JP Morgan Chase CEO Jamie Dimon gives us yet one more reason why Too Big to Fail is Too Big to Exist.
In the ossified culture of Too Big Finance, he just doesn't get the fact that:
- Just because you've been a member of the Lucky Sperm club doesn't mean that you know everything.
- Just because you can trot a clown car full of "analysts" out to justify a stock proice doesn't mean that they know everything.
- When people who aren't in your business are traumatically impacted by the culture of corruption, incompetence and greed in your business,they will demand input regarding your regulation - and those ideas will be valid.
- Telling regular people to trim back their lifestyles and lauding the currently unreasonable atmosphere of credit lockups (not to mention what Chase is doing on credit card interest and fees) while whining like a bitch about the horrid imposition of executive compensation caps really gets me to thinking seriously about the value of revolutionary tribunals, bullet-pockmarked walls and machine guns.
- When your 16 year old was left at home for a weekend with the keys to the car and an unlocked liquor cabinet, he screwed up. Tearful invocations of "trust me" don't cut it from him, so why should those invocations be acceptable from a Master of the Universe?
Deconstructing Jamie Dimon
I believe that in five years this country - and most banks - will be fine overall. This crisis will be a memory, and the traditional strengths of America will show through: its ability to come together and to innovate, and its work ethic. This is a country that likes to work, which I think is a good thing.
Fundamental parts of the banking business will not change. Serving corporations and customers with financial needs, ranging from loans to debt to M&A - that will still be taking place. Some may be happening in boutiques and investment banks, and some may be a part of bigger companies. That's fine - that's what competition is all about. Other things will change forever. Some of the structured products will never come back. Securitization markets will be smaller. And leverage will be lower forever. That's a good thing.
Make no real systemic changes. If you make systemic changes, I might not be able to replace the gold plated toilet in my annually replaced Gulfstream with a solid gold one. We'll do some cosmetic repair and promise to be stingy while we're grabbing up some really great buys on the cheap, all to our own benefit (and the benefit of our close friends in other executive boardrooms) - all while we get the PR boon of appearing responsible.
Another change will be in the way some banks pay people. There is no question that the compensation system on Wall Street helped distort the way financial companies defined risk. At J.P. Morgan Chase (JPM, Fortune 500) we already operated under best practices on compensation - paying a large portion in equity and rewarding people for sustainable, long-term performance. A lot of companies are now putting in place more stock-based systems and more clawbacks; they'll be doing a lot more looking at performance over an extended period. This will not get rid of all the problems, but it certainly will mitigate them.
See, we're caring and concerned, which is why I'm making caring, concerned sounding vague statements promising some sort of reform. Kinda. see the concerned look on my face, and hear my concerned tone?
In my whole life, I've never hired someone who was taking the job simply for money, not once. I wanted them to join because they wanted to build a great company over a long period of time. You certainly can sleep at night when you believe that you are building an institution by serving clients. I think that companies with too many people trying to make as much money as they can in the short run are the same companies that are no longer around.
Which is why I'm whining like such a sniveling bitch about executive compensation caps.
I'm not a psychologist, but if you ask me whether there has been a sea change in consumption in society, I would say yes. Having two cars instead of three or going out to dinner less and turning the lights off - those are not sacrifices the way you would traditionally mean sacrifices. If people are a little more thoughtful, more conservative, and if their fundamental values are more important than how much money they make, those are all good things. These changes are not going to destroy our country; they're good for our country.
Don't ask me, my fellow executives, or the powers here at JP Morgan Chase to make these changes though - they might become unmotivated and do a shittier job. Because when they were properly motivated by monster pay, they fucked up royally. Imagine how bad it could be if they weren't so motivated. I shudder at the thought.
In order to address the public anger and outrage over what has happened to our financial system, I think we in the banking community need to take some responsibility. Banks, including ours, should acknowledge that they made mistakes. We all have to look at the past 24 months and be absolutely humbled at the mistakes we made - and we made plenty of them. Yet it is also painful for our people to be vilified.
Maybe if we say we made mistakes, people will frown at us and say "you're right. Don't do it again."
And then they should walk away and trust us to fix it, because that is what we're all about - your trust. And we've done so well with it, done a bang-up job at that.
But don't yell at us too much or make us make systemic changes, because that might hurt our fragile feelings - after all, most of us were born to privilege, praise, access to fine educations and excess. We can't take it if you tell us too harshly that we fucked up.
J.P. Morgan Chase was asked to buy Bear Stearns for the sake of our country and financial system, and people here worked around the clock for six months to do the transaction. Then we accepted TARP money because we were asked to. But I think that TARP at this point has become a scarlet letter for some firms. Banks have also been criticized for improving lending standards. Yes, lending standards have gotten tougher, and that's reasonable. What is unreasonable is to say that the current crisis in part was a result of bad lending standards, and then to say we should keep standards that way.
We're noble and selfless.
I do believe that Ben Bernanke and Hank Paulson and Tim Geithner and John Dugan and Sheila Bair acted bravely and boldly in completely uncharted waters. I give them a lot of credit for doing that. It would have been far easier to be bureaucratic. And while it hasn't all worked out perfectly, they did their best. Now what we really need is a systemic regulator who can anticipate weaknesses in our financial system rather than react to them, spotting the next problems, not the current ones.
You've stopped the leak, sort of, now get out of our way, and give us a lackey from our own ranks that we can control, so that any real reform can be put off until our next giant catastrophe.
Ultimately, however, it is up to us to manage our own companies wisely. That is why we have what I call a fortress balance sheet. What that means is a significant amount of capital; high quality of capital; strong liquidity; honest, transparent reporting; and excellent risk measurement and management. We have more common tangible equity than many large financial institutions. We've always been that way, keeping plenty of liquidity. We have to balance risk taking with doing what's right for our customers and shareholders. I always say my grandma could have made those crazy profits by taking more risk. But are you building a better business?
Trust us. We really mean well this time. Hear all the impressive sounding words to get you to invest in us again?
We also need the fortress balance sheet so that we can seize opportunities and continue to invest in our businesses. It's not only about the quality of earnings; it's also about the quality of growth. The lesson here is a basic one: Management has to have the fortitude to do the right thing for shareholders. It can't be goaded and pushed into seeking out excessive growth that can't be justified.
Trust us - just don't push us too hard, because our frail, coddled psyches can't handle it.