Jamie Dimon, Head of JPMorgan Chase: "Everyone Should Be Allowed To Fail"

The head of the country's second-biggest bank, considered by many to be "too big to fail," said Tuesday that no firm should be immune from failure.

"Everyone should be allowed to fail," said Jamie Dimon, chief of JPMorgan Chase. "Failure is a good thing."

Dimon's comments were made during the Securities Industry and Financial Markets Association's annual meeting in New York.

Leading a bank many consider to be the strongest in the country -- of the four biggest banks it's the only one to not experience a quarterly loss during the financial crisis -- JPMorgan Chase has emerged from the crisis even stronger, thanks to its acquisition of Washington Mutual and Bear Stearns.

During a conversation touching on a variety of topics, a few nuggets emerged. Among them:

*He's a Democrat.

*Dimon said that consumer credit will decrease. Total outstanding household debt -- which includes mortgage debt -- stands at $13.7 trillion. Dimon said it's going to come down to $12 trillion.

*Lending standards have tightened. "We're going back to old fashioned lending," he said.

Story continues below

advertisement

*Consumers bear some responsibility for the crisis because of the amount of debt they assumed during the boom years. Referencing consumers who got loans under false pretenses, like borrowers who got mortgages saying they'd live in the home but instead bought them as investment properties: "Shame on them," Dimon said, "And shame on us for not doing our due diligence."

*In discussing the causes of the crisis, he pinned a lot of the blame on the federal government, namely the government-sponsored mortgage giants Fannie Mae and Freddie Mac. They were the biggest of the regulatory failures, he said.

*"Derivatives aided" the collapse, he said, "but they didn't cause [it]."

*On these last two points, Dimon brought up the Office of Thrift Supervision and its handling of troubled insurer and massive bailout recipient AIG.

Some background: The OTS regulates savings banks and thrifts -- banks that are required to invest heavily in mortgages by virtue of their charter. AIG owned a thrift, and the company division behind its risky derivatives bets, the unit that was responsible for the company requiring about $182 billion in taxpayer-funded commitments -- AIG Financial Products -- was structured in a way so that it would fall under the OTS's supervision. The regulator has since admitted its oversight "fell short."

Talking about regulatory failures, Dimon said: "The OTS regulated the derivatives arm of AIG -- you gotta be kidding me."

"The problems didn't happen in the OCC-regulated part [of the financial system]," Dimon said, referring to the federal regulator of national banks, the Office of the Comptroller of the Currency. Rather, the problems "happened in the OTS-regulated part."

The bank knew AIG's derivatives unit fell under the OTS -- "we knew that," Dimon said.

The agency "should have never been allowed to exist," he added.

Comments

[PhilipTaylor]

VERY COOL VIDEOS ON FINANCIAL CRISIS:

http://www.youtube.com/watch?v=fZMO1ZS3g0o

More from Congress:
http://www.youtube.com/watch?v=EIUfj8Ulm_I&NR=1

Dlyan Ratigan Video Clips:

http://ampedstatus.com/one-person-in-the-mainstream-media-who-gets-it-the-greatest-theft-in-history-videos

[PhilipTaylor]

CRISIS = PARASITIC WALL STREET BANKSTERS/INSURERS
+GREED-INDUCED LEVERAGING
+ HIDDEN DERIVATIVE FEES
+ COMPLETE LACK OF ETHICS

Toxic Mortgage Derivatives enabled Wall Street Banksters to become parasitic.

BUSH TURNED-OFF Regulatory apparatus (ignore BIG GUYS) = NO WARNINGS!

Adam Smith said, "To promote the little interest of one little order of men (Wall Street) in one country, it hurts the interest of all other orders of men in that country (Americans), and of all men in all other countries (around World)."

WHAT’S CURE: Replace EL1T1STS controlling Financial System, both firms and people.

Complete Removal of firms and people that created Crisis at operational or senior levels!

[PhilipTaylor]

JPM CAUGHT RED-HANDED BY FBI FOR USING DERIVATIVE TO STEAL FROM SCHOOLS AND CITIES:

Link: http://www.bloomberg.com/apps/news?pid=20601014&sid=aIL9gsK5wG40

Example 1: JPM made more money than it paid out for Erie, Pennsylvania School District=
School Got = $755,000 and JPM collected $1.2 million in fees.

Example 2: JPM made over $4 Million on Philadelphia Intern Airport $6.5 Million Derivative
In SEC testimony “They're about getting fees and getting the most fees they can get.” that is 10 X Cost of a bond issue. JPM bankers then gave $280,000 to Airport Executive’s school district for signing Contract.

[PhilipTaylor]

HOW HIDDEN FEES IN DERIVATIVES SCAMS WERE USED TO STEAL THE FUTURE
- VERIFIED BY FBI investigation of JPM!

Having worked with CPA's and Managers Building Complex Math Models all my life I have some insight into what Bankers and their PhDs did in creating LUCRATIVE DERIVATIVES! Retired now!

Question Bankers had was how to increase Salaries/Bonuses to $Tens/Hundreds of Millions using Derivatives.

Buying&Rep ackaging&S elling mortgages could not provide enough PROFIT MARGIN for MASSIVE INCOMES!

Bankers decided to "STEAL the FUTURE" using statistica l+mathemat ical Projections of Housing Hyper-Inflation (2003-06 PEAK)!
__________ __________ _____

HOW Banksters stole OUR FUTURE!

Look under the HOOD of a Derivative= a bunch of mortgages sliced and packaged together+HIDDEN FEES

1. Used Math Models to Project Housing Hyper-Inflation 2003-2006 forward TEN+Years.

2. Add Projected Growth in Fees to Cost of Derivative s-Capturin g FUTURE GAINS.

3. SKIM off FEES into Executive/Employee Incomes!

4. Sell FEE Laden High Risk Derivatives as Fake Rated "AAA" Low Risk paper.

Derivative begin life at say 50% of FACE VALUE (projected hyper-inflated future value)

Reason Derivatives are worth Near ZERO after housing dropped less than 50%.

Derivatives should be worth 50% but NO! NEAR ZERO!

Simple Models to STEAL AMERICA'S FUTURE resulted in Hidden “Off-Balance-Sheet” Toxic Derivatives

[aNdYtm]

Sure everyone should be allowed to fail. But let's talk about the consequences of that failure or conditions where it would be acceptable.

If the failure affects only the person that failed, sure it is allowed. This presumes only individual responsibility and so do the consequences of failure, such as loss of face, a promotion, or even a job.

If the failure affects the society at large, the consequences ought to be more severe. In the corporate and financial world, reclaiming all the bonuses paid, and forfeiture of all future and retirement perks.

If the failure is on the scale as recently perpetrated by the Wall Street firms, the firms should be shut down and allowed to fall like Lehmans.

Self regulation never works because human beings are inherently selfish. And the society at large is doing nothing to stem this malaise. Instead it is rewarding it.

[Wisconsin Dave]

POLITICIAN ONLY CAPITALISM COULD LOVE

So for a moment let us try and fathom a system that so glorifies darkness.

Capitalism: a market free of government regulation where all power
and wealth goes to those with the greatest ability to achieve.

So the solution is very simple, we give everyone an equal ability to achieve.

And so, as me a slow thinking laboring man have a 100 I.Q. or maybe less,
while all of the super rich have a 150 I.Q. or above, we need science to
hurry up and design us a bráin-equalizer.

Also, so we can start off equal, excessive wealth of the rich must be
passed on down until all is fair, square and equal.

Problem is, we are all given a different level of intelligence as a test, to see if
we pass our excessive wealth down to those less intelligent where it belongs.

[tuberider]

America is a failed state. We should have let J.P. Morgan and Goldman Sachs go first. At least we could have gone out with good manners.

[lbjack]

Big IS bad. When a business attains a market share (AIG) or a strategic position (Bear Stearns) on which an entire market depends, it becomes "too big to fail." It should never be allowed to reach this point.

Alas, as every honest economist knows, Marx was right: Companies are subject to the law of diminishing returns, in the form of lost rent (interest), just as machines are subject to diminished performance, from the loss of energy (heat). Thus, companies must constantly seek greater efficiencies, either internally (technology, layoffs) or by growth (economies of scale).

Businesses MUST grow, and inevitably some businesses will grow so big that a sector of the economy will depend on them. It's a natural outcome of the capitalist system. (When Lenin said imperialism is the highest stage of capitalism, he was right. That's what globalization is about: It's not just desirable for capitalism, it's vital.)

How to combat too-big-to-fail:

Restore Glass–Steagall NOW.

All mergers and acquisitions must be subjected to a too-big-to-fail test. Regardless the current strength of its constituents, if the result is a company whose hypothetical failure would cause systemic damage, then no deal. Of course, criteria are hard to arrive at, and creative accounting can always game the system, and the SEC can't be trusted. Ideally there should be an M&A czar, whose default decision is No. Short of this, the OCC should be given a new mandate.

[DiogenesOfAlaska]

I don't buy into your meta - physical view of finance and economics. But I can assure you that economics itself has arrived at the conclusion that too big to fail is an anomaly that needs to be counteracted by means of the law and oversight - for the sake of the functioning of the markets.

If you like the econophysics-talk: having entities of reasonable size is a boundary condition that does not replicate itself from the intrinsic dynamics of the marketplace alone, but which must be imposed from the outside.

It may seem that it doesn't matter how you say these things, and that I've said the same as you did. But I don't think so. I have a hunch that textbook microeconomics is more convincing than Marx and Lenin.

btw I have no idea whether Marx and Lenin really said those things

[Democratuser]

We need more stimulus spending. More jobs programs. Lets pray that Obama can get it done. Millions of lower & middle class Americans are falling through the cracks. We need a bailout to help them, not the banks.

hat tip to http://financeopinionss.blogspot.com

lets get unemployment benefit extension passed

[FloridaMich]

jamie dimon....HOW MANY JOBS HAVE YOU SENT TO INDIA THIS YEAR??? KEEP JOBS IN AMERICA YOU GREEDY BUM

[pipp]

Does Jamie D. claim credit for giving people more opportunity to fail, with the Chase scheme that raised their credit card interest rates to the moon? What a guy!

[Realist1965]

Don't borrow if you can't afford it. Shocking principle!

[chrispy13]

wow...all are allowed to fail...like one said below me he is here to make sure you fail that not right

http://www.youtube.com/user/CTWeatherChases

[Realist1965]

Love it - and he's a Democrat to boot! But the rest of the sheeple are OK with plowing our tax dollars into making cars that aren't safe, aren't profitable, and don't sell. That's a great solution! Talk about credit card debt on our dime?!

[stuporman]

"everyone should be allowed to fail"...and he is here to make sure that you do

[hellboundtrain]

Terminate CDO's & CDS based on frauds and deceptions.

[TheFabOne]

Jamie Dimon, Head of JPMorgan Chase: "Everyone Should Be Allowed To Fail"

True. And Chase and Citibank should have been tops on the list.

[PS9]

Check your facts. JPMorgan Chase has had earnings every quarter since the economic slowdown began.

[duchessofdork]

Yes, and those earnings have come at a great price to all who have used Chase products.

[Energizer2009]

For those of you wanting more of an explanation, read this.

"There weren’t enough Americans with (bad) credit taking out loans to satisfy investors’ appetite for the end product. The firms used (financial bets) to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when (hedge funds) bought a credit-default swap, (they) enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets (hedge funds) and others made with firms like Goldman Sachs and AIG. (Hedge Funds), in effect, were paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all."

Why the market failed - http://twisri.blogspot.com/2009/03/why-market-failed.html

Adam Smith on the Current Financial Crisis - http://twisri.blogspot.com/2009/04/adam-smith-on-current-financial-crisis.html

What happened. What now. - http://twisri.blogspot.com/2009/04/commercial-and-investment-banks-used.html

To REALLY see what went wrong, take a look at page 6: http://www.sec.gov/rules/proposed/s71903/wmccir122203.pdf See page 2: http://www.sec.gov/rules/proposed/s71005/wcunningham5867.pdf

Also see: http://www.ethicalmarkets.com//wp-content/uploads/2008/12/financialbailoutcomment1.pdf

[vm12608]

Thank you. I don't know who you are, but Americans need to read these things and understand. Of course, it won't let them keep a roof over their heads, but so it goes, I guess.

[grk96]

Well stated!! In the real world we also call this "insurance fraud."