It has been a difficult year for Jamie Dimon, Chairman and CEO of JPMorgan Chase. On top of the loss of over $6 billion generated by the “London Whale,” Dimon and the bank appear to have become the favorite target of regulators. “Even as regulators on Thursday announced a settlement over the ‘London whale’ trading loss, the weariness expressed at the board meeting underscored the bank’s stunning fall from favor. JPMorgan emerged from the financial crisis healthier and more profitable than its rivals, and its chief executive, Jamie Dimon, was hailed as a wise and responsible manager. In just 18 months, however, JPMorgan has swung from Washington’s favorite bank to financial punching bag.” (New York Times, DealB%k, 9/19/13) We learned earlier this month that the bank established a legal reserve of $23 billion, which lead to its first quarterly loss ever on Dimon’s watch. Warren Buffett weighed in on CNBC, “If a cop follows you for 500 miles, you’re going to get a ticket. And you’ve had a lot of cops been following a long time and they’re going to write some tickets.” Buffett also added, “Babe Ruth had 60 home runs that one year. I don’t know how many times he struck out. I don’t care.” (New York Times, DealB%k, 10/16/13)
While Dimon still appears to have the full support of his board and his belief in a strong balance sheet has served him well, there is still the question of fairness. We need to recall that most, but not all of these settlements resulted from JPMorgan acquiring Bear Stearns and Washington Mutual during the crisis. “Bear Stearns would have gone down if JPMorgan hadn’t acquired it,” Henry M. Paulson, Jr., the former Treasury secretary, said earlier this month on CNBC. ‘If that had happened, it would have been a real disaster,’ said Mr. Paulson, who helped oversee both deals.” (New York Times, DealB%k, 10/21/13)
We need strong global banks. While I believe in our local and regional banks, our largest corporations, which compete in global markets, need the services of our largest banks. Are we putting JPMorgan at a disadvantage versus its global competitors and at the same time hurting the company’s shareholders? (I should add that I have been a shareholder in the past, but at this time I do not own any shares of JPMorgan.) I am rooting for JPMorgan, Bank of America, Citi and Wells Fargo to get back to business and for the settlements with the government to come to an end.