What It Costs the Worst Bank to Be Truly Evil
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Who's in Charge Here?
You'd think shareholders would be up in arms at Dimon and the Board of Directors for mismanaging their bank so badly. And yet they're all still in their seats, thanks in part to the way large corporations are allowed to manipulate their own corporate governance. Dimon is both CEO and Board Chair, an extraordinarily privileged position he was not asked to give up after the London Whale scandal.
And about that scandal: There are four things worth knowing about the Whale:
- The trades were illegal, according to all the evidence.
- Despite the bank's bragging about its risk management model -- which it publicized widely as a lure to investors -- that model wasn't followed by the London office.
- Jamie Dimon's publicists and politician friends have burnished his reputation as "America's best banker" - and he bypassed his bank's org chart so that the London unit reported directly to him.
- His friends and publicists have also burnished his reputation as the country's most ethical banker. As Henny Youngman used to say, How do ya like me now?
We've been all over JPMorgan Chase and Jamie Dimon for a long time. (See below for a partial listing), so we're glad to see the public tide finally turning against the bank and its leader. One of the triggers for that shift was the Senate's report on the bank's trade, which is as damning in its own way as Rosner's.
The media climate's changing, too. Lynn Parramore of Alternet has written a piececalled "The Spectacular Rise and Fall of Jamie Dimon, Wall Street's Golden Boy." A Google search of "Jamie Dimon" and "tarnished" (as in reputation) yields articles from USA Today, Bloomberg News, and WGBH News. And Dimon was finally forced to resign his seat on the Board of the New York Federal Reserve.
At long last, people are openly questioning the competence and ethics of Dimon and his team.
But nothing's really happened. Dimon's still the boss. Nobody's been charged with a crime. The only 'punishment'the bank has faced has been fines which, while massive by ordinary standards, are a slap on the wrist considering the gravity of the offenses.
The bank executives who committed those crimes haven't paid a penny in restitution, nor have they been charged with crimes. Those fines have been paid by the bank's shareholders, who in some cases were the victims of the very crimes that led to the fine in the first place!
It's like we said the other day about Cyprus: In banking, the victim's expected to pay restitution to the criminal.
Chase's most recent annual report, the document which represents it to current and prospective shareholders, boasts of a "laser focus on managing expenses" and states that "As a business, we are guided by our objectives to expand and deepen client relationships, invest consistently in our franchise, and maintain our risk and expense discipline."
How's that working out for you?
Senators came down hard on these malefactors last week -- rhetorically, anyway. But the government isn't cracking down on this den of iniquity. It's enabling it. As Rosner notes, "Rather than being driven by the strength of its operations and management, many of JPM's returns appear to be supported by an implied guarantee (emphasis Rosner's) it receives as a too-big-to-fail institution."
That's right: Instead of cracking down on these guys, the government is helping them get even richer -- and helping their out-of-control bank get even bigger and more dangerous. And they're doing it at a time when the Attorney General of the United States has made it clear that he will not prosecute criminals at a too-big-to-fail bank like Chase. Talk is cheap, but actions speak louder than rhetoric.