"History is written by the victors." Winston Churchill
In the movie "The Unforgiven" a dime novel writer, W.W. Beauchamp, follows around an old gunslinger that he has christened the Duke of Death, only to find out from the film's antagonist that the Duke only gained his reputation by revising his ambush and shooting of a drunk unarmed man for no good reason. Upon hearing the real story, the Duke was henceforth known as the Duck of Death.
Jamie Dimon, the esteemed CEO of JP Morgan Chase has similar lies, oops, flies buzzing around his droppings. Shawn Tully is leading the bunch. One of his derivatives is Ryan Avent
Ryan Avent writes and edits The Economist's economics blog, Free Exchange, and has freelanced for a variety of publications on economic topics as well as urban development and environmental issues. Avent is also a graduate of the London School of Economics.
Here is a sample of Ryan's sycophancy of both Tully and Dimon. Here he cites 3 paragraphs from Tully and offers additional spin for the Dimon machine. I'll offer my counter-spin.
Fortune's Shawn Tully has a highly complimentary profile of Jamie Dimon which tries to explain exactly how he managed to dodge the subprime bullet:
One red flag came from the mortgage servicing business, the branch that sends out statements, handles escrow, and collects payments on $800 billion in home loans, its own and others'. During a regular monthly business review for the retail bank in October 2006, the chief of servicing said that late payments on subprime loans were rising at an alarming rate. The data showed that loans originated by competitors like First Franklin and American Home were performing three times worse than J.P. Morgan's subprime mortgages. "We concluded that underwriting standards were deteriorating across the industry," says Dimon.
In the investment bank, Winters and Black were discovering more reasons to be cautious. CDOs issue a range of bonds, from supposedly safe AAA-rated ones with relatively low yields to lower-rated ones with higher yields. Winters and Black saw that hedge funds, insurance companies, and other customers were clamoring for the high-yielding CDO paper and were less interested in the other stuff. That meant banks like Merrill and Citi were forced to hold billions of dollars of the AAA paper on their books.
What's wrong with that? Doesn't an AAA rating mean the securities are safe? Not necessarily. In 2006, AAA-rated CDO bonds yielded only two percentage points more than supersafe Treasury bills. So the market seemed to be saying that the bonds were solid. But Black and Winters concluded otherwise. Their yardstick, once again, was credit default swaps - insurance against bond failures. By late 2006 the cost of default swaps on subprime CDOs had jumped sharply. Winters and Black saw that once they bought credit default swaps to hedge the AAA CDO paper J.P. Morgan would have to hold, the fees from creating CDOs would vanish. "We saw no profit, and lots of risk, in holding subprime paper on our balance sheet," says Winters.
So - Ryan takes this from it -
This is genuinely impressive: Dimon and his lieutenants saw clearly in late 2006 two risks which wouldn't crystallize for most of us until the summer of 2007. Interestingly, both of them could be considered a variant of "model risk" -- the risk that financial models which have worked in the past will stop working in the future.
A sycophant says what? Ryan Avent is a true Wall Street bubble boy. He pretends to live in one and profits by inflating others. Like all of the other "Who knew there were ice bergs in the sub-arctic North Atlantic" Wall Street victimizers, Ryan ignores that people in power were screaming about those risks since the late 1990's. It was only the sheer power of jack-walleted bullies like Dimon and his banking lobby that allowed this mess to occur. Model Risk? It wasn't a risk. This was an impending failure. Designed. Guaranteed.
The first was the credit risk on mortgages. It seems an obvious worry now, but back in 2006, almost no one in the world of mortgage bonds spent any time on credit risk. The only risk which people worried about was prepayment risk; credit risk was a minor issue, partly because the debt was secured and partly because it had never been an issue in the past. (Which made it almost impossible to model.)
Seriously Ryan? You're 1/3 right, your banksters made sure noone was gonna repay early with the diseased loans they created. Credit risk however was a MAJOR issue. It was necessary for to create the guaranteed systemic failure that JP Morgan would profit from. And since when was credit risk never an issue in the past. It used to be the only issue.
He goes on and on with similar tripe, ignoring the fact that Jamie Dimon engineered this failure, because he knew he was not only going to profit by knowing which side to bet on, but he also had the tools to slice his competitor's throats, leaving him one of the last punks standing.
Avent closes with this:
And much as I'm skeptical of attempts by glossy magazines to lionize the CEO of the moment, I do think it's reasonable for Dimon personally to take a lot of the credit. As Tully shows, Dimon sets the tone for the risk-conscious management of the bank as a whole: essentially everyone there is a risk manager, and that function isn't outsourced to some marginalized and powerless group of resented risk officers.
Could Dimon have achieved something similar if he'd succeeded Sandy Weill at Citigroup? Frankly I doubt it: Citi really is too big and unwieldy to manage. But JP Morgan Chemical Chase Manhattan Bank One Bear Stearns Manny Hanny, it seems, isn't.
Ryan is right about another thing here: Dimon deserves credit. For flushing this country down the toilet. He was just as bad as any other bankster. He let JP Morgan push just as much garbage paper as nearly every other bank. But because of the "red flag...from the mortgage servicing business...on $800 billion in home loans" they knew when to dump their garbage before the bins filled up. That's dances on the line of insider trading. That is market exploitation and manipulation.
Ryan's last line not only showcases not only his juvenile approach and disdain for objectivity, but also exposes JP Morgan's true nature: to destroy and consume others.
UPDATE - Jamie recently was spewing out his garbage towards the auto industry -
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said General Motors Corp., which filed for bankruptcy protection today, "has been a great shame to this country."
You may be right but really, who are you Jamie, the pot or the kettle?
UPDATE II - Jamie's deep respect to our Treasury Secretary -
"Dear Timmy, we are happy to be able to pay back the $25 billion you lent us," Dimon said at the 31st Annual NYU International Hospitality Industry Investment Conference. "We hope you enjoyed the experience as much as we did."