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.