Welcome, people who hate sleep, to the Huffington Post live blog of JPMorgan Chase's second-quarter earnings conference call. As much fun as the morning after a meth binge, or so I have heard.
We'll be live-blogging this two-hour event, though maybe not for the entire two hours, as the call will likely drift into tedious analyst questions about minutiae. But we'll live-blog a good bit of it.
The bank earlier reported quarterly income of $5 billion, or $1.21 a share, with a $4.4 billion loss caused by dumb credit trades at its chief investment office.
Ordinarily you pre-game an event like this by consuming mass quantities of alcohol, or harder stuff, but it's 7:30 in the freaking morning, so instead enjoy reading some of these fine walkups to the call, won't you?
There's Deal Journal's David Benoit, who lists the five things he wants to hear on the call -- up high, as you'd expect, is the size of the London Whale trading loss and the size of the money that will be clawed back from Ina Drew and other scapegoats, er, responsible parties.
I'd like to hear those things, and then I'd also like to hear somebody at the bank talk about the PFG customer money they've got -- how much do they have? Is it all accounted for? Are they under investigation by anybody? Let's just say I'm not holding my breath on that one.
Maureen Farrell at CNN/Money suggests investors take a hard look at whatever profits the bank reports this morning, make sure they're not all prettied up with accounting tricks to hide the gigantic hole left by the London Whale.
Bloomberg's Dawn Kopecki suggests there's nothing less on the line here than Jamie Dimon's sterling reputation as a golden banker god sent from the Sun People to rule us all.
And now, on to the live blog.
That testy response by Dimon is an appropriate note on which to end this live blog, with the call just about to wrap up.
To sum up: JPMorgan is sorry, guys, really sorry, so it's time to move on and think about how awesome JPMorgan is. At least until we hear more about its role in the Libor scandal, the PFG scandal, power-market manipulation, et cetera et cetera.
Thanks very mcuh for reading, everybody.
To wrap up his answer to the too big to fail discussion: "The CIO was a mistake. Sorry."
Somebody else is grilling Dimon about how his bank may be too big to manage.
Dimon is fighting back, saying its size is a source of strength -- doing "wonderful things" because of its size while small banks fail left and right.
According to Bloomberg TV:
"If I could hire Jamie Dimon I would. I would hire him for any job!"
Pool cleaner, hedge-trimmer, golf caddy, Coke-bottle opener... any job!
Mike Mayo: "We saw how the sausage is made today, but I wonder if I get food poisoning some time in the future."
Famous bank analyst Mike Mayo asks the big question: Maybe the bank has a huge management problem. Is it too big or complex to manage?
Dimon's one-word response: "No."
There's laughter on the call. Ha ha, hilarious.
Mayo asks Dimon if he's "lost a step," to more laughter.
Dimon goes on about how awesome JPMorgan is -- survived the crisis, growing, blah blah. He says the problem is marketing. They made a mistake, is all. They're in better shape now. Move on already.
He can't prove a negative, he says again about three times.
Another analyst asks why the bank is doing so darn well despite the economy being lousy.
"The underpinnings of the American economy aren't that bad," Dimon says.
Dimon dodges a question about the Libor scandal, of which JPMorgan is a part. He says it's too early to say anything, they're working with regulators, but we shouldn't jump to any conclusions or anything.
An analyst asks about the bank's controls -- why should we believe the bank was being straight on Libor if they were goofing on credit derivatives? Great question.
Dimon says he can never prove a negative, OK? He feels good about their controls now. He thinks the CIO business was isolated, so there.
So the London Whale has cost them $5.8 billion, but the losses may not yet be over -- but are mostly over, Dimon says.
Jamie Dimon is back on the call to talk about Ina Drew, the JPMorgan vet in charge of the CIO.
He says he has "enormous respect for Ina," and talks about her contributions to the company.
"She has acted with integrity and tried to do what's right at all times," he says.
He says, "Ina offered to give up a significant amount of past compensation equivalent to the maximum clawback amount."
So, no numbers, but it's a lot.
All of the managers in London responsible for the bad trades are now gone from firm -- none are receiving severance or 2012 bonuses.
The bank is clawing back the maximum permitted from each of these people -- two years of total compensation for each of them.
No dollar amounts, sadly. No names -- though we know the London Whale himself, Bruno Iksil, is one of them.
All in all, the bank believes this was an "isolated event," and it's caused the bank to "step up its game" generally.
They've bolstered their oversight, as discussed in a PowerPoint slide that uses a lot of words like "instituted," "enhanced," "established" and "restructured."
Everything should be fine now.
In November 2011, the bank approved a new risk model that let the CIO take on more risks. This was, in hindsight, not such a good idea.
Again, the blame is on the CIO office for "sloppy" execution and poor oversight of the new model.
They're really dumping a lot of the blame on the chief investment office -- the trade was badly designed, the oversight was bad, and upper management was in the dark because it trusted the CIO because it had a long track record.
The CIO jacked up the size and complexity of its portfolio, which left them little room for error.
It should have been discussed and vetted at more senior levels, but was not.
CIO judgement was poor, oversight was poor, and the office's risk model was poorly done.
They've been undergoing a management review for the past two months -- a rigorous review of how the company lost $5.8 billion in trading.
They have a very clear picture of what happened now! A cookie for them.
Keith McCullough of Hedgeye is not as joyful as Cramer about JPMorgan, possibly:
"Every single day this industry is burning whatever is left of American financial market credibility at the stake," he tweets.
"June was terrific" for JPMorgan, Cramer tweet-yells. If you don't count all the scandals!
The bank released $1.25 billion in loan-loss reserves in the quarter. That helps the bottom line. They say they did it because their loan portfolio is looking stronger. Okey-doke.
Janet Tavakoli of Tavakoli Structured Finance writes in:
"Given the stream of revelations about the lack of corporate governance for the CIO going back for a long period before the above mentioned quarter, one should have no confidence in previous marks or accounting statements. Note there appears to be a material misstatement.
"As for other divisions of JPMorgan, red flags furiously wave."
Now here's CFO Douglas Braunstein talking:
They're restating first-quarter earnings, based upon recent facts uncovered about CIO traders marking book. They question the integrity of their traders' marks. So they restated quarterly earnings.
The loss of the portfolio prior to the restatement would have been $5.1 billion. After
Now it's $5.8 billion -- so perhaps that's the real loss number for the London Whale, not $4.4 billion. Remember, that started as $2 billion.
"We learned a lot," Dimon says. "This has shaken our company to the core."
"We don't like to deceive ourselves about profitability," Dimon says.
CNBC shouty man Jim Cramer tweets that the JPMorgan call is "going well," 17 minutes into a 2-hour ordeal. Sort of like Bear Stearns was fine, amiright?
Light weekend reading, courtesy of Zerohedge: "The JPMorgan Guide To Credit Derivatives," by Blythe Masters.
The chatter on Twitter this morning has been about the quality of earnings -- how much did the bank pad its earnings to paper over the big loss by taking money out of loan reserves and that sort of thing? We'll be listening for that.
He says the bank's $4.4 billion in trading losses, is an isolated event:
"We do believe these events are limited to the CIO," he says. "We can now get back to what we do best."
All solved, then!