“When we make mistakes, we take them seriously and often are our own toughest critic,” Dimon said in the remarks ahead of his appearance before the Senate Banking Committee to discuss losses linked to credit derivatives by New York-based JPMorgan’s chief investment office. “While we can never say we won’t make mistakes — in fact, we know we will — we do believe this to be an isolated event.” [Bloomberg]
BreakingViews has a couple of posts up about one of my favorite things in the financial universe, Credit Suisse’s habit of paying its bankers in structured credit instruments that take pages to describe. How’s that going? Great:
Three years ago, around 2,000 employees were forced to take some $5 billion of the riskiest assets from the Swiss group’s balance sheet as their bonuses. Now, recipients are being offered the chance to buy more. What once seemed like a punishment has turned into something of a perk.
Investors in the “Partner Asset Facility” already sit on a paper profit of around 80 percent, thanks to a recovery in the value of the original portfolio. That gain is essentially safe, since most of the assets involved have been liquidated or sold down and the funds are sitting in low-risk, low-return investments. The snag is that beneficiaries can’t get to the payouts until 2016.
To ease the pain of waiting, Credit Suisse is giving participants another bite. They have a chance to plough some of their paper profits back in, buying up to $1 billion of risky assets, including mortgage securities, from the bank’s books. Over a third of participants opted in to a similar offer late last year. Some of the purchases are to be funded by leverage, leaving perhaps half to come from willing PAF holders.
Phrases like “risky assets, including mortgage securities,” are always a bit of a minefield, but the sense is clear enough, which is that a whole lot of senior people at Credit Suisse are pretty keen to take money that is basically theirs, which is currently held in the form of basically cash, and invest that on a ~2x levered basis in, er, “risky assets, including mortgage securities,” which let’s just stipulate have a higher risk and higher return than cash.
How would you describe those people? Read more »
Volcker Rule Would Have Required JPMorgan Whale To Look Himself In The Mirror And Ask “Is This Really What I Want To Do With My Life?”By Matt Levine
It looks like London Whale Bruno Iksil is currently vacationing in a quantum state between fired and not-fired, which I suspect is relatively pleasant compared to, like, trading credit indices, and his immediate supervisors have all moved on to bluer oceans. But layers and layers of people above them continue to have to tug at their collars and worry about the whole why-didn’t-we-stop-his-whaling-and-what-does-it-mean-for-our-jobs thing. Jamie Dimon has done a certain amount of that, but today the regulators in charge of JPMorgan got ther chance to do some collar-tugging in front of the Senate. Let’s just assume that was enlightening.
The three directors who oversee risk at JPMorgan Chase include a museum head who sat on American International Group Inc.’s governance committee in 2008, the grandson of a billionaire and the chief executive officer of a company that makes flight controls and work boots. What the risk committee of the biggest U.S. lender lacks, and what the five next largest competitors have, are directors who worked at a bank or as financial risk managers. The only member with any Wall Street experience, James Crown, hasn’t been employed in the industry for more than 25 years…The committee, which met seven times last year and hasn’t changed its composition since 2008, approves the bank’s risk- appetite policy and oversees the chief risk officer, according to the company’s April 4 proxy statement. [Bloomberg]
He’s got this. Read more »
The past couple of weeks, some might argue, have been the worst of Jamie Dimon’s professional career. Although being fired by Sandy Weill in 1998 was obviously a distressing time in Dimon’s life, a JPMorgan trader’s multi-billion dollar (and counting) loss appears to be even more painful for the CEO, who now has a reputation (and a title: “America’s Least Hated Banker”) to defend. While it’s unlikely that the blunder will cost him his job, every article written questioning Dimon’s judgment, suggesting that he is in fact fallible, and wondering aloud if he is simply a pretty face (that is about to get the regulation it has vociferously argued against rammed down its throat) clearly hurts. So far, Dimon has chosen to frame the situation, at least publicly, as a group fuck-up, one for which the responsibility is shared among himself, The Whale, The Whale’s bosses, and The Whale’s bosses’ bosses. Over the weekend, though, a heretofore unmentioned character, whose actions set in motion the events that served to tarnish JD’s halo, was added to story. And now, Dimon has a place to channel his anger: on a bloodsucking vermin whose days are numbered. Read more »