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Institutional Investors Love Sleazy Bankers

8:42 am in Banksters by masaccio

Institutional Investors Defend the Bridge for Jamie Dimon

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.

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Jamie Dimon’s Sleazy Record

9:25 am in Uncategorized by masaccio

Portrait of Jamie Dimon

Don't you feel sorry for poor Jamie Dimon?

On May 21, shareholders of JPMorgan Chase will have the opportunity to express their views of the Chairman/CEO of the mega-bank, and PR people have been filling the inboxes of every possible media outlet. They even got to the New York Post which ran an Op-Ed by Charlie Gasparino on Dimon’s bad feeling about splitting the roles of Chairman of the Board and Chief Operating Office:

Dimon hates the idea of splitting the two roles; he thinks the separation would make it more difficult to manage the world’s biggest bank, with line managers unsure who’s really calling the shots.

He’s right: Anyone thinking that having two people at the top means better corporate governance only has to look at all the corporate scandals at firms with a separate CEO and chairman, with Enron and Worldcom leading the way.

That’s pretty rich coming from a Fox Business News guy, writing for another part of Rupert Murdoch’s empire, but failing to mention the problems with phone hacking, bribery and those ugly arrests, all that under a single Chairman/CEO.

Gasparino has much in common with Andrew Ross Sorkin and Steven Davidoff of the New York Times Dealbook. Just like Gasparino, both Professor Davidoff and Sorkin are focused on how unfair this all is to the Great Man, but none of them mention of the rat’s nest of crooked business at JPMorgan.

For that, you have to look at the blogosphere. Josh Rosner of Graham-Fisher issued a major report listing the many laws JPMorgan broke under Dimon’s control. Here’s a list pulled from Rosner’s report by Dave Dayen at Naked Capitalism, where you can read the report for yourself. Apparently Sorkin, Davidoff and Gasparino just don’t see ther relevance:

Bank Secrecy Act violations;
Money laundering for drug cartels;
Violations of sanction orders against Cuba, Iran, Sudan, and former Liberian strongman Charles Taylor;
Violations related to the Vatican Bank scandal (get on this, Pope Francis!);
Violations of the Commodities Exchange Act;
Failure to segregate customer funds (including one CFTC case where the bank failed to segregate $725 million of its own money from a $9.6 billion account) in the US and UK;
Knowingly executing fictitious trades where the customer, with full knowledge of the bank, was on both sides of the deal;
Various SEC enforcement actions for misrepresentations of CDOs and mortgage-backed securities;
The AG settlement on foreclosure fraud;
The OCC settlement on foreclosure fraud;
Violations of the Servicemembers Civil Relief Act;
Illegal flood insurance commissions;
Fraudulent sale of unregistered securities;
Auto-finance ripoffs;
Illegal increases of overdraft penalties;
Violations of federal ERISA laws as well as those of the state of New York;
Municipal bond market manipulations and acts of bid-rigging, including violations of the Sherman Anti-Trust Act;
Filing of unverified affidavits for credit card debt collections (“as a result of internal control failures that sound eerily similar to the industry’s mortgage servicing failures and foreclosure abuses”);
Energy market manipulation that triggered FERC lawsuits;
“Artificial market making” at Japanese affiliates;
Shifting trading losses on a currency trade to a customer account;
Fraudulent sales of derivatives to the city of Milan, Italy;
Obstruction of justice (including refusing the release of documents in the Bernie Madoff case as well as the case of Peregrine Financial).

And, exhale.

Dayen’s list doesn’t include on-going investigations like LIBOR or the London Whale trades now revealed to be a serious problem, and it doesn’t include the most recent scandals like manipulation of Interest Rate Swap Index fraud, which may or may not involve JPM. But why would that matter to shareholders? After all, the stock is up about 10% in just the last few days, and is back to the glory days pre-Great Crash.

Rosner explains that JPM has paid out $8.5 billion in penalties, interest and so on since 2009, about 12% of income between 2009 and 2012, with much more to come. Those unknown future costs are described in many pages of its 10-K, including footnote 31 starting on page 316, without mentioning an actual amount held in reserve for possible litigation and mortgage put-back losses. Whatever it is, JPMorgan estimates that it might be up to $6 billion on the low side. 10-K at 316.

Shareholders who care about law-abiding management might wonder if Dimon is worth it. They might want to take Dimon up on his promise to leave if the vote goes against him.

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Goldman Sachs Profits Down, Compensation Up, Investors Flee

11:44 am in Corporate Corruption by masaccio

Wall Street Warnings, photo by Duncan Hull

Goldman Sachs released its income and expense data for the second quarter of 2012. Revenues are up 4% from the first quarter, but down 17% over the same period last year, and for the first six months of 2012, they are down 13% over the same period last year. Net earnings (profits) are down 55% over the first quarter. For the first half of 2012, net earnings are down 12% over the same period last year.

Compensation is a different story. For the first six months, compensation is 44% of revenues (p.4), compared with 42.4% for all of 2011. P.55 That includes a reduction of 9% over the first quarter. In contrast, dividends to common stock were $.46 for the quarter, amounting to approximately $230 million. Shareholders get 3.5% of the revenues and insiders get 44%? Really? Whose money is at risk, again?

That’s modern capitalism for you, lousy results don’t lead to lousy rewards for the insiders. Greedy bankers taking all the money, who could have imagined?

This story fits right in with Jennifer Ablan’s title in a Reuters piece: Banks Behave Badly redux: Is It Killing Confidence? She gives a quick rundown of the various crimes and frauds of the financial sector, and describes investor withdrawals from equity mutual funds and pretty much anything smacking of risk. She gives regulators a passing smack, not as hard as they deserve, but no doubt investors noticed that no one from Wall Street has gone to jail, or even been investigated, for the massive criminal corruption that led to the Great Crash.

She misses several components, though. We all know that big investors get an edge. Gretchen Morgenson confirms that the big investor funds get a heads up on changes in opinions of major analysts, the people whose views can have a big impact on the prices of the securities they follow. The major banks are repeatedly caught doing business with money-launderers, Ponzi Schemers, check-kiters and even terrorist organizations. The scandal today is HSBC, but there are plenty of others.

But the biggest problem is the arrogance of Wall Street and its corporate counterparts: they really believe that all those CEO Worship stories they get from an adoring media. Look at this picture of a preening Jamie Dimon, giving it his best gazing into the future of Randian Glory for the business paparazzi. And that isn’t all, we non-Wall-Streeters, otherwise known as “muppets”, need to revere them, praise them, and never, never hurt their feelings by using ugly descriptions like pirates, or thugs, or, even worse, by insisting on regulating them like the thieves and liars that they are.

Who Can Obama Nominate To Head Up the Consumer Financial Protection Bureau?

9:00 am in Uncategorized by masaccio

Treasury Secretary Geithner doesn’t want Elizabeth Warren to head up the Consumer Financial Protection Bureau, created by the new financial reforms. As Shahien Nasiripour points out in the Huffington Post, Warren has called out Geithner on a number of issues, not least of which is the failure of Treasury to lead on the foreclosure problem.

President Obama can’t handle internal controversy, and what a battle it would be. On one side, the money boyz, Larry Summers (women are genetically unsuited for math), Geithner (Sheila Bair and Mary Schapiro are too serious about their jobs and not sufficiently impressed with the political skillz of the money boyz). On the other side, yet another woman more qualified by temperament, brains, determination, knowledge and skill than the money boyz. Geithner couldn’t bear having Warren describe his fetish for giant banks, the only people who might hire him after he exits the revolving door.

We know how that "battle" comes out: just look at Dawn Johnson. That means that Warren, who created the idea and has been its strongest proponent, is out as possible leader.

So, who can the President appoint who would be acceptable to the money boyz, and the administration’s buddies and potential massive contributors at the Business Roundtable? Herewith a list of possibles.

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