Institutional Investors Love Sleazy Bankers
Jamie Dimon easily beat back a non-binding shareholders proposal to split the jobs of Chairman and CEO at JPMorgan Chase, winning 68% of the vote. Institutional investors own over 73% of the stock of JPM. That means that many if not most mutual fund managers and plenty of pension fund managers and endowment managers voted to keep in office a man who has presided over a string of law-skirting but money-making operations. JPMorgan’s list of offenses, described here, have earned the bank tens of billions at the cost of only billions in fines, penalties and put-backs from bad mortgages. And the bank estimates that there is more coming, maybe $6 billion more than it has set aside in reserves. JPM’s earnings are up, boosted by release of some $1.5 billion from reserves, but with a bit of luck, the hit will come later, now that Dimon is safe.
Mutual fund managers and other money managers think that the only important thing is the bottom line, and it’s a fact that ignoring the law delivers truckloads of money to the bottom line. That’s especially true for banks that are too big to prosecute. Eventually law enforcement shows up, in the form of bank fetishists like Lannie Breuer and his faint-hearted boss, Eric Holder, but what can they do? A minor fine, requiring the bank to give up some of its gains? An unpleasant press release? Maybe a grilling before some mild Senators, more impressed by the possibility of a campaign contribution than any interest in locking up wrong-doers?
I particularly like the coverage in the Washington Post, under the title, How Washington Humbled JP Morgan Chase Chief Jamie Dimon, in which we learn that Washington didn’t humble Dimon at all. Legal troubles, like those reported by Senator Carl Levin of the Senate Permanent Subcommittee on Investigations, are irrelevant to Dimon, who wasn’t at the hearing to take any of the responsibility for the London Whale Trade losses or misstatements.
And I just love the coverage given to the Capo di tutti Capi by Andrew Ross Sorkin and Steven Davidoff in the New York Times Dealbook blog. To read their praise of JPM and its Great Man, you’d never know that the bank might have side-stepped a few legal rules on its way to being the Greatest Bank Ever! They were aided in their efforts by the lobbying of such privileged rich white old men as Warren Buffett, Rupert Murdoch, Michael Bloomberg, and Hank Paulson.
I don’t know how much difference it made,though. For money managers, the only important issue is earnings. For that you need a top banker who is utterly indifferent to legal matters, willing to ignore the Weapons of Mass Destruction Proliferators Sanctions Regulations and the Iranian Transactions Regulations. And you need a Chairman/CEO who can fast talk his way out of trouble, like Dimon with his Fortress Balance Sheet and his presidential cuff-links. Isn’t it wonderful that people’s retirement is in part dependent of the ability of Jamie Dimon and his sleazy bank to make money?
But the real message these institutional investors and the privileged white rich old menare sending is that Dimon is their guy, and that politicians and regulators should do as he says. Right now, Dimon wants to defeat Brown-Vitter, which would force JPM to raise equity. Higher equity reduces the amount of money Dimon and his lieutenants can borrow, and it’s borrowing that increases the amount they can gamble for their profit and the taxpayers’ loss. That might mean lower compensation for the banksters. Gasp! But the win restores any political strength Dimon may have lost, and increases his ability to stop Brown-Vitter. That hurts everybody by leaving the mega-banks with their Obama/Holder/Breuer/Congressional approved status as Too Big To Fail.
Thanks a lot, institutional investors. We salute your willingness to subordinate basic law-abiding competence to sleazy money-grubbing. How very 21st Century of you.
Graphic: Horatius at the Bridge via OpusMei.