JPMorgan CEO is ‘for perfecting the Union’
It’s a bit rich that dire warnings of an exodus from London’s financial services industry are coming from Jamie Dimon. The CEO of JPMorgan Chase & Co. — the king of U.S. finance, really — predicted in an interview with an Italian business daily this week that the banking giant would have to move “some thousands of employees” out of its City of London operations if certain advantages to being in the EU now disappear.
Of course, we are talking about Brexit and, specifically, the “single passport” system that allows financial services companies established in EU member states to offer their services in other EU member states free of further bureaucratic rigmarole. With the U.K. on its way out, what will be the impact?
“The worst case is that we might have to relocate a few thousand people to other offices in the Eurozone, though the majority would stay in the U.K.,” Dimon told Il Sole 24.
Prior to the Brexit vote, Dimon suggested that 4,000 employees might be on the move to other Eurozone branches if the Leave side won. Dimon is regularly admired now as one of the world’s most successful bankers. It is often noted in the business pages that he has a good head of hair. Sometimes the adulation makes Mr. Dimon sound like the Richard Gere of the financial world. My, what short memories we have. Dimon could have said that in light of past malpractice the American banking giant with $2.4 trillion (U.S.) in assets and $97 billion in revenues last year was going to stand firm as a friend to Britain.
He could have considered that the story of the London Whale is not dead yet, though we’ve known for four years about the $6.2-billion trading loss within the high-risk U.K. unit.
Remember when Dimon called that catastrophe a “tempest in a teapot?”
The attempt to hide those losses failed, JPMorgan paid out $920 million — oh, let’s call it $1 billion — in fines, there was a task force report and a board report and Dimon’s compensation was cut in half. Were there sufficient risk management controls in place? No. Who is responsible for that? As part of the settlement the company admitted that it violated federal securities laws.
Four agencies were involved in reaching the global settlement.
“JPMorgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses,” said George S. Canellos, then co-director of the enforcement division at the U.S. Securities and Exchange Commission.
Now let’s revisit the financial crisis of 2008.
Remember subprime no-doc Alt-A mortgages and the bundling of toxic loans, which were then sold to investors?
In November 2013, the U.S. Justice Department announced that it had reached a $13-billion settlement with JPMorgan, making it the largest settlement with a single entity in American history.
It was an eye-popper. Dimon skated, unscathed.
At the time of the announcement, U.S. Associate Attorney General Tony West said this: “The conduct JPMorgan has acknowledged — packaging risky home loans into securities, then selling them without disclosing their low quality to investors — contributed to the wreckage of the financial crisis.”
He might well have said wreckage of an economy. The resolution also
“The conduct JPMorgan has acknowledged . . . contributed to the wreckage of the financial crisis.” TONY WEST U.S. ASSOCIATE ATTORNEY GENERAL IN 2013
included a provision that JPMorgan provide aid to underwater homeowners.
Perhaps it is with some of this contemporary behaviour in mind that the company’s most recent annual report addresses the question of trust.
And I quote: “We believe that the only way to be restored to a position of trust is to earn it every day in every community and with every client.”
That’s a long way off. The global financial crisis was the result of incompetent, high-risk, selfinterested banking. The City of London paid a high price for that disaster. (Some observers complain that the old ways of the City, or the “Square Mile” were lost to the Americanized preference for shorttermism, ushered in thanks to Margaret Thatcher’s seismic changes to financial services, the so-called Big Bang, when she was prime minister.)
So it would be a good moment for Mr. Dimon to express a degree of gratitude. In his interview with Il Sole, he did offer some encouraging thoughts. Brexit could, in fact, bring about some positive change.
“I am more for perfecting the Union, and the common market, an open market, pull it together, to make it a better place,” he said.
There are, he said, “rational complaints” of the EU. “We are going to fix them for all of Europeans, not for Britain alone, but for everyone else.”
That sounds like a great starting point. jenwells@thestar.ca