Receiving Wide Coverage ...
The Punchin' Jamie Show: This weekend the news was all JPMorgan and Jamie Dimon fallout, all the time. We expect pretty much the same through Tuesday, when the bank's annual meeting is scheduled. Once again the only sane way we can think of to summarize the deluge of information, analysis and pontification is to break it down by theme. Take a deep breath, folks, here we go again...
Heads roll. Three JPMorgan managers based in London are "expected to leave" (in the Journal's careful wording) this week, including Ina Drew, the chief investment officer (with an R; she runs, or ran, the chief investment office — no R — where the $2 billion bungle took place). A fourth employee, trader Bruno Iksil, a/k/a the London Whale, is also "likely" to depart, the Journal says. JPMorgan is also conducting an internal probe into what went wrong; one of the questions being asked is whether it was wise to put the CIO in London, so far away from the New York headquarters. Wall Street Journal, New York Times, Financial Times
About those heads: The Journal and Bloomberg's Max Abelson both profiled the departing Drew. The Journal calls her a "survivor," since she's been with JPMorgan Chase since the days it (or, rather, one of its main constituent parts) was known as Chemical. Abelson depicts Drew as a low-key but avid risk-taker. A piece from 1993 about Drew in Crain's New York Business has been floating around the Internet. (It's from one of those "40 Under 40" lists.)
What It All Means, Wall Street Edition: The Journal says employees at JPMorgan are worried that the Whale's blub, er, flub, will hurt their reputations. Rival investment banks and megabanks that also have been resisting tougher regulation are painfully aware of the plays-into-the-hands-of-pundits thing that Jamie mentioned last week. And the debacle could give Moody's one more reason to make good on its threat to downgrade a host of a large institutions, which would force those firms to post more collateral to counterparties. The "Heard on the Street" column goes into more detail on the Moody's angle. In the Times, Peter Eavis notes that the CIO's ill-fated bets show that there's a fuzzy line between proprietary trading (verboten per Volcker) and supposedly more wholesome activities like portfolio hedging and market making. Eavis also points out that JPMorgan is far from alone among its peers in being an active trader, especially given the excess liquidity in today's environment.
What It All Means, Washington Edition: In his Times column, Paul Krugman gloats at the "poetic justice" of Dimon suffering this embarrassment after his turn as "the point man in Wall Street's fight to delay, water down and/or repeal financial reform." The big trading loss, Krugman writes, is "an object demonstration of why Wall Street does, in fact, need to be regulated." Along similar lines, the FT says that until the CIO's ginormous goof, "Wall Street seemed to be winning the war on the Volcker rule," as evidence by the delayed implementation. Now, reformers have new ammunition … jeez this is all starting to sound repetitive. Wasn't everyone making all these points Friday morning? Coming from a different perspective, an editorial in the Journal laments that the trading loss "will become an excuse to give regulators even more power, when what taxpayers really want is a system that ends too-big-to-fail banks." The FT also interviews Tom Hoenig, vice chairman of the FDIC, who wants broker-dealer operations separated from banks, particularly the big, interconnected ones; the interview took place before the JPM blowup was disclosed. A story published Saturday in the Times details JPMorgan's efforts after Dodd-Frank was enacted to lobby regulators to create a loophole in the Volcker rule to allow portfolio hedging. A news article in the Journal suggests that JPMorgan could lose its lobbying clout in the capital, even with Republicans. The article notes that the first lawmaker to call for hearings on the JPM trading loss was Sen. Bob Corker, a critic of bank regulation from the GOP side of the aisle. New York magazine reports that "Dimonfreude" has become a meme, although the ha-ha-payback-time-what-goes-around-comes-around sentiment seems to be found mostly among politicos like Carl Levin and, uhm, pundits like Krugman; rival bankers at places like Goldman Sachs aren't indulging. (They probably can't afford to — see item directly above.) Oh, and we almost forgot — the SEC’s investigating the trades, too.
Stay Tuned: At tomorrow's annual meeting, "some shareholders may be galled by the prospect of blessing … Dimon's $23 million pay packet for 2011 and a $15.5 million 2011 payout for Ina Drew," according to another "Heard on the Street" item. However, the column notes that most of the ballots in the annual say-on-pay vote were probably cast before the trading loss was disclosed on Thursday. On the other hand, our friend Francine McKenna writes in her latest BankThink column that shareholders can still change their votes if they come to the meeting in person or contact the corporate secretary. The question is whether the recent gaffe is sufficient motivation.
And, Lastly …
We forgot to set our DVR to record "Meet the Press" on Sunday, but you can watch Dimon's appearance on the NBC show, in which he said he was "dead wrong" to scoff at early press reports about the Whale's trades, right here.
