling them “anti-American.” That’s code for “American banks [along with international banks] might make less money, can’t have that.” And he’s ranted about journalists being overpaid.

Dimon is so full of himself that he chewed out two central bankers: Bernanke and Mark Carney of Canada, soon to be the governor general of the Bank of England. Carney, an ex Goldmanite, was less easily cowed than Bernanke and (for those who had heard of the Dimon temper tantrum, which certainly included readers of Reuters and the Financial Times) gave him a bureaucratic dressing down in a speech the following day:

Everyone is claiming to be a boy scout while accusing others of juvenile delinquency. However, neither merit badges nor detentions will be self-selected but, rather, determined by impartial peer review and mutual oversight.

Translation: we central bankers are in charge, and don’t you forget it. I think I’m going to enjoy Carney at the Bank of England.

Dimon also had the bad taste to get pissy about a Department of Justice lawsuit against JP Morgan for pre-acquisition conduct of Bear Stearns. It’s hard to be sympathetic. As we wrote:

For some context, Dimon is far and away the most experienced dealmaker of any Wall Street CEO. Acting along side Sandy Weill, he built a financial conglomerate based on a series of acquisitions, over 1100. They were such successful buyers that their integration program was envied throughout the industry.

Jamie’s little problem is that he did a sloppy acquisition, period. If you don’t get a waiver of liability that you should have, shame on you. (Update/clarification: When word of the Bear lawsuit broke, many observers assumed that the liability would have been included in the Fed’s $29 billion backstop of the deal and were surprised to find it didn’t). There was already evidence of questionable dealmaking on Bear by JP Morgan. The deal was retraded due to a major error in the contract, leading JP Morgan to have to increase its price for Bear.

And in general, Dimon has joined the choir of bank CEOs blaming lower profits on more regulation, as opposed to blowing up their customers and the housing market, and some nasty side effects of heroic Fed efforts to save their bacon (ZIRP ending profit on float, and flattish yield curve curbing the profits of simple “borrow short-lend long” strategies). No wonder Buffett loves him. Read this palaver from Bloomberg:

“If we did run into problems in markets, I think he would actually be the best person you could have in the job,” Buffett said in response to a question about Dimon from Charlie Rose, according to the transcript of an interview that was scheduled to air yesterday on PBS. “World leaders would have confidence in him.”

Huh? Most world leaders would be put off by an American bully. And we have at least one person who actually was around during the last crisis and knows how to resolve banks: Shiela Bair. Or how about a different former banker who takes the public interest much more to heart than Dimon does: Gary Gensler. Daniel Tarullo is much lower profile, but also gets high marks from people who have worked wit him.

The last thing we need is another Treasury secretary who has a vested interest in preserving the banking status quo (the status quo already has inertia and plenty of powerful backers). Dimon would reinforce just about everything thåt is wrong with financial services regulation in the US, starting out with not believing in it. And that’s precisely why he’s the pet pick of the uber-rich.

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70 comments

  1. Gerard Pierce

    What were the circumstances of Buffett’s statement? Is there no chance that he suddenly developed a warped sense of humor and was pulling someone’s chain?

    1. @FalsePolitics

      Warren Buffet’s endorsement of Jaime Dimon for Secretary of Treasury is like Joel Osteen backing Creflo Dollar for Pope!

      Happy #TerrorTuesday Everyone!

  2. bhikshuni

    For some reason, Buffet has this reputation as snake charm boy of progressive thinkers.

    Berkshire-Hathaway has a huge share of Bank of America, ahem, the bank that transferred so many billions of BOAC risk to its FDIC banks, in other words, to you and me.

    In some ways he’s worse than the other players, since he helps lend Obama the notional fig leaf that the tail is not really wagging the dog.

    1. Propertius

      It’s the folksy, self-deprecating, aw-shucks manner that does it. Fauxgressives confuse it for “authenticity” – kind of like when Obama talks about “folks”.

      Real “men of the people”!

      1. jake chase

        The best thing about WB is that he doesn’t loot his own company. What he does do is skin all the corporate and banking idiots who attempt to do business with him. He has a wonderful eye for value and almost no one else alive can truthfully say that. I wish I had sold Intel on the day he announced he had sold it.

        I first heard of him in 1972, and so did everyone else who read Adam Smith’s best seller, Supermoney. I believe those who bought Birkshire back then have watched their investment increase over 100 times! I tried to get my Dad interested and he pooh poohed it. By the time I could afford to buy it myself the stock was $85,000 a share.

        The SEC tried to prosecute him in 1976 over some shennanigans involving a green stamp company. He beat them up too. I wish he ran the whole damn country, because he doesn’t seem to care about money and is one hundred times smarter than any politician.

        1. Crazy Horse

          Actually Jake, the Buffet Walks on Water myth is easy to vaporize. Just do a little due diligence.

          A million dollars invested in Berkshire Hathaway shares a decade ago is now worth 1.8 million nominal — the stock actually depreciated in real purchasing power over the decade.

          A million in gold bars stashed under the mattress would now buy nearly five million green pieces of paper with pictures of dead presidents printed on them.

          Or course gold isn’t real money like stock certificates stored underwater in Manhattan basements or deposit receipts from MF Global—-.

    2. LeonovaBalletRusse

      bhikshuni: “Buffet has this reputation as snake charm boy” — has the ring of Franklin Cover-up in Omaha and D.C.

    3. pws

      Unlike most of the lunatics who rule our world, he has the occasional moment of lucidity where he says something that is actually sane.

      Obviously, speaking favorably for Dimon at Treasury is not one of those moments.

  3. WalterW

    Huh? You mean the very Gary Gensler who has taken the public interest so much to heart as to indefinitely stall even the CFTC’s second paper tiger investigation into the (or rather: JPM’s, of course) silver manipulation? Indeed, he’d truly be the Honest Abe of the Treasury!

    1. WalterW

      Oops, according to Ted Butler, the CFTC’s current stalled silver investigation is actually its +third+ useless effort.

    2. earnyermoney

      Gary Gensler? LOL

      The same guy that allowed JD to steal the segregated customer accounts of Jon Corzine’s MF Global.

      1. Yves Smith Post author

        And the only guy to go seriously after the biggest scam in dollar value in history, Libor manipulation.

        You were saying?

      1. Zadoofka Florida

        Let’s just elect Elizabeth Warren the queen in this USA and be done with all the “appointments”, “cabinets” and “advisors”, oh and “think tanks” too. BTW, have you seen the NYT article on the Bank of Kabul? Hilarious. Can’t wait for Bill Black on NC tomorrow!

  4. psychohistorian

    If we get Dimon as Treasury Secretary it certainly will be obvious the 0.1% remain in control of the entire playing field. By putting Dimon out there through wannabe moral Buffet the 0.1% are establishing the end of the playing field that the winner will be selected from…..if not Dimon…..who Obama said after all was a real savvy guy (sic).

    Laugh the scoundrels off the stage! When you are done with that laugh their puppet masters behind the curtain, the global inherited rich, out of control of our world with ongoing inheritance, accumulated private ownership of property ownership of the financial system and the tools of the rich, the multinational corporations, have the rights of We the people……

    1. LeonovaBalletRusse

      p, like IRS with Capone, they need to be caught in an *offsides* scandal, akin to Franklin Cover-up, like Isle of Jersey for Royal Banker fun.

      1. Howard Beale IV

        Since Dimon has already stated that he has zero interest in the Treasury position, how exactly does this pronouncement change anything?

  5. The Dork of Cork.

    When did bankers at the NYFR take over the US Treasury or was it always this way ?
    I assume it was always like this ?

    Still Jamie will be good entertainment.
    http://www.youtube.com/watch?v=ekQ_Ja02gTY

    Would a Jimmie Connors character make any difference in the great scheme of things ?
    http://www.youtube.com/watch?v=RvgVgnCqaKw

    Its the monetary system is it not ?
    The people are not that important.
    The Game will go on and on and on until we get a larger breakdown crisis.

  6. Fiver

    Nobody plays the “lesser evil” game better than Buffett – except Obama.

    I don’t know if I buy Obama opting for the “best” banker given how many scorched investors remember what happened the last time one of those (Paulson)ran the Treasury. While Obama has no more use for his base, I don’t think he would be quite so brazenly offensive when he can more quietly name a lesser-known “lesser evil” or even better, an even “greater evil” than Dimon dressed-up as a “lesser evil” – Geithner and Bernanke come to mind as object lessons.

    But whoever it is, I would expect both a major effort to get a true bubble rolling tied to some sort of scheme to off-load, off-shore, or off-balance sheet (the Forever File) US debt.

      1. neo-realist

        I bet that Buffet is wealthy and powerful enough to ensure that anybody that tries to blackmail him gets the “Dick Cheney team” treatment.

  7. Ralph Musgrave

    If a bankster was appointed the equivalent of Treasury Secretary in the UK, there’s be riots. Which proves the truth of Edmund Burke’s observation: “Custome reconciles us to everything”.

  8. PaulArt

    “Jamie’s little problem is that he did a sloppy acquisition”
    Is there an acquisition that makes sense? Why were these worthies allowed to acquire 1100 companies? We should identify the people asleep at the FTC and hang them from the nearest lamp post. Acquisitions are like a man justifying the bedding of several women by pointing out what great genes he and the women have which must surely result in the birth of prodigies who would benefit mankind. When we go from a ‘Free Market’ to an Unfree Market, the road is littered with the detritus of acquisitions all justified in the name of the customer. We know that its nothing but bilge water from stem to stern.

  9. Greg R

    If someone had told you when OWS started 14 months ago that this is where we would be now, would you have believed them??? It’s a crying shame.

  10. OMF

    You have to consider the alternative. What if a more reasonable candidate replaces Geithner?

    A reasonable man could be more moderate. He could begin to implement sane and workable policies. He could begin to pare back some of the outrageous concessions and perks giving to the banking sector. And that could begin a general unwinding of this corrupt era.

    In short, a more reasonable candidate could be the beginning of the end for the banks. So they must at all times promote a more “extreme” candidate. They must always push for Dimon, or Diamond, and ultimatly the likes of Dick Fuld. The banks are riding the Tiger of political corruption and they must grasp ever tighter with each punce in order to stay on.

    They will always ratchet up the ante, and the candidates. I mean it about Dick Fuld.

    1. Susan the other

      Sheila Bair for Treasury. Even though she was being facetious, she said a remarkable thing: Why not just open the Fed window to anyone, any citizen, who wants to borrow 10 million at zirp and invest it in treasuries. That’s the smartest thing anybody has said so far.

  11. Ms G

    Dimon as Treasury Secretary. Ok, my head is exploding in 10,000 different directions. WTF, WTF, WTF. Buffet needs to be “retired” and gagged.

  12. Fraud Guy- Also

    Tom Steyer, CEO of Farallon Capital, is said to really, really want to be the next Treasury Secretary. I have heard this from multiple people who are close to him.

    For those who are not familiar, Farallon is one of the largest hedge funds in the world, and Steyer, the founder, is one of many prominent ex-Goldmnanites from Yves era there.

  13. Shortlist

    The ideal Treasury Secretary for this juncture would be Alfred Herrhausen’s moldering corpse. Lock the bankers in a room with him and let them work it out.

  14. bloodnok

    got skin in this game: refinanced our hovel with quickenloans, getting a reasonable but not stellar rate reduction. before we’d manage to make a single payment, they turned around and sold our loan to mr dimon’s empire. wonderful! from the corruption of wells fargo to the corruption of jp morgan chase ….

  15. enraged

    “Or how about a different former banker who takes the public interest much more to heart than Dimon does: Gary Gensler. Daniel Tarullo is much lower profile, but also gets high marks from people who have worked wit him.”

    Who says it has to be a former banker? Why is it that, in this country, being a former banker opens all the doors to government and highway robbery? In some countries, any government-level position requires that you study administration, political science, oftentimes the laws. Here? Just be a former banker. Crooked enough to have survived in that cut-throat environment of drug, booze, prostitution and the likes, but not too crooked to become fast a liability.

    1. ChrisPacific

      I think it’s along the lines of “set a thief to catch a thief” – i.e., a non-banker without an understanding of the intricacies of banking and finance would be too easily conned.

      The issue is that thieves don’t take naturally to enforcement roles. Most would rather cut a deal with the mark to enrich them both at the expense of everyone else.

  16. diptherio

    We Need Jamie Galbraith, we get Jamie Dimon…typical.

    On the up side, Dimon, being the pure manifestation of hubris that he is, is sure to call forth and be confronted by his Nemesis, which will ultimately overcome and destroy him (if the ancient Greeks are to be taken at their word).

    This being the case, and seeing as how most of us desire a massive overhaul and re-jiggering of the financial system, putting Dimon at the head of Treasury might be just the thing to ensure the inevitable collapse of the existing system, as the clash of the epically egotistical with their Nemesis generally results in extensive collateral damage.

    If creative destruction is what we need, Dimon is probably just the guy we want: Nihilism really seems like his thing.

  17. rich

    Whalen: Deutsche Bank’s Absurd Claims About Banks

    A gentleman named Jan Schildbach of Deutsche Bank (DB) has published a research report “Universal banks: Optimal for clients and financial stability; Why it would be wrong to split them up.” This report is remarkable for many reasons, but not because it makes a convincing investment case for mega banks. Rather, it proves that anybody can make a case for any proposition so long as one carefully avoids touching any inconvenient facts.

    But, again, this is completely wrong. Not only do large universal banks have lower nominal and risk-adjusted returns than smaller banks, but the periodic need to be bailed out by government renders the largest banks a nightmare for investors and the public. In the case of C and JPM, for example, these institutions require massive subsidies from the public that the DB analyst does not even mention in his report. Even in nominal terms, banks such as C and JPM have been consistent value destroyers.

    Or let’s look at the market for OTC derivatives, another market that is very important for DB, JPM and C. In this market, banks are allowed to continue trading even when a obligor defaults. In the US, the TBTF banks are exempt from the automatic stay in bankruptcy when it comes to OTC derivatives. This crucial exemption is worth tens of billions of dollars per year and represents a considerable subsidy from public and private investors to the big banks. Yet somehow the DB analyst misses this point entirely in his analysis. This is hardly a surprise since DB is one of the largest players in OTC derivatives in the world.

    http://www.ritholtz.com/blog/2012/11/whalen-deutsche-banks-absurd-claim-about-banks/

  18. David Chaney

    In echo of Gerard Pierce’s observation re: Buffet, and why he is completely discredited, while being toasted by the utterly befuddled, complicit, and shamelessly ignorant press: This man is the biggest stockholder in Well Fargo, which is a foreclosure mill, and now has dooubled down and bought B of A shares, also a foreclosure mill.

    As you all know, Buffet has gone big time into buying foreclosures, but has been bemoaning the lack of “product” i.e. the illegally taken homes of hardworking American people who are now thrown in the street.

    Warren Buffett is the ultimate wolf in sheep’s clothing, fifth column operative.

    Guess Dimon as Treasury Secretary would let Buffett drop any pretense of actually caring about the “middle Class” (on which he is busy fomenting a ware beneath the radar) and finally just start the raping and pillaging.

    Then the curtain falls on his King Lear contenance on stage.

    Buffett is disgusting in his duplicity. “Look at how much my secretary is paying in taxes. Oh it’s criminal. Keep Looking. OK, now that I’ve distracted you me and Dimon can finish the rape and pillage of Amerika.”

  19. Peter Pan

    Is it just me or is Warren Buffet appearing to be more like the Godfather of the Financial Mafia? When I read his reply as to why he invested in Moody’s, I immediately envisioned the Godfather saying, “I’m a business man. It’s a good business. It makes money”.

    Now he wants the biggest whiney ass bitch on Wall Street, Dimon, to be the next Secretary of the Treasury. Why? I’d suggest it’s because Dimon IS Buffet’s whiney ass bitch. Dimon will pay tribute to Buffet. Buffet will get his cut of the financial windfall that Dimon will seek for the Financial Mafia.

  20. Hugh

    Know your enemies, and know that they are your enemies. I am surprised that anyone thinks that Buffett or Obama or Dimon or Geithner or any of the rich and the elites would act any differently than they do. They are your enemies. They have taken your job, looted your pension, stolen your home. They are pricing you out of healthcare and higher education. They are even now setting their sights on Social Security and Medicare. Quite simply they mean to destroy you, everything you believe, and everyone you love. Stop treating them as mildly eccentric people with legitimate but slightly different views from yours. For them, you are not people. You are part of the menu.

  21. Paul Walker

    Warren’s rose tinted horn rim filler, at best, only provide a 5% solution, well short of the standard 7%.

  22. Susan the other

    I get the feeling that Dimon for Treasury was the plan several years ago, say by November of 2008. He worked closely with Bernanke. He has been allowed to say all sorts of outrageous things. He was/is the confidant of Obama, and a big campaign supporter. They are both Chicago connected. Jamie Dimon carried a lot of water: WAMU, Bear Stearns, keeping gold and silver down and the dollar up, etc. Now he gets to sell his unsellable MBS inventory (because he forgot to indemnnify JPM from the Bear portfolio? or because JPM was the trust for most of it?) to Bernanke, no questions asked. And because he gets to, all the other banks get to too. That deal with BAC getting to stuff the FDIC with its bad MBS/CDS is probably because BAC has to pay Buffet back 10 Bn and has to have at least that much on its books. JPMChase has been playing fast and loose while on life support for 5 years. Maybe he is the chosen one, the one bankster to rise above the deluge. If they put him in at Treasury, maybe it means it’s time to open the floodgates and let the TBTFs go down. One can only hope. Jamie Dimon for Treasury if he will nationalize and regulate the banks as only he will know how to do properly, having broken all the lax and useless rules himself.

  23. Ms G

    Wow, Dimon and Gensler up at bat for Big Jobs in finance regulation!

    This is LULZ territory (and I didn’t know what this was before Lambert’s I Can Has Austerity post yesterday. So, “I CAN HAS REGULATION! MEOW!”

  24. TC

    Doesn’t Dimon have better things to worry about like, for example, making his company’s shareholders a freegin’ dime, an accomplishment he has yet to achieve in his 10+ years at JPM.

    I think that, although “while some elements of systemic risk have been reduced in the wake of the crisis, such as inadequate capital levels, many, like interconnectedness and weak risk management, remain,” this does not detract from “the idea that these banks would ever get in trouble again [being] dismissed by Dimon and his peers as ridiculous,” and this largely because the pricks know the entirely inept, financially perplexed paragons of central banking are boxed into a paradigm finding them presently at the doorstep of an early 1920s Weimar redux: a reality assuring what are otherwise technically insolvent, TBTF titans of tyranny will remain going concerns, at least on paper whose value is set to rapidly depreciate in a “whatever it takes” hyperinflationary deluge making this same policy of the past several years look like a mere academic exercise rather than an act of war, which it appears set to become, and this in more ways than many seem willing to contemplate. “Central bankers are in charge?” I hardly think so. They’re overwhelmed and in their present form about to be relegated to the dustbin of history, yet only if more Americans awaken from their present [imperial] monetarist fantasies and insist on a return of sound credit (along lines expounded by Hamilton) to replace the present imperial order benefitting a few (and fewer still in the chaotic environoment we are about to enter) at the expense of the many.

    So, despite possibly being “correct” about the diminished prospect of soon getting in trouble again, just what defines “success” and “failure” in the banking business in all probability is about to enter a realm wherein no one living has a wit of experience.

    On this note I should add that, like Dimon, Buffett has better things to worry about than who should be the next U.S. Treasury Secretary, as his big ol’ railroad is about to meet financial conditions sure to drive it straight into the ground. The “American ‘can do’ spirit” he admirably often cites as being that power to overcome past troubles the nation has faced (this being the basis for his turn from more speculative assets like insurance companies to a physical asset like a railroad) appears about ready to meet its greatest challenge ever in the nation’s 200+ year history. In this fast approaching, unrivaled vile and chaotic climate the so-called “uber rich” are more than likely about to join the ranks of paupers. Just watch.

  25. Rob

    Maybe this is perfect.the end of pretense that things will get better.rather than watching and hoping for something better….we can see the beast is horribly wounded and we ought to go and smash it’s head with a sledge hammer…you know, to be kind.and put it out of its misery.everybody close your mouth and swing hard.

  26. steelhead23

    Please note the donation jar along the margin banner. Damn right this is a valuable blog – we should all contribute to keep the lights on.

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