Slimin’ Jamie Dimon Tells Howlers About Persecution of Banks, “Fortress Balance Sheet”

Jamie Dimon seems to think if he can tell his Big Lies long enough, he’ll be believed. In reality, the only ones who will buy his blather are his fellow members of the elite banker looting classes and their hired help.

Dimon’s latest opportunity to play Ministry of Truth came in an analysts’ call last week, when he tried presenting JP Morgan and banks generally as “under assault”. This was so patently ridiculous that it quickly elicited the scorn it deserved. For instance, from DS Wright at Firedoglake:

Remember that time the US government broke up all the Too Big To Fail banks and prosecuted bankster executives for the crimes that brought down the financial markets in 2008? Me neither. Yet JPMorgan CEO Jamie Dimon is caterwauling to the media about Wall Street being “under assault” by US regulators.

Dimon’s complaining appeared to be instigated by JPMorgan posting a drop in quarterly profits. JPMorgan recently had to pay legal costs and fines related to a slew of criminal activity that ranged from fraud in the mortgage market, rigging currencies, and participating in the Bernie Madoff Ponzi scheme. The fines which the bank paid were relatively small and no JPMorgan executives were prosecuted. Quite an assault.

Or how about Tim Mullaney at MarketWatch:

J.P. Morgan & Chase’s chief executive officer is taking a well-deserved roasting for complaining Wednesday that “banks are under assault” from regulators, who nastily want them to make good on old misfeasance, while meanly insisting they raise ever-more capital so the 2008 credit crash and near-depression won’t recur. Asked for details, Dimon responded: “Are you kidding?”

Poor baby. He’d be way more convincing if J.P. Morgan’s press office hadn’t been unable to produce a list I requested of all the legal settlements the nation’s biggest bank has been forced to enter in recent years. Neither could Better Markets, a Washington-based consumer watchdog that bedevils the too-big-to-fail set. From enabling Bernie Madoff to manipulating energy markets to defrauding credit-card customers, there are just too darn many scandals for either side to count. Better Markets once tried to make an intern compile a list but gave up — there were so many, at J.P. Morgan and elsewhere, they decided it would take a full-timer, President Dennis Kelleher said.

So, let’s try this as a first principle for post-crash banks: If all lib’rul horses and all P.R. men can’t figure out how many problems you’ve caused, take my sainted late mother’s advice and “shaddap.” That’s “shut up” in Jersey City.

Mind you, it isn’t just that JP Morgan has been cited by regulators for an impressively large list of abuses; it’s also that the Morgan bank is far and away the biggest miscreant of all US banks. As Dave Dayen wrote in March 2013:

As an excellent preview for the Friday fireworks, I urge you to read an astonishing new report, which I’ve embedded below, from analyst Josh Rosner of Graham-Fisher and Co. The best way to describe the report, “JPM – Out of Control,” is that it reads like a rap sheet. Notably, Rosner takes mortgage abuses almost entirely out of the equation, and yet still manages to fill a 45-page report with documented case after documented case of serious fraud and abuse, most of which JPM has already admitted to (at least in the sense of reaching a settlement; given out captured regulatory structure the end result is invariably a settlement with the “neither admit nor deny wrongdoing” boilerplate appended). Rosner writes, “we could not find another ‘systemically important’ domestic bank that has recently been subject to as many public, non-mortgage related, regulatory actions or consent orders.”

In other words, JP Morgan is a hopeless, recidivist lawbreaker. So it should be no surprise that Dimon chooses to demonize regulators who stand between him and more profit rather than clean up his bank’s act.

Dimon’s second beef is the notion that JP Morgan should be broken up, an idea presented by Goldman in a recent analyst’s report. Dimon pushes the “bigger banks are better” fallacy and basically argues that the US needs JP Morgan as some sort of national champion as a defense against the domination of the Chinese. I’m not making that up. Chinese banks are pretty much nowhere as in international banking business, and that’s the best bugaboo he can come up with?

In fact, “universal banking,” the old European banking model, has long been recognized as a bad idea among banking industry experts. Every study of US banks has shown that the basic premise, that large banks are more efficient on a cost basis, isn’t true in practice. Banks exhibit slightly rising cost curves at a not hugely high total asset size (the break point depends on study methodology, but it’s pretty much never higher than $25 billion in assets). So even if there might be actual economies of scale, they appear to be more than offset by diseconomies of scope.

Moreover, it was the smaller, nimble investment banks that put the US in its dominant position in finance in the 1980s, eating the lunches of domestic champions in national markets. And corporate customers don’t want to consume all their services from one bank. They understand that a German bank is going to have better intelligence about and relationships in Germany than any US bank will ever have, so they take a “horses for courses” approach both in geographic markets that are important to them as well as by product line. The idea that being bigger is going to give you an advantage with those selection criteria is barmy.

Having said that, there are areas of banking where being big in that product line pays off, but that does not mean being a honking big bank overall is a plus. To be a capital markets player, you have a high minimum level of required infrastructure: trading operations in the three major time zones (Asia, UK/Europe, US) and offices in many major cities and a large technology platform (ongoing investments in risk analytics, trading and sales software, back office). This means high fixed costs. The more revenue you can pump though these businesses, the better the bottom line. Similarly, in asset management, profits are much more a function of the size of individual funds, not of the size of the asset management business overall.

As the Financial Times explained:

Together with regulatory and investor pressure for higher returns, universal banks have lost their lustre around the world. That is why Mr Dimon had to be creative in imagining a future Chinese threat rather than pointing to a current one in Europe or Japan.

Antony Jenkins, Barclays chief executive, told the FT last month that “the universal banking model is dead” and the bank he took over in 2012 has to be more selective.

Deutsche Bank seems set to be the latest to throw in the towel. Germany’s biggest lender, which until recently was telling analysts it aimed to remain Europe’s last universal bank, is considering spinning off its consumer banking operation as part of a new strategic plan to be announced in the second quarter.

“It is much more incumbent on the few remaining players who are still universal banks to explain and justify why they are sticking at it,” said Marco Mazzucchelli, a senior executive at Switzerland’s Julius Baer who served on a European Union commission that drew up plans for banking structural reform.

“Europe had many universal banks until recently and yet this was inconsequential for economic performance: why should one be concerned if they are no more?” asked Mr Mazzucchelli. “Even if the Americans are not forced to do this by the regulators, they will face pressure to do so from the market.”

Jamie Dimon’s final howler was the repetition of his “fortress balance sheet” canard: ““This is a fortress balance sheet company. It is impenetrable. We are stronger than ever.”

Bollocks. If Morgan Stanley had failed, Goldman by its own admission would be next. JP Morgan would have been engulfed by virtue of being the largest clearer of tri-party repo.

In fact, JP Morgan has far and away the biggest regulatory balance sheet hole of any major US bank. From Bloomberg in December:

JPMorgan Chase & Co. (JPM), already facing the highest capital surcharge under international rules, may need more than $20 billion in additional capital by 2019 to meet a new Federal Reserve requirement.

The Fed laid out a plan yesterday for boosting surcharges for eight large U.S. firms beyond those already levied on the world’s biggest banks by global regulators. While the Fed stopped short of specifying the buffers for each company, it said they probably will range from 1 percent to 4.5 percent based on last year’s data — exceeding the maximum of 2.5 percent set internationally. The eight banks would need a total of $21 billion to comply, Fed officials said in a briefing.

JPMorgan “was the firm that is actually going to have to come up with more capital,” Fed Vice Chairman Stanley Fischer said in a subsequent meeting. He said one bank was $22 billion shy and “that seemed a pretty impressive shortfall.”

In other words, Jamie Dimon is his bank writ large: bullying, dishonest, and an unrepentant lawbreaker.

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32 comments

  1. Ulysses

    “Jamie Dimon is his bank writ large: bullying, dishonest, and an unrepentant lawbreaker.”

    Yes, and we might also add: one of a handful of kleptocrats who actually has his interests represented in our so-called “representative government.” Any national politician who campaigned on a pledge to put Jamie Dimon behind bars would be elected in a landslide. The fact that no national politician shows any interest in doing this reveals the illegitimacy of our kayfabe system.

    1. Ulysses

      I am reminded here of the famous words of Louis Brandeis:

      “Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”

      This is why the unpunished government crimes of torture, violations of the Bill of Rights, murder of innocent children by drones, etc. are so dangerous. Yet I would go further than Brandeis– and add that the steadfast refusal of the government to criminally prosecute an unrepentant lawbreaker, like Jamie Dimon, also invites anarchy.

      1. jsn

        “For no society of men whatever can persevere its unity and continue to exist, if the criminal element is not punished, since, if the diseased member does not receive proper treatment, it causes all the rest, even as our own physical bodies, to share in its affliction…because when the wrong-doers have power they become more daring, and corrupt the excellent also by causing them to grow dejected and to believe that they will obtain no benefit from right behavior. For wherever the insolent element has the advantage there inevitably the decent element has the worst of it; and wherever wrong-doing is unpunished, there self-restraing also goes unrewarded… For it is not by any characteristic of birth that what is friendly is distinguished from what is hostile, but it is determined by men’s habits and actions, which, if they are good can make that which is alien like unto itself, but if bad can alienate everything, even that which is alien” Julius Caesar. Dio’s Roman History trans. E. Cary (1916)

        1. diptherio

          Gresham’s dynamic explained in the first century bce…nice find.

          If you’re into the ancient historians, my favorite is Ammianus Marcellinus. Worth the read if you haven’t already. He had a front row seat for a good deal of what he writes about during the reign of Constantine, Julian and their successors. It’s always astounding how little things change over the centuries…

        2. 2little2late

          And who can forget Aristotle: “At his best, man is the noblest of all animals; separated from law and justice, he is the worst.”

      2. Ivy

        Would it be too much of a stretch to say that Justice Brandeis was concerned about a different type of Broken Windows?

      3. participant-observer-observed

        Or worse!

        History shows the etiological vector following the break down of law and order and civil society trends toward violent vigilantes and organized crime.

        It is not anarchy and chaos for long.

        It is open season call for a return of triads and mafias, etc..

  2. inode_buddha

    First class sociopath, IMHO. Sure, you could have crazy groaf if you were allowed to do absolutely anything you wanted…. thereby killing your host society in the process. I’ve seen guys like this in auto racing venues: If it isn’t explicitly written in the rulebook, they assume its legal. All other questions (sportsmanship, cost-effectiveness) are irrelevant to them. They tend to ruin the sport for everyone else, making it very expensive in the process for someone to enter.

    1. HomoSapiensWannaBe

      Yes, a sociopath. One of the characteristic traits of a sociopath is the need to portray oneself as a victim.

  3. inode_buddha

    Interesting how he’s feeling a bit defensive after being told that there are rules in polite society.

    1. NotTimothyGeithner

      Well, you know what they say about smoke and fire. My guess is any kind of investigation even into little people at the big banks would be impossible to shut down. The false promise of Obama worked, but people are angry now, a flim flam man spouting platitudes will be questioned. The bankers lost their biggest proponents in November, “moderate Democrats.” The public is more skeptical of the GOP, and for all that was made of the Tea baggers losing primaries, they only lost to candidates voting against the 2008/2009 bailouts. We can’t expect positive steps given the GOP congress, culture of Team Blue, and Obama’s complicity in protecting banks, but Dimon’s public statements suggest to me that there isn’t a workable pro-Wall Street majority anymore. There won’t be a backstop to a contagion-Lehman event unless attitudes change.

  4. Sam Adams

    Jamie Dimon is only an unrepentant kleptomaniac if he’s prosecuted. Was he prosecuted?
    Fixed that.

  5. Kokuanani

    While it’s satisfying to see the full extent of Dimon’s delusional rantings exposed here and by our usual friends [DDay and DSWright], what’s going on the in “traditional” media? Is CNBC pulling out its handkerchiefs, fainting couches and sympathy cards? I’ll bet Obama made a behind-the-scenes condolence call as well.

    I know Jamie’s rantings received front page coverage at HuffPo, but I want to see this mocked and scorned far & wide.

  6. Jim A.

    And of course the REASON that the Chinese banks aren’t big players on the international stage, is that amazingly they are even LESS trusted than the American mega banks. Because with the American mega banks, depositors/shareholders/bondpurchasers etc. can have the illusion that all the illegality is don on their behalf, rather than on the behalf of the managers. With the Chinese banks, everybody knows that the string-pullers and benefactors of the shady accounting and market manipulation are the movers and shakers in the Chinese “Communist” Party.

    1. participant-observer-observed

      “And of course the REASON that the Chinese banks aren’t big players on the international stage, is that amazingly they are even LESS trusted than the American mega banks.”

      Trusted by whom? The Chinese in China, Taiwan, Singapore, Malaysia, Indonesia?

      Let’s see who has the most USD cash reserves. There’s your answer!

      1. participant-observer-observed

        Referencing Wikipedia,

        I am not seeing USA in the top ten, are you?

        1 People’s Republic of China[1] 3,945,932 Sep 2014[1]
        2 Japan 1,260,548 Dec 2014[2]
        3 Saudi Arabia 740,400 Nov 2014[3]
        4 Switzerland 526,172 Nov 2014[4]
        5 Republic of China (Taiwan) 426,438 Nov 2014[5]
        6 Russia 386,200 Jan 9, 2015[6][7]
        7 Brazil 375,426 Nov 2014[8]
        8 Republic of Korea 363,095 Nov 2014[9]
        – Hong Kong 327,930 Nov 2014[10]
        9 India 319,239 Jan 2, 2015[11][12]
        10 Singapore 260,553 Nov 2014[13]

  7. MG

    ‘Fortress balance sheet’ with walls built of crystallized sugar and will melt at the first sign of any kind of deluge.

  8. participant-observer-observed

    “Poor baby. He’d be way more convincing if J.P. Morgan’s press office hadn’t been unable to produce a list I requested of all the legal settlements the nation’s biggest bank has been forced to enter in recent years. Neither could Better Markets, a Washington-based consumer watchdog that bedevils the too-big-to-fail set. From enabling Bernie Madoff to manipulating energy markets to defrauding credit-card customers, there are just too darn many scandals for either side to count. Better Markets once tried to make an intern compile a list but gave up — there were so many, at J.P. Morgan and elsewhere, they decided it would take a full-timer, President Dennis Kelleher said.”

    LOL We would call in Price Waterhouse Coopers again to help out but they are busy because they still haven’t finished counting the 2008 fallout books!

  9. Jack

    He’s only 58. Anyone think there really will come a time in the next 20 or 30 years when mob justice will string him and his kind up from lampposts? I wouldn’t actually like that scenario since it wouldn’t be real justice and if things go that way how long before a Reign of Terror sweeps the country and gets a lot of blameless people killed? But it certainly would be cathartic, wouldn’t it?

    On a related note, what grounds would there be for placing bankers under citizen’s arrest?

    California Penal Code 837. A private person may arrest another:

    1. For a public offense committed or attempted in his/her presence.
    2. When the person arrested has committed a felony, although not in his presence.
    3. When a felony has been in fact committed, and he or she has reasonable cause for believing the person arrested to have committed it.

    2 and 3 certainly seem to apply to the 2008 crash. We know and have plenty of proof crimes were committed, it’s just no ones wants to prosecute.

  10. Expat

    Let’s lock up Blankfein, Dimon, Prince, and Cheney in a cell with no food. Give them each a spork and come back in three weeks. Obviously Cheney will be the lone, well-nourished survivor at which point we lock him in a cell with 1000 rats and simply weld the door shut, because,well, do we really even care who wins?

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