Jamie Dimon: Inspiring Fear Among “Wealthy Private Clients” Even in Disgrace

I’ve got that wonderfully satisfied yet mildly sick feeling I used to get after eating too many sweets as a kid, what with all the schadenfreude directed at Jamie Dimon and his $2 billion loss.

But I’m particularly struck by this story, in which Gretchen Morgenson recounts how Jamie DImon called Paul Volcker and Richard Fisher “infantile” at a party a month ago, for warning about Too Big To Fail banks. That piece of news, like all the rest, added to my sugar buzz. But I was struck by this passage, describing Morgenson’s sources.

The party, sponsored by JPMorgan for a group of its wealthy private clients, took place at the sumptuous Mansion on Turtle Creek hotel. Mr. Dimon was on hand to thank the guests for their patronage and their trust.

During the party, Mr. Dimon took questions from the crowd, according to an attendee who spoke on condition of anonymity for fear of alienating the bank. One guest asked about the problem of too-big-to-fail banks and the arguments made by Mr. Volcker and Mr. Fisher.

Mr. Dimon responded that he had just two words to describe them: “infantile” and “nonfactual.” He went on to lambaste Mr. Fisher further, according to the attendee. Some in the room were taken aback by the comments.

That is, Morgenson’s source(s) is not some entry level trader. He or she is a private client, a very rich person, whom Dimon was brought in to suck up to. Not just suck up to, but “thank … for their trust.”

Here we are a month later and Dimon and JPM generally have proven that trust was misplaced. If it were me, I’d be pulling my money out of JPM before Dimon pulls an MF Global with it. Yet even still, this very rich person is afraid of “alienating the bank.”

Not that that’s surprising. After all, Goldman Sachs still commands the kind of fear that leads people to invest with it, even after it became clear it was suckering clients to buy shitpile that it could then short.

Still, if there’s a sign of just how perverse our finance system is right now, it’s that the rich people Dimon is supposed to be sucking up to actually fear him, even after he has been disgraced.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including Vice, Motherboard, the Nation, the Atlantic, Al Jazeera, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse in Grand Rapids, MI.

18 replies
  1. GulfCoastPirate says:

    Didn’t Jamie already know a month ago that these losses were coming?

    I can’t believe Obama didn’t break these big banks up.

  2. earlofhuntingdon says:

    A fool and his money are soon parted.

    Anyone with enough money to invest to interest Mr. Dimon should know that their interests will never trump Dimon’s, his organization’s, or those of the investment vehicles his people peddle.

    As Phoenixwoman and the Guardian report, Mr. Dimon’s current Job 1 is to lay off blame for his mismanagement onto others. Naturally, the first person he “fired” was his top woman; even the “rogue trader” who created Dimon’s latest loss is still working for him.

  3. quake says:

    @jo6pac: The problem is they are very smart in the same ironic sense as “the best and the brightest” in Halberstam’s book on the Viet Nam debacle. They work only within a restricted framework and never question the axioms. That’s fine in mathematics or religious studies, but in the real world it leads to incredibly intelligent (but wrong) deductions made from an incorrect starting point.

  4. Dan says:

    @GulfCoastPirate: My thoughts exactly. As I understand it, Dimon was aware the this shitpile three months ago.

    So, while Dimon was conning these patrons into keeping their money at JPMC, the company was in a nosedive.

  5. tjallen says:

    I find the bank’s explanations so far completely unbelievable.

    First they pretended that one or a couple traders caused this, as though big banks do not have layers of management, completely staffed oversight departments, completely staffed risk departments, and so on. Lots of people knew this trading/hedging was going on, and had input.

    Second, to pretend hedging is not part of the investment strategy is a big lie. Investing, and hedging the downside risk are two sides of one coin. You do not hedge without an investment to protect, and big investors do not invest without hedging. The two activities are joined completely. It’s not as though you have one without the other.

    Finally, the whole point to having a bank is that it is NOT sloppy and NOT subject to unsupervised bad judgement. The bank is supposed to be meticulously careful with money, and a bank is trusted for its good judgement, or at least trusted that all judgements are carefully supervised. If a bank is sloppy and has bad judgement, no one should ever put their money there. He admits to the public, oh we were sloppy and exercised bad judgement. Why would anyone put money in a bank that the leader admits to sloppiness and bad judgement?

    The absurdity of a bank leader saying his bank was sloppy and exercised bad judgement hints to me that actually they are covering up much worse sins (crimes and fraud).

  6. tjallen says:

    Also don’t miss that Dimon has said that the $2 Billion figure is “volatile” in the billion dollar range, in other words, 2 billion dollars plus or minus a couple more billion were lost, and we won’t know the full amount until they “responsibly unwind” the deals. How much you want to bet it is lots more than 2 Billion in losses at J P Morgan “bank” ?

  7. MadDog says:

    @tjallen:

    “…Finally, the whole point to having a bank is that it is NOT sloppy and NOT subject to unsupervised bad judgement. The bank is supposed to be meticulously careful with money, and a bank is trusted for its good judgement, or at least trusted that all judgements are carefully supervised…”

    Ahhh, but you see these are banks in name only. The marketing mirage of careful, thoughtful, and judicious fiduciaries of OPM is just that, a mirage.

    At any other income level than that of the One Percenters, these folks would be the greed-addicted gamblers playing the slots in Lost Wages or Ratlantic City with their very last dollar of grocery money.

    The simple truth is that banking isn’t banking anymore, and hasn’t been for a long while. If they do any real banking anymore, it is only as an afterthought to their greed-fueled casino addiction.

  8. tjallen says:

    @MadDog: I agree in general, except these “banks” are still banks under the law, with regulations they are required to follow to gain the protected status they enjoy. (both official protection like FDIC and informal “too big to fail” status). Also, the bank’s stockholders and the big institutional investors, who are far from naive, depend on the banking codes to protect their investments.

    I mainly made the naive-sounding remarks you quoted to imply that Dimon’s answer (we were sloppy, oops, sorry) was so absurd as to imply coverup of worse sins.

  9. P J Evans says:

    @tjallen:
    Add to that that the first person out is a VP. That’s where it fails for me: Jamie should be aware of what’s going on at that level, because these are his nearest associates.

  10. orionATL says:

    @quake:

    very nicely said!

    the dimone approach to the society that gives him his extraordinary privileges:

    take a “position” – financial/stock, m&a, political, or with respect to a debatable point on regulation –

    then sit on your argument and bellow loudly.

    that’s our jaimie-boy – jaime “bellowing bull” dimone.

    the fool on the hill, it turns out, really is a fool – a daemon fool.

  11. orionATL says:

    @tjallen:

    a point i would have made had you not.

    the “unwinding” of this mess may cost jp morgan chase an additional 3 to 8 billion dollars – can’t recall the cite for this off hand.

  12. Bob Schacht says:

    I think that the reason for the “fear” these private investors have of Dimon & Co. is because these credit default swaps etc. have grown so complex that the average investor, even most of the rich ones, have no idea of how to monitor their investments, so they depend on Dimon’s staff (and Goldman Sachs) to evaluate these instruments for them. In the old days, investment was pretty straightforward: You watched the price/earnings ratio, and made your decisions accordingly. I know that I have no idea how to manage my savings in today’s world, so I depend on Vanguard mutual funds. But what would I do if I found out that Vanguard was gambling with my money?

    JPM and Goldman Sachs love complexity. They have sufficiently sophisticated teams of accountants and lawyers to manage that complexity. They hate simple things like the Volcker Rule, so they try to make it more complicated. Elizabeth Warren is right: The key to real reform is to make everything simple again. Restore Glass-Steagall in modern form. We cannot afford to let the foxes write the rules on how to guard the hen house.

    Bob in AZ

  13. Richard S says:

    What was hard to watch was Obama giving Dimon a tongue bath on the View. Disgusting!

  14. earlofhuntingdon says:

    Fear may also be due to knowledge that the most toxic assets are still very much on the books of Dimon and his aristocratic peers. Among other things, that means bankers’ advice will be aimed at minimizing their own exposure, and increasing their fees and returns; it will not be aimed at maximizing investors’ or shareholders’ return (the latter for the obvious reason that management’s megabonuses must first be paid, regardless – or in spite of – huge losses or even nominal gains). That leaves the wealthy partly having to shift for themselves (others, similarly conflicted, will fill the gap Dimon and his cohort leave), something they haven’t done for quite some time.

  15. Bob Schacht says:

    @earlofhuntingdon: “…investors’ or shareholders’”
    We now know from an insider that Goldman-Sachs viewed investors and shareholders as what others might call “marks”–i.e., with contempt. The G-S investors and shareholders who don’t realize this, are inviting themselves to be fleeced. And they will be. And why should things be any different at JPM?

    Bob in AZ

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