Will Obama Replace Geithner with Dimon?

According to rumors, President Obama will soon replace his treasury secretary Timothy Geithner with JP Morgan Chase (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 (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 (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.

Comments

[apppro]

I would be much happier if Dimon would stick to JPM business and get our damn dividend reinstated before he seeks any change of venue. After he does put it back - well good riddens.

2009 Nov 25 09:22 AM

[HappyLeader]

Buffett or his equivalent (if there is one) would be fine. But your comment about Obama paying back his Wall Street contributors is right on target. Wouldn't it be a welcome change if Obama could stay away from both the Goldman Sachs and banks "too big to fail" crowd, and appoint someone who is not part of the greedy gang who got us into this mess?

2009 Nov 25 09:26 AM

[BigBadBarry]

Thanks for the link to the Buffet article on the Import Certificates plan. A shame more people didn't heed it back in 2003!

2009 Nov 25 09:34 AM

[James Lewis]

Come on Mr Richman. We know you feel strongly about China's trade practices. But believe me putting Warren Buffet at the healm is not going to help bring trade deficit down. Can you imagine the conflicts of interest here!!

I figure Obama is going to replace Geithner because he has no real guaanxi to talk about and quite frankly knows f**k all about how to get the Chinese to play a little fairer. I also figure that Obama is more interested in opening up China's financial system as apposed to trade wars. Who better to do this, than a banker? One who has spent time in China.

If it was upto me I think I would put someone from Asian or African decent. White people antagonise the Chinese far too easily.
Especially Amercian white people.

2009 Nov 25 09:41 AM

[JLK]

This has to be a sick joke. JPM is as bad as Goldman, it has just managed to avoid the recent bad PR. Dimon is not going to make the necessary reforms, like bringing back Glass-Steagall. Stiglitz would be better. Still better would be someone like Niall Ferguson, who has a historical perspective on what is happening.

2009 Nov 25 09:57 AM

[Graham and Dodd Investor]

JPM over Goldman Sachs is like saying you'd rather have a wolf guard the chicken coop instead of the fox.

On Nov 25 09:57 AM JLK wrote:

> This has to be a sick joke. JPM is as bad as Goldman, it has just
> managed to avoid the recent bad PR. Dimon is not going to make the
> necessary reforms, like bringing back Glass-Steagall. Stiglitz would
> be better. Still better would be someone like Niall Ferguson, who
> has a historical perspective on what is happening.

2009 Nov 25 11:40 AM

[Howard Richman]

James Lewis,

Buffett's understanding of how things work in the economy is incredible. His 2003 piece (that I linked to) was quite precient. In that piece he correctly called the precise top for the dollar's exchange rate and said that he was beginning to short the dollar. Berkshire Hathaway shareholders have been the beneficiaries of his economic understanding.

He does indeed have conflicts of interests. But I hope that he has too much integrity and common sense to let those conflicts influence him. I am hoping that he would do for the American people what he has been doing for Berkshire Hathaway shareholders.

Also, he could bring effective subordinates with him. My guess is that he would hit the ground running and that he would not be easily intimidated by anyone.

Unfortunately, I doubt that he would even accept the position, if it were offered.

Howard

2009 Nov 25 12:48 PM

[apppro]

Until you get the shorts who brought this system down out of the market, it won't matter who's in charge of the chicken coop because we're all going to end up in their outhouse anyway.


On Nov 25 11:40 AM Graham and Dodd Investor wrote:

>
> JPM over Goldman Sachs is like saying you'd rather have a wolf guard
> the chicken coop instead of the fox.
>
> On Nov 25 09:57 AM JLK wrote:

2009 Nov 25 04:28 PM

[Glen88]

My vote would definitely be for Ralph Gomory.

A compassionate, pragmatic, intellectual. That he is so little known is a shame.

2009 Nov 25 04:31 PM

[BlueOkie]

Buffett said he thought gov't did a good job. Already no to any gov't positions.
The Chinese say you borrow money, get further in debt and want to tell us how to do things. The real problem is the IMF. It was originally started during WWII and all currency had to be on gold standard. ($35 US) They have reversed that position to the point that no currency can be on the gold standard

2009 Nov 26 08:15 AM

[Wildhawk]

All this talk of Obama naming Dimon as a replacement for Geitner misses an enormously large point: Dimon would have to WANT to take the Treasury post. Does anyone actually think Dimon would want to give up his job running one of the 5 most powerful companies in the world to take a job make $200k a year as a bueauracrat, no matter how powerful the post? Not going to happen, folks, nor do we want it to happen. The comments to the effect of the fox guarding the hen house are spot on...

2009 Nov 26 09:45 AM

[Old Trader]

Wildhawk,

Its my understanding that Dimon has, in the past, expressed interest in government service. History is replete with examples of people who've moved back and forth between the private sector, and high appointed gov. positions. After all, it looks great on the resume, and strokes the ego.


On Nov 26 09:45 AM Wildhawk wrote:

> All this talk of Obama naming Dimon as a replacement for Geitner
> misses an enormously large point: Dimon would have to WANT to take
> the Treasury post. Does anyone actually think Dimon would want to
> give up his job running one of the 5 most powerful companies in the
> world to take a job make $200k a year as a bueauracrat, no matter
> how powerful the post? Not going to happen, folks, nor do we want
> it to happen. The comments to the effect of the fox guarding the
> hen house are spot on...

2009 Nov 26 12:21 PM

[MattZN]

Sheesh, what an absurd article. Do you actually believe that Obama can just wave his magic hand and, poof, the trade deficit is solved? There are only a few ways to do it in a free-market society, with the prime mover being a lower dollar. A lower dollar is what we are getting, do you see it magically fixing the trade imbalance?

For that matter, it is America's gluttony on energy that is primarily to blame for the bleeding of the U.S. dollar. It's been this way for 40+ years. Just how exactly is a president supposed to fix that? There's only one domestic supply even remotely capable of replacing foreign oil and that is natural gas. It would take a trillion+ investment and another decade of infrastructure build-out to replace the gasoline infrastructure we have now. I'd love to see it, but Americans tend to throw out the people who would otherwise be able to accomplish it.

And China... just what makes you think the U.S. has ANY leverage in dictating policy to China? Just what are we supposed to do, threaten war? Maybe you are advocating legislation that American businesses not do business with China? Just what exactly do you think we can do? China has its own worries. If anything is going to force them to change the Peg against the dollar it will be their own internal issues, such as the prospect for inflation (in China) and an overheated economy (in China). Nothing we say is going to matter compared to that.

This stuff takes years to accomplish. Anyone who thinks it can be done in a mere year and is willing to castrate whoever is currently in power because they can't wave their magic hand and fix it instantly is a person I don't want to see anywhere near government, let alone with the ability to vote.

-Matt

2009 Nov 26 01:09 PM

[Rick S.]

I get a kick out of all the "get China to play fair" comments. China is just doing what the two rules Uncle Sam taught them well.

#1 Take care of number one.

#2 When that conflicts with free trade, fair trade, world economic stability or environmental concerns, see the first rule.

2009 Nov 26 02:37 PM

[Tired American]

If the truth is ever allowed to be printed about Jamie Dimon & the manner he conducts business & manipulates the economy he would be a candidate for Bernie Madoffs cellmate not treasury secretary!

2009 Nov 27 10:58 AM

[desicon]

Day dreaming has a better chance than Obama's policies to balance the trade deficit .

What matters most is the man at the top. Why is it everyone running like chicken with the head cut? Am I the only one seeing the naked emperor?

2009 Nov 27 06:48 PM

[Tony Daltorio]

Why bother replacing an enabler (Geithner) with an addict (Dimon)?

They're both deeply involved in the greedy 'criminal' business known as Wall Street...

2009 Nov 28 11:38 AM

[User 357992]

Terrific, just what we need; another Wall Street executive as Treasury Secretary! Hold on to your wallets (if you still have one to hold on to). Those who created the problem are certainly those who can fix it. This is not going to get any better until the American people throw these Washington whores out and start all over again.

2009 Dec 04 04:27 PM