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Richard (RJ) Eskow

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Jamie Didn't Know: The Tragic Legacy of JPMorgan Chase's CEO

Posted: 06/27/11 11:13 AM ET

Why are people still interested in what Jamie Dimon has to say? As CEO of JPMorgan Chase, Mr. Dimon presides over a serial corporate criminal whose long list of confessed crimes got longer only last week. As an investment and economics "expert" he failed to anticipate the worst financial crisis in modern history.

Now Jamie Dimon's come up with a list of economic concerns for the economy that would be amusingly clueless, if it weren't such a sad example of the Marie Antoinette-like detachment and hauteur of our financial leaders.

Dimon had a lengthy interview with an Australian newspaper, which Business Insider distilled into five reasons why (according to Mr. Dimon) people are negative about the economy:

1. Greece (which is, as most people know, facing default)
2. Japan -- as a result of the Fukushima disaster
3. Oil
4. Politics -- which in Dimon's case means the fear of too much regulation for banks like his
5. Fiscal deficit

What's not on that list is much more telling than what is. If anybody but a Wall Street executive were to cite the reasons why things are so bleak, the list would look like this:

1. Jobs -- millions of people don't have them, and millions of others are under-employed.
2. Wage stagnation -- while compensation for clueless CEOs soars, everybody else is struggling.
3. Lost wealth -- Real estate prices have collapsed, leaving middle-class America bereft.
4. Household debt and student debt
5. People aren't buying things, which prolongs that knotty jobs problem

If he were merely a self-indulgent and clueless millionaire, Mr. Dimon's reality distortion field would be nothing more than another artifact of the Second Gilded Age in which we live. But his misperceptions hold enormous sway in Washington. His bank's lobbyists wield considerable influence, his opinions (and contributions) are guiding the actions of Republicans and "centrist" Democrats, and two senior administration officials have worked for him.

Let's take a look at Mr. Dimon's list of concerns. Greece has borrowed enormous sums of money which it's now unable to repay at full value. In a mirror image of the moral debate here at home, nobody seems to be pointing out that the banks who lent them that money made a careless and reckless bet. Once again, the argument goes, ordinary people should bear the full weight of a bad bank loan while incompetent lenders suffer no penalties for their recklessness.

At least the Treasury Department in Great Britain is suggesting that British banks bear their share of the burden for fixing the Greece problem (and that's under a center/conservative government). An American agency has yet to make the same proposal.

Japan's nuclear disaster, contrary to opinions expressed by Mr. Dimon and others, was absolutely predictable -- not as an inevitability, but as a possibility. While Mr. Dimon suggested the Fukushima accident was a "black swan" -- an occurrence nobody could have foreseen -- the presence of five nuclear reactors on a beach in an earthquake zone made the accident a foreseeable contingency that should have been addressed. (Nassim Taleb's "black swan" concept has provided a generation of irresponsible corporate executives with an excuse for managing their own risk.)

Japan faces another threat, too. Mr. Dimon's bank is near the top of the list of "too big to fail" banks prepared by Japanese regulators. A JPMorgan Chase failure there would threaten the entire Japanese economy.

As for politics, Mr. Dimon claims that the recovery has stalled because of too much banking regulation. As Robert Reich observed, that notion is "bizarre." And smart economists agree that it would be tragic to cut government spending for deficit reduction before a real recovery has taken hold. (It would, however, be very good for Jamie Dimon and JPMorgan Chase.)

Still in his fifties, Mr. Dimon has many years of work life before him. But we already suspect that his professional legacy will be written with the words "Jamie didn't know." Deregulation put the global economy at risk, and Jamie didn't know. Dimon's entire industry went on a reckless gambling spree with government money, and Jamie didn't know. Spending and demand were down for anybody making less than $100,000 per year, leaving demand low and unemployment high, and Jamie didn't know.

But then, "not knowing" is also Mr. Dimon's moral and legal defense as JPMorgan Chase CEO. Given the level of corporate crime and malfeasance in his organization during his tenure as CEO, it seems that he's been a remarkably unobservant executive. He's failed to instill a corporate culture that places a premium on ethical behavior and respect for the law. Consider the evidence:

JPMorgan Chase participated in a blackmailing scheme in Jefferson County, Alabama, that was so corrosive and corrupt that it was forced to give up three quarters of a billion dollars to settle the case. Apparently Jamie didn't know this was going on in his organization, although it lasted quite a while.

A whistleblower report says that JPM knowingly sold hundreds of millions of dollars worth of bad credit card debt to third parties. Apparently Jamie didn't know.

JPM paid $25 million, a slap on the wrist, to settle charges that it illegally propped up a failed mortgage lender in Florida. Apparently Jamie didn't know.

Only last week JPMorgan paid $153 million to settle charges after it illegally lied to investors about a portfolio put together by a hedge fund that was betting that portfolio would fail. Apparently Jamie didn't know.

And in the very same week that JPMorgan Chase was making this sweetheart deal with the SEC and paying a fine for its wrongdoing, Jamie Dimon said this to the Australian: "It's so unfair to talk about Wall Street and ethics."

"The people that we deal with a lot on Wall Street are some of the most ethical people I know," Dimon added.

When anyone wonders why we need more banking regulations and stronger enforcement, Mr. Dimon (once called our "least hated banker") is Exhibit A. JPMorgan has set aside more than two billion dollars in expected litigation costs arising from its foreclosure actions. And yet I believe him when he says he's hurt and angry at the harsh way the public judges him and his peers.

Public distrust of bankers is the highest it's been since Gallup started tracking it in 1979, and has fallen to nearly half of what it was in 2007. Institutions like Mr. Dimon's are bigger than ever, and pose a greater risk than ever to the global economy. Bankers still break the law with impunity. Why does the public fear and distrust his profession? Why do people want to rein in Mr. Dimon and his peers before they cause even more harm?

Tragically, Jamie doesn't know.

 

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