In her fascinating 1999 biography of J.P. Morgan,”Morgan: American Financier,” Jean Strouse writes, “He could, he said, do a year’s work in nine months but not in twelve.” Morgan would keep a workaholic’s schedule while in New York but would break for frequent trips to Europe, flopping around its spas to ward off depression and his hypochondriac fears of ill-health. He saw nothing macho about refusing holidays. The current crop of Wall Street CEOs might benefit from a similarly restorative schedule. If Goldman Sachs’s Lloyd Blankfein were to hit Positano and J.P. Morgan’s Jamie Dimon to take the waters in Baden-Baden from May to September, it may not help their image. But following Morgan’s example, it might be better for banks’ general health if their executives didn’t always feel they are in permanent crisis mode. [WSJ]
Theory: JPMorgan Would Be In A Helluva Lot Better Shape If Jamie Dimon Would Take Four Months Vacation Each YearBy Bess Levin
Bloomberg: Not One Bank CEO Can Fill Jamie Dimon’s Shoes, Especially Not That Guy From Australia Who Doesn’t Own An IronBy Bess Levin
Earlier today, Bloomberg ran a lengthy piece about the latest crisis on Wall Street: a lack of Jamie Dimon. Specifically, a lack of Jamie Dimon telling meddlesome regulators, anti-industry populists, know-nothing Congressmen, and hypocrite bastard newspapers where they can go and what they can suck. True, it’s not as though he’s gone anywhere, and he’s still reminding people “it’s a free fucking country” but “juggling multiple investigations and a $5.8 billion trading loss on wrong-way bets on credit derivatives” has left his hands a little tied and, some believe, cost him his once untouchable “stature” in the industry.
And while one should never simply offer problems without solutions, Bloomberg isn’t gonna sugarcoat this one: when it comes to “any kind of credible statesmen” to step in for JD, Wall Street is shit out of luck and not just because no one besides Lloyd came close in sales of their respective Bankers At Work And Play pin-up calendars. Among current CEO’s, Lloyd Blankfein, Brian Moynihan and Vikram Pandit are deemed too busy “fixing their own firms or repairing their reputations,” while Wells Fargo chief John Stumpf, though respected among his peers, is ruled out due to geography (“Part of Jamie’s fitting into that role was his natural brashness as a Wall Streeter and New Yorker, and that is not John”).
“Swung by @JPmorganchase and got to see where all the action takes place.“ [Meghan Musnicki]
You Misplace 5 Or 6 Billion Dollars And All Of A Sudden People Stop Trusting You To Keep Track Of Your MoneyBy Matt Levine
When JPMorgan’s whale drowned a lot of people asked “where were the regulators?” and that was a silly question, because the people with the most incentive and ability to keep the whale afloat were, in descending order, (1) the whale, (2) the whale’s bosses, (3) the whale’s bosses bosses, (4) the regulators, and (5) the people asking “where were the regulators?,” so if categories 1-3 missed the problem then there’s no reason to get all mad at category 4. “If X’s could do Y they wouldn’t be X’s” is an important tool to keep in your mental toolkit, and if regulators could distinguish good from bad trades they’d be at least risk managers and probably, like, Warren Buffett.
What regulators are supposed to do, ideally, is not pick trades but rather set up systems to prevent bad trades from having ruinous systemic effects, and a major method of doing so is capital regulation. JPMorgan lost $5.8 billion on whale-failing, and if you or I lost $5.8 billion we would probably be scaling back our vacation plans, but Jamie Dimon isn’t because JPMorgan had lots and lots more money where that came from. Capital!, in both senses of that exclamation.
JPMorgan can’t outrun the ripples from its multibillion-dollar “London Whale” trading blunder. The largest U.S. bank admitted Thursday in a federal filing that it pushed back a plan to resume share buybacks, scaled back several key measures of capital at the request of regulators and lost money on 28 trading days in the second quarter. The developments came as the New York company tried to unwind a series of problematic positions taken by a trader in the bank’s Chief Investment Office nicknamed the “London Whale” for his outsize market bets. [WSJ]
It feels virtuous every so often to take glance over at the triparty repo market. You get a nice dose of horrified vertigo and then go back to your life and don’t think about it for a while and that always feels better. Now is a good time to get back to it, what with continued worrying about money-market funds – a core player in the market – and two interesting things this week about triparty repo: this testimony from Matthew Eichner of the Fed to a Senate subcommittee, and this report from Fitch.
Here is how I imagine triparty repo:
- A bunch of money market funds and other cash investors keep $1.8 billion of cash at JPMorgan and Bank of New York Mellon, the “clearing banks” in the triparty system.
- A bunch of securities dealers keep a pile of securities – worth, on a good day, more than $1.8bn – to JPM and BoNY Mellon.
- The dealers need money to fund those securities, because what are they going to do, pay for them themselves?
- Every afternoon, the cash investors and the securities dealers frantically negotiate which dealers swap their securities (at negotiated haircuts) for which cash investors’ cash.
- Every night, the cash sleeps in the (notional) arms of the securities dealers, while the securities (and a promise to buy them back in the morning) sleep in the (notional) arms of the cash investors.
- Every morning, the cash wakes up and springs from the dealers’ beds back into the waiting arms of the cash investors, and vice versa etc.
- Which means that the dealers need to borrow cash to be able to give it back to the investors. Where do they get the money?
- Well, from JPMorgan or BoNY.
- Where do JPM and BoNY get the money?
- Well, from deposits.
- Whose deposits?
- Well, the deposits of the cash investors.
More or less, right? Read more »