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Dimon in the rough

4 min read

Modern Money

So Jamie Dimon is human after all. His firm has finally missed the fairway and found itself in the rough. His shareholders, employees and probably the White House are desperately hoping he can reach into his bag, grab his favorite club and pull off a Bubba Watson or a Phil Mickelson. Meanwhile, some rivals on Wall Street and antagonists in Washington are likely hoping he pulls a Jean van de Velde.

With Dimon facing some serious challenges in the coming days and weeks, a wise caddy would tell him to focus on these five key things.

  1. Keep your focus today. It is simply bad luck that this “tempest in a teapot” blew up right before JPMorgan’s annual shareholder meeting as I suspect Dimon will receive questions about little else. Accountability will be key with that audience, so Dimon must highlight the swift actions that have been taken in that regard. As of this writing, Chief Investment Officer Ina Drew was out, while London-based Achilles Macris and Javier Martin-Artajo were on the hot seat. (Am I the only one who sees something eerily mythic in a Wall Street titan being felled by an Achilles?)
  2. $3 billion is still a lot of money to some people.* Dimon has chosen to highlight the strength of JPMorgan’s balance sheet by noting that the $3 billion loss won’t have a crippling affect on the bank’s overall performance. That approach is logical because his job is to exude confidence to his shareholders and the Street. But the flip-side of that message might prove messy down the road. There are large portions of the public and more than a few policymakers who have been arguing that the major Wall Street banks are simply too big. Too big to fail … Too big to manage … whatever. Dimon is essentially bragging to those people that his firm is so big that it can lose $3 billion and barely even feel it. Don’t supply such perfect ammunition for the people who blame Wall Street for the financial crisis, for the recession, for the loss of their job, etc.
  3. Optics matter. Dimon once said regulatory proposals to increase capital buffers would be “the nail in our coffin for big American banks.” So it is a bit awkward, to say the least, that he can now act rather glib about losing $3 billion simply because his firm enjoys a rather healthy … ummm … capital buffer. And who can forget the skewering Dimon gave Federal Reserve Chairman Ben Bernanke less than one year ago. The one where Dimon asked Bernanke a rambling “question” that included a few choice brag lines about how Wall Street had cleaned up its act: “Most of the bad actors are gone” … “Most very exotic derivatives are gone.” Those statements don’t look so smooth now. It is time to let someone else carry the anti-regulation torch for Wall Street.
  4. Don’t worry about the SEC. There is a big difference between unwise conduct and illegal conduct. Even if a Securities and Exchange Commission investigation does reveal any illegal conduct, we are talking about the SEC here. They will announce a fine. No one will have to admit any wrongdoing. And everyone will be able to get back to business. But Dimon has got to remember that he can’t actually say he isn’t worried about the SEC. Memorize the following phrase: “We plan to cooperate fully with the SEC and are eager to see what the investigation reveals.” Get ready to say it … a lot.
  5. They still love you in the clubhouse. There has been a lot of speculation about whether Dimon will lose his influence on Wall Street and in Washington. That’s nonsense. When Dimon calls, President Barack Obama is still going to answer the phone. Bernanke will continue to defer to Dimon. The only difference is that Dimon will have to step back from the spotlight and exert his influence in private.

*The loss has been widely reported as $2 billion, but Dimon has estimated that it could grow by an additional billion.