John Preston

JP Morgan's Jamie Dimon Still the Golden Child in Washington

Years ago, in the 1980's, I worked at a Savings & Loan in California. We were, at best, an OK mortgage lender in terms of the overall marketshare....

We were, however, exceptionally profitable...exception... well capitalized....and exceptionally well positioned for fluctuations in the interest rate markets. We were Forbes #1 ranked S&L for 5 straight years.

Our achilles heel was our asset structure. As the S&L crisis hit full steam in the late 1980's to early 1990's....re-regulation occurred. The new rules required a new asset structure, which required liquidation of over 30% of the balance sheet. The resulting erosion of value in the assets to be sold crushed the S&L and cost the taxpayers about 1 billion dollars....

This process, at least for thissingle institutionm could have been avoided if the assets had been allowed to amortize off te balannce sheet, and the process had been stretched out for a longer period of time.

It is my understanding, from reading, not from direct analysis, that JPMC is in the same boat. The wrong re-regulation could crush this bank...and the cost would be far greater than 1 billion dollars.

On of the so-called "take aways" from the current mess is that all too often haste, and poorly focused, angst driven decisions, can lead to bigger problems.....