Will Obama Replace Geithner with Dimon?

 |  Includes: BRK.A, BRK.B, CYB, IBM, JPM, MS
by: Howard Richman

According to rumors, President Obama will soon replace his treasury secretary Timothy Geithner with JP Morgan Chase (NYSE:JPM) CEO Jamie Dimon.

Perhaps Obama is not pleased with Geithner declaring on October 15, in a report to Congress, that China was not manipulating its currency. That statement undercut Obama's November calls for more balanced trade.

But there is little indication that Jamie Dimon would be any tougher with China. As a banker, he has been actively courting the good graces of the Chinese government.

One of Dimon's main goals at JP Morgan Chase has been to do business in China. He even wrote a chapter, entitled "Prospects for Chinese Banks: Why Global Banks are Drawn to China," in a 2009 book (China's Emerging Financial Markets: Challenges and Global Impact).

In September, JP Morgan Chase was in the news when it acted as an advisor to the Chinese government's Sovereign Wealth Fund (CIC) helping it take a 14.9% stake in Nobel Group, a Singapore-based commodities trading house with assets all over the world.

CIC gets its money through the Chinese government's policy of intentionally running trade surpluses with the United States and then sterilizing dollars earned by its exporters (i.e., keeping them from being used by the Chinese to buy U.S. products) by using them to buy American assets. CIC often uses its dollars to buy stakes in businesses in the United States. For example, in December 2007 CIC bought a 9.9% stake in JP Morgan Chase's sibling Morgan Stanley (NYSE:MS).

If Obama were serious about balancing trade, there are three possible candidates for Treasury Secretary who have advocated Warren Buffett's excellent Import Certificates plan. All of them have executive experience:

  • Warren Buffett, the CEO of Berkshire Hathaway (NYSE:BRK.A) who predicted America's coming inflation back in 2003.
  • Ralph Gomory former Senior IBM VP in charge of science and technology and former President of the Alfred P. Sloan Foundation.
  • Dick Alexander, founder and chairman of Global Shop Solutions.

Unfortunately for America, Obama appears to be much more concerned with paying back his Wall Street campaign contributors than in balancing trade.

Disclosure: I own Chinese yuan through CYB.