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Jamie Dimon Is Too Big To Fail

It's easier to imagine the end of the world than the end of JPMorgan Chase.

If you were wondering why Jamie Dimon spent the last week in the mood of a conquering tyrant who's just hoisted the battle flag over his last remaining rival's toppled capitol, hop on over to JPMorgan's latest quarterly results and take a deep whiff. That smell is victory.


The House of Jamie pulled in $1.65 a share, crushing expectations of $1.52 a share, with fixed-income and trading revenue up double-digits from Q1 2016. The bank remained dominant across the board and gobbled up the competition. “You can’t expect us to continue to gain share at those kinds of levels,” CFO Marianne Lake said. “We will defend that share, but the competition is back and healthy.”

In other words, Jamie's riding high, with nary a care in the world. The feeling of invincibility is somewhat freeing. Here's Jamie on the earnings call:

In an impassioned speech, he said there is dysfunction in the mortgage market that he thinks has cut lending by up to $500 billion a year, boxing out many of the Americans who would benefit the most. His comments were based on a March 31 report from JPMorgan's fixed income strategy team, which said that "under an early 2000s lending regime, another $500bn of new purchase loans could have been extended in 2016."

"If that number is right, shame on us" for not doing something about it, Dimon said.

If Jamie Dimon has no apparent self-awareness about wishing out loud for a return to the “early 2000s lending regime” – and all the baggage that that entails – he must be on something better than drugs. That something is Big.

Though it might make a certain regional Fed president want to go swing an axe, Dimon has been holding forth lately about how Too Big To Fail isn't a thing anymore. His technical argument is that in the event of a big bank meltdown, bondholders will take the hit that taxpayers did last time thanks to the bank's giant buffers. The unspoken argument, though, is that JPMorgan is just too damn good to fail. I mean, look at these net interest numbers! Behold this fortress balance sheet! Bow before me!

Anyway, with all the problems of financial risk and corporate governance neatly tied up, it's time for a bored and triumphant King Jamie to turn his magisterial gaze elsewhere, namely, making America great once more. As Lake assured on the call, “People are serious about wanting to make appropriate change to the regulatory environment, and we will be appropriately engaged.”

JPMorgan is all good. Next up: America.

Jamie Dimon says there's something shameful going on with the mortgage market [BI]
J.P. Morgan’s Earnings Climb, Boosted by Trading [WSJ]
JPMorgan Beats Estimates on Strong Trading, Fatter Loan Margins [Bloomberg]



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Banks Prove That They Are Not Too Big To Fail By Saying "We Can Fail" On A Piece Of Paper, Moving On

One way you could spend this slow week is reading the "living wills" submitted by a bunch of banks telling regulators how to wind them up if they go under. Don't, though: they're about the most boring and least informative things imaginable and I am angry that I read them.* Here for instance is how JPMorgan would wind itself up if left to its own devices**: (1) It would just file for bankruptcy and stiff its non-deposit creditors (at the holding company and then, if necessary, at the bank). (2) If after stiffing its non-deposit creditors it didn't have enough money to pay its depositors it would sell its highly attractive businesses in a competitive sale to willing buyers who would pay top dollar. This seems wrong, no? And not just in the sense of "in my opinion that would be sort of difficult, what with people freaking out about JPMorgan going bankrupt and its highly attractive businesses having landing it in, um, bankruptcy." It's wrong in the sense that it's the opposite of having a plan for dealing with banks being "too big to fail": it's premised on an assumption that the bank is not too big to fail. If JPMorgan runs into trouble that it can't get out of without taxpayer support, it'll just file for bankruptcy like anybody else. Depositors will be repaid (if they're under FDIC limits); non-depositor creditors will be screwed just like they would be on a failure of Second Community Bank of Kenosha.