Jamie Dimon: The Face of America’s Free Market Politburo

Sorry for the Jamie Dimon obsession today, but the extended article from his interview with the Financial Time is just as infuriating as his whining about “anti-American” banking rules. In this one, this so-called capitalist lays out his solution to mortgage woes: a Larry Summers figure should invite a bunch of public companies down to DC for a private meeting at which they’ll decide what the market will look like.

Meanwhile, the increasingly distant relationship between politicians and financial leaders has, Mr Dimon suggests, caused its own problems. In the 1990s, Larry Summers as Treasury secretary allegedly phoned a recalcitrant regulator and told her he had 13 bankers in his office who said proposed rules on derivatives could create economic chaos. Reformers saw this as supremely unhealthy. But a meeting between regulators, banks and investors could usher in a grand bargain over the future of mortgage finance, according to Mr Dimon.

“The right way … is to convene all the people involved in the markets, discuss all the plusses and minuses, talk about what you want, design a new mortgage market and go,” he says.

“We’re raring to go. If someone called me and said: ‘Come on down’, I’d get on an airplane and do it today. And so would every major bank.”

As it is, the various plans for mortgages – like other regulations – create overlap that ends up with an unworkable system, he says. “You could design several different types of mortgage market that would work but you can’t design a warthog – you can’t have it be non-recourse, pre-payable, fixed rate, 500 days to foreclose and think you can have a mortgage market. It’s got to work for investors, it’s got to work for everybody.”

Dimon (or the FT–this is a bit unclear) is advocating doing what Summers did when he forced Sheila Bair to back off her consideration of regulations on derivatives. Most people now believe that Bair was right in that dispute, that regulations would have limited the damage of our recent crash. But Dimon, it appears, would like to repeat the short-sighted decisions about regulation that got us into this mess.

And note how “all the people involved in the markets” for Dimon includes regulators, banksters, and investors, but no actual consumers?

Can’t let the riff raff into the Politburo.

Note, too, that Dimon’s promise that “all the major banks” would be at the table if called comes just a week after the banksters blew off Tom Miller and the other Attorneys General trying to give them a Get Out of Jail Free card for their mortgage servicing abuses.

On that note, Dimon whines that the crappy housing market has held back the banks’ recovery. That’s like saying, “If people would just recover from their radiation poisoning more quickly, the country would be better able to recover from having nuked them.” There’s no self-consciousness here, no admission that the woes of the banks (and the economy generally) stem from the banks having marketed of a bunch of shitpile put together using faulty securitization in the first place.

In a normal recovery, some of these issues would diminish in significance. A resurgent housing market would not only help bank profits and cushion the impact of regulation but stem the lawsuits that have engulfed the industry.

If mortgage-backed securities perform better, investors have little incentive to sue for the way banks mishandled their construction.

If only investors didn’t have good reason to sue, they wouldn’t sue.

Which sort of makes clear that when Dimon complains about double jeopardy, he is again bidding for an AG settlement that releases the banks from their other shitpile liability.

But we are not there. “My guess is the legacy litigation is going to go on for three to 10 years because every securitisation is different,” says Mr Dimon. “We are geared up and we’ve hired some top experts that do nothing but this. We’ve put away billions of dollars [in reserves against losses] already. It’s an unfortunate drag on the company but we’re still looking at the mortgage business as a very important business going forward and these are legacy problems that will have to work themselves out.”

One litigation issue that participants say should be settled is the foreclosure mess, where banks improperly processed the mechanism for repossessing homes of people not making their payments.

State attorneys-general want a big financial settlement, including help for struggling homeowners. Banks, though, will only pay up if they get a broad release from future litigation. “Obviously some errors were made regarding who signed off on files,” says Mr Dimon. “We are working hard to settle these matters. But you can’t settle something and be subject to double jeopardy – that’s the issue. But we’re willing to be punished for what we’ve done wrong.”

Dimon, of course, is pretending that robo-signing fraud was the only crime the banks committed here, and that the big banks don’t have a range of liabilities.

Altogether, this poor capitalist is whining and bitching that the government is not helping banks avoid the consequences of their past decisions.

17 replies
  1. orionATL says:

    the first paragraph of the article:

    In 2009, as Citibank’s share price plunged to less than a dollar and HSBC’s profits dropped to less than a third of what they’d been in 2007, Standard Chartered Bank posted its seventh successive year of income and profit growth—without any help from emergency government funding. While the financial industry as a whole was facing a crisis of legitimacy, Standard Chartered was raising its standing with key customers and regulators alike, increasing its overall lending by 13%, its mortgage lending by 21%, and its loans to small and medium-sized businesses by 14%.

    What accounts for the bank’s strong performance in such a troubling time? One explanation is that before the downturn, Standard Chartered had developed a distinctive business model, which everyone faithfully continued to execute. “We had a very clear strategy, and we stuck to it. Everybody understood it, and we were very, very focused,” says the bank’s CEO, Peter Sands.

  2. orionATL says:

    my personal view expressed here is that leadership THE critical element necessary for dealing with the endemic moral and legal corruption afflicting american politics and american government.

    of bank ceo sands and other ceo’s they discuss, the hbr authors write:

    “While its model and its culture, as well as its geographic footprint, gave Standard Chartered clear advantages, what really made the difference, we contend, was a new take on leadership. Sands is one of a group of CEOs who have been evolving a superior approach to running their companies. We call them “higher-ambition leaders” because, unlike many executives, they are not content with achieving only strong economic returns. Rather, they strive to generate high performance on three fronts at once: creating long-term economic value, producing significant benefits for the wider community, and building robust social capital within their organizations. Many CEOs, of course, do well in one of these areas, but what sets higher-ambition leaders apart is their ability to unlock their organizations’ full human and business potential to excel in all three.”

  3. orionATL says:

    volvo ceo leif johannson is also discussed in the article including how he sold off the auto part but kept and streamlined volvo trucks.

  4. scribe says:

    Keep in mind that, when Jamie Dimon talks, it’s Barack Obama with his hand up his shirt, moving his lips.

    I’ve said it before and I’ll say it again: what do you expect when Wall Street is being run by the characters out of “American Psycho”?

    And, OT, EW, when are you going to get pushbuttons so I can italicize, bold and such?

  5. der says:

    I think it was Brooksley Born that got the 13 bankers call.

    If he was sitting in a bar with Yves Smith I think she’d hit him upside the head with a beer bottle, likely a full one. It’s that shit-pile creating MERS entity the bankers put together throwing centuries of land title law out the window so they had more to pad the “profit” bin of their bonus total that’s got the choke-hold on mortgage lending. Also, too what comes with that tax/fee avoidance to county registers of deeds are all the perks one gets being a Master-of-the-Universe. Now title companies won’t issue policies without knowing who holds the note and without title insurance banks won’t lend. The MOTU’s are too arrogant to admit how their good ideas were shit and they screwed it all up. They should be in a pillory set in the middle of the town mocked and have rotten tomatoes thrown at them until they piss red. Fuckers.

  6. MadDog says:

    Shorter Jamie Dimon: “If the US won’t let us be in the criminal gang, the rest of the gang will get to steal and keep all of the money!”

    Call a wambulance Jamie!

  7. MadDog says:

    And I really think this is the epitome of Jamie’s whining:

    “…But we’re willing to be punished for what we’ve done wrong…”

    As in: “A slap on the wrist is ok, but don’t stop us from committing these crimes again!”

  8. rkilowatt says:

    …Summers did when he forced Sheila Bair to back off her consideration of regulations on derivatives…

    Do you mean Brooksley Born? Born was snuffed when she recognizd the threat of unregulated financial instruments, under B Clinton.

  9. klynn says:

    “Obviously some errors were made regarding who signed off on files,” says Mr Dimon.

    Obviously “some” errors were made?


    Good lord. Is he going for the “Understatement of the Year” award?

  10. KWinIA says:

    I’m happy to be called a customer, but being called a consumer is offensive. I select and purchase things. Some of them, I eat. Calling me a consumer is like calling me an eater, long a pejorative conservative term for unproductive people.

  11. Fractal says:

    Note, as in the Dimon piece, not a single mention of “fraud” but instead a focus on how BAC must “atone” for its (wait for it …..) “excesses.” I.e., BAC won’t even admit to “sins,” which is what normally requires atonement, let alone admit to “fraud.”

    “And when it comes to the biggest problem facing the bank, how much it will cost to atone for the excesses associated with the housing bubble, the options are even less appetizing.

    “Angry investors are trying to force Bank of America, and other large banks, to buy back billions of dollars worth of mortgages that have defaulted, arguing that the home loans did not conform to the original underwriting standards or were originated with little evidence of adequate assets on the part of borrowers.

    “In other cases, investors including the federal government and the insurance giant A.I.G. want to recover tens of billions of dollars from the big banks for losses on securities they assembled from now-troubled subprime mortgages.

    “For Bank of America, the bulk of those losses stem from the 2008 acquisition of Countrywide Financial, the subprime giant. While Mr. Moynihan has not ruled out putting the Countrywide unit into bankruptcy, such a step would make it harder for healthy divisions of the company to borrow, Mr. Kotowski of Oppenheimer warned.

    “To make matters worse, Mr. Kotowski said, the cost of the mortgage mess has mushroomed, undermining confidence more broadly in how the bank has handled the issue.

    “At an investor conference last November, Mr. Moynihan vowed ‘hand-to-hand combat’ to fight these claims, but the settlements by Bank of America in January and June were a shift away from that strategy in an effort to put the litigation behind the company and resolve the resulting uncertainty.

    “The legal onslaught has only intensified, however, with more lawsuits filed on Sept. 2 by the federal agency that oversees mortgage giants Fannie Mae and Freddie Mac, and the fears about how much the mortgage implosion will eventually cost Bank of America loom as large as ever.

    ” ‘The mortgage risk is everything for Bank of America,’ said Glenn Schorr, an analyst with Nomura. ‘They can take several billion dollars out in costs, but if they lose the big numbers people are talking about in terms of mortgages, the cost cuts won’t make enough of an impact.’

    “But Mr. Schorr said that cost cuts also signal that Bank of America could address what is within its reach to influence. ‘They can’t control Europe imploding or this enormous mortgage risk,’ he said. ‘But they can try to control their operating performance.’ “

  12. rugger9 says:

    Why pay the piper if you can get the taxpayers to bail you out?

    The real issue is the ponzi-like bets made by the CDS and MBS owners on whether the loans would bust. What essentially started as the hedge against downturn became a revenue stream, and 3-4 dollars made of vapor existed in addition to the actual dollar represented by the property. IMHO that’s what the TARP money paid off, not the small business lending we were led to believe by Paulson and his cronies. So, of course the $$$ was no longer there for lending, Dimon paid himself and his friends off. First. Since he was so much more clever than the rest of us, he felt he deserved a free pass.

    Jail time and restitution, make ’em live in a barrel.

  13. P J Evans says:

    Jamie Dimon is so qualified to talk about how business should work. Not.
    He ought to be in jail, right next to Summers and Geithner, for extremely grand theft and fraud.

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