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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: JPMorgan Chase
May 21, 2013 at 11:00 AM

JPMorgan Chase’s Dimon wins, again

JPMorgan Chase Chairman and CEO Jamie Dimon  (Mark Wilson/Getty Images)

JPMorgan Chase Chairman and CEO Jamie Dimon (Mark Wilson/Getty Images)

It should be no surprise that Jamie Dimon won his bid to keep both the chairman and chief executive titles at JPMorgan Chase. The company and lead director Lee Raymond, himself a retired chairman and CEO of Exxon, lobbied shareholders hard. Dimon implied he might resign if he lost the chairman’s job. Scholars at the Stanford Graduate School of Business, looking at 20 years of data, put out a report claiming that splitting the two roles had little effect on stock price or future performance. Considering that relatively few major U.S. corporations separate the jobs — a practice corporate governance experts advise for proper checks on management power — this survey may be limited, but no matter. Most of all, JPM shares have been on a steady climb for the past year.

In the end, it wasn’t even close, even though Institutional Shareholder Services Inc. and Glass Lewis & Co., influential advisory firms to institutional investors, supported stripping Dimon of the chairman’s job and unseating directors on the risk committee. The resolution itself received 32 percent support from shareholders who voted, down from 40 percent for a similar resolution in 2012. Dimon himself received 98 percent of the vote for the board. And for all the sturm und drang leading up to today’s annual meeting in Tampa, the resolution was non-binding. The bank was not required to implement it.

On top of the stock price and the clubby group-think of boards and institutional investors, Dimon still has his aura. He ably led the bank through the worst financial crash since the Great Depression. He extended its national retail franchise by purchasing the good part of Washington Mutual during the crisis. Perhaps as important, he has tremendous influence in Washington and has probably been the most effective individual in keeping the Dodd-Frank “re-regulation” weak, championing the big banks and gutting an effort that would have put tighter controls on derivatives. Against all this, the $2 billion London Whale trading loss is not much when assayed by the big institutions that vote most of the bank’s shares. In addition, the board whacked Dimon’s compensation as penance, the head of the division responsible for the loss was forced out and some $100 million in compensation to the traders was clawed back. This is more accountability than many big companies provide.


Comments | More in Banking, JPMorgan Chase, Washington Mutual

May 6, 2013 at 10:38 AM

Dimon in the headlights as shareholders decide his fate

Jamie Dimon, chairman and chief executive of JPMorgan Chase and acquirer of Washington Mutual, may no longer be “America’s least-hated big banker” — admittedly a low bar. Last year, he presided over the “London Whale” trading fiasco, a bet gone wrong that cost the bank $6.2 billion. Investigation of the disaster further tarnished the bank’s once glowing reputation. Both the Federal Reserve and the Office of the Comptroller of the Currency censured JPM for poor oversight of its trading (read gambling) and also for lax controls against potential money laundering. A U.S. Senate subcommittee said the bank misled investors.

Now, Dimon is facing a proposal that the chairman and chief executive officer jobs be separated, and three JPM directors not be re-elected when the firm holds its annual meeting May 21st. Institutional Shareholder Services, an investment advisory firm, has backed the initiative. ISS cited “material failures of stewardship and risk oversight.” The three directors targeted are David Cote, James Crown and Ellen Flutter, all on the board’s risk policy committee.

Not to worry. Even Warren Buffett has ridden to Dimon’s defense, telling CNBC that Dimon should keep both jobs. In his annual letter to shareholders, which came out last month, Dimon wrote that the Whale “was extremely embarrassing, opened us up to severe criticism, damaged our reputation and resulted in litigation and investigations that are still ongoing.” He promised to do what it takes to make JPM “the safest and soundest bank on the planet.” But earlier this year he threatened to leave if he loses both jobs, and that worries the Wall Street conventional wisdom, which holds that Dimon is indispensable. Also, note how a similar effort to separate the two jobs turned out at Boeing. At least JPM’s board forced Jamie to take a one-year pay whack to show some accountability.


Comments | More in Banking, JPMorgan Chase, Washington Mutual

March 18, 2013 at 10:29 AM

‘In our face’ capitalism

The newest hire in the mail room of Boeing’s headquarters could have done as good a job as Jim McNerney last year, as the radical outsourcing he oversaw and encouraged led to the grounding of the 787 Dreamliner. Even so, Boeing’s lapdog board gave McNerney a 20 percent raise, to $27.5 million. At least Jamie Dimon, CEO of JPMorgan Chase had his pay cut in half, to a pauperish $11.5 million for the “London Whale” trading debacle. But a new Senate report shows how Dimon, supposedly America’s smartest and most prudent banker — the guy who bought Washington Mutual for chump change — is presiding over a financial system every bit as dangerous as the one that brought on the Great Recession.

Gretchen Morgenson of the New York Times writes:

Its pages of e-mails, testimony, telephone transcripts and analysis show that traders in the bank’s chief investment office hid money-losing derivatives positions, if only temporarily; that risk limits created by the bank to protect itself were exceeded routinely; that risk models were changed to minimize losses; that bank executives misled investors and the public; and that regulations are only as good as the regulators enforcing them.

Why do Dimon or McNerney still have jobs? Because the cult of the imperial CEO is alive and well, despite the executive malpractice and outright fraud that brought on the 2000 recession (Enron, HealthSouth, Tyco, etc. etc.) as well as the financial crash of 2008. They do whatever they want. Politicians quail before their contribution-bearing lobbyists. Boards are worthless. The message to average Americans who lost jobs, net worth and economic mobility: In your face.


Comments | More in Aerospace/Boeing, Banking, Corporate crime, Corporate governance, Executive compensation, JPMorgan Chase, Washington Mutual

June 13, 2012 at 9:50 AM

Jamie Dimon and ‘Old Testament’ justice

Testimony before the Muppets of the Senate Banking Committee by JPMorgan Chase Chairman and Chief Executive Jamie Dimon has taken a break for lunch. It’s a chance to take stock. First, some givens. The “banks own the place,” as Sen. Dick Durbin famously said (too-big-to-exist bank stocks are rallying). ProPublica details the cozy relationship here. Second, Dimon is smart, smooth, persuasive and, when he wants to be, charismatic. He gets what he wants (e.g., Washington Mutual).

Apparently, Dimon’s defense of the $2-billion-plus trading loss is that “Basel made them do it.” Basel being the international banking regulations that were set to make banks do a more rigorous assessment of their assets and setting aside capital to protect against trouble. Dimon said before the glazed eyes of the Muppet-senators:

In December 2011, as part of a firm-wide effort in anticipation of new Basel capital requirements, we instructed (Chief Investment Office) to reduce risk-weighted assets and associated risk. To achieve this in the synthetic credit portfolio, the CIO could have simply reduced its existing positions; instead, starting in mid-January, it embarked on a complex strategy that entailed adding positions that it believed would offset the existing ones. This strategy, however, ended up creating a portfolio that was larger and ultimately resulted in even more complex and hard-to-manage risks. This portfolio morphed into something that, rather than protect the firm, created new and potentially larger risks. As a result, we have let a lot of people down, and we are sorry for it.


Comments | More in Bailout, Banking, JPMorgan Chase