A thank-you would be nice, says Jamie Dimon, holding court on JPMorgan's Bear Stearns...


A thank-you would be nice, says Jamie Dimon, holding court on JPMorgan's Bear Stearns acquisition. His bank, he says, did the Fed a favor and has lost $5-10B on the purchase, thanks to litigation and writedowns. "Would I have done Bear Stearns again knowing what I know today? It's real close." Previous: JPM is sued by NY over activities at Bear Stearns.

Comments (19)
  • Tony Petroski
    , contributor
    Comments (6356) | Send Message
     
    "Would I have done Bear Stearns again knowing what I know today? It's real close."

     

    He's running an organization that "has lost $5-10B on the purchase..."
    What's close about that? Is it the prestige of owning the carcass of Bear Stearns? And I realize accountants can massage numbers but do they really get a 5-billion range?

     

    It used to be a joke describing Washington D.C., that "a billion here and a billion there and soon you're talking real money." Now for the nation's banks it's "five billion here and five billion there and it's a rounding error to our quarter-three earnings." In D.C. it's "a trillion here and a trillion there."

     

    Time to sell parts of JPM to other unwilling buyers--let's break up the too-bigs, and let's get the D,C, trough filling up with billions again and not trillions.
    10 Oct 2012, 05:00 PM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    I'll try to remember to send Jamie $5 tomorrow for his good Samaritan work.
    10 Oct 2012, 09:20 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    This is not crony capitalism. Solyndra is crony capitalism where good money from the US taxpayer is given away to donors to reward and enrich them on the premise of a very shaky business case.

     

    Taking on a wounded dog like Bear Stearns is risky especially with only a few days notice but on the other hand we have a $14 Trillion economy that could fail and cause massive losses to every stakeholder in the US and globally. These are deals that a large bank cannot tell the government to go away on and JPM was the strongest player hence they got the call. Citi was a mess and in trouble so they were worthless. The alternative is Lehman Bros which declared BR and the global economy started falling apart.

     

    The lesson for large banks is to hang up on the Fed or better yet tell them that they take on all lawsuits generated from the activity of the acquired firm. That is what will happen in the next round and government will then say the terms are too aggressive but they made this mess.

     

    A lot of you people don't know what you are talking about. It is fine to rant but at least have your facts straight and the argument applied to the right example.
    10 Oct 2012, 09:40 PM Reply Like
  • divinecomedy
    , contributor
    Comments (465) | Send Message
     
    Well it is kinda crony capitalism. The litmus test is whether a business can stand on its own without government help. JPM was the strongest, but it would have gone down in the end should Morgan Stanley, followed by Goldman Sachs, etc were to go down as well. After all they are all counterparties to one another in many of their deals.

     

    You also mentioned about using taxpayer money for shaky business case. Well it's shaky business case to invest in securities backed by nothing.
    10 Oct 2012, 10:12 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    "The litmus test is whether a business can stand on its own without government help."

     

    Generally a true statement but in the 2008 case we were close to having the economy fail which would have taken down the banking system and all other kinds of industries. That does not mean all those industries need crony capitalism it just means that they need a functioning economy to thrive in.

     

    Not sure about your "securities backed by nothing" comment. What do you have in mind?
    10 Oct 2012, 11:16 PM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    The government cannot and will not tell the fed anything, it never has yet. The Fed is not a government entity never has been. The Fed is made of private banks.The Fed controls and manages this nation's money supply down the last ATM transaction as Bernanke said in his 2009 interview with 60 minutes. Nothing illegal or conspiratorial about it. Its the law passed in 1913, the federal reserve bank act.Congress has the authority to revoke the Feds charter but politicians like to have a 3rd party around to blame in case the deals blow up like in 08 or 1929. The Fed has dolled out a lot more money out to its super banks clients since 08 than our entire $14 trillion economy and where did all that money go? To prop up all their 300 to 1 over-leveraged bets, like their unfunded credit default swaps, insurance against credit default save there is no money to pay any claims save the premiums they collect for that "insurance". Trillions of $$ of those things out there still. They still sell those today. When Jamie Diamon appeared before Congress it seemed to me the senators were doing the testifying in front of him. On one occasion he just ignored one senators comments to him.....get lost.
    10 Oct 2012, 10:30 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    Congress has created a lot of this mess and as you point out made the Fed for better or worse. Jamie testifying in front of Congress is like a PHD being grilled by a raucous High School class. It is funny and pathetic at the same time.
    10 Oct 2012, 11:18 PM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    yeah I thought it was sad watching the "peoples" representatives being dismissed so handily on TV by the CEO of worlds largest bank.. He might as well have been saying: I'm late for my golf game ......get lost .

     

    nothing has changed since 08. More debt out there than ever before. the largest miss-allocation of capital in history. The CEO of Westward resorts said yest. on CNBC he had fired almost 2/3rds of his workforce since 2007 (7000 employees) and he had never been more profitable he said. Wonder what the percent of his company's earnings growth over the last few years has come from layoffs?. That is your recovery. In 1934 the dow went up 24 or 28% with the "official" unemployment rate at 18%. Market and the general economy are not necessarily correlated.
    11 Oct 2012, 08:13 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    A lot of companies are making numbers only by cutting costs because the economy is not growing in any material way. Costs often means cutting headcount.

     

    The Obama recovery is very anemic and after watching and listening I can only conclude he does not know what he is doing.
    11 Oct 2012, 04:25 PM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    I see it as he's paying for the sins of his father GW as the saying goes. he inherited this mess , just continuing on the same path as before. He works for the same people,The GIANT consumer credit bubble that created all this is gone, not coming back this lifetime unless you're a super bank .
    CDS or credit default swaps. trillions of those out there, insuring everything under the sun country debt like Greece , Spain etc, expect of course"legally" it s not insurance so no requirement to keep enough funds in reserve like insurance companies must by law to pay claims. Only the premiums they collect from those CDS sales , trillions and trillions of those things out there, still selling them. They know Greece and Spain cant pay, their GDPs keep shrinking unemployment rising(25%) and they keep lending them money???? Makes no sense, unless you sold everybody and their brother that country debt as "insured" without no money to pay any claims, which is illegal. but it's not really insurance just sold as insurance.
    The other cute part with a CDS is since it is not "legally" insurance you can cover any third party you wish unlike regular insurance where law says you must have an interest in say that person like life insurance. Who says a $500 an hr lawyer is overpriced? When you are playing using 300 to 1 leverage like they were (are)don't take much to crash it all. That's what happened in 08 (and in 1929). On usdebtclock.org, trillions on top of trillions of those worthless CDS derivatives out there. Currency default swaps is how they got Greece to qualify for EU membership, still debt no matter how much you cook the books or whatever you call that debt.Greeks still on the hook for it
    Th Fed has never been a government entity, it's made up of private banks who serve private banks, by law, the federal reserve bank act of 1913 nothing conspiratorial about it, it's been the law. Has 2 principal mandates as you may know unemployment and inflation. How they choose to do it is their business.
    11 Oct 2012, 09:06 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    Understand your observations and concerns. Only will quibble with you one issue and that is Obama has made it worse by not making sure we grow as fast as possible. How do you grow? Answer is you drive UE down. Who hires people? Businesses. Who has Obama hammered the last 4 years? Businesses.

     

    We cannot have a strong GDP without business flourishing but Obama does not want that. Therefore I conclude he is an idiot. You cannot drive UE down without business involvement.
    11 Oct 2012, 09:52 PM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    Try this. That guy in Ohio a few years ago some made such a fuss cause he owed so much and could not find another job that paid as much as his last job. Make the banks reduce the rate on his debts( super banks have been getting better deals than that). Now he can pay, banks get paid what he owes them, local community sees more money from him. Multiply that times millions of people = GDP growth, real growth. Nothing has changed they still owe but now they can pay debt back vs foreclosing on him and others, nobody gets paid that way.You cant bleed blood out of a rock. Last I heard this economy of ours was like 70% consumer based. Makes more sense to me than the current plan whatever that one is
    11 Oct 2012, 10:22 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    I don't know what the current plan is either except CYA and find someone to throw under the bus.

     

    The Fed has lowered rates already to record lows. In fact they are probably negative real rates. If anyone cannot pay now then they are in too deep.
    12 Oct 2012, 12:15 AM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    If you go out and refinance all these underwater mortgages and delinquent ones at lower rates banks have a much better shot at getting paid vs being stuck with worthless paper the Fed has to buy waiting for that paper to become valuable again some day. Homeowners have more money to deploy in their local economies, everybody gets paid, everyone wins . And the fed does not have to continue spending $40 billion each month to buy paper nobody wants. .
    12 Oct 2012, 09:50 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    I agree with the refinancing at lower rate scenario and that is what is happening now. The fed is providing these lower rates by buying paper and driving down the yields. And the capital infusion is also helping drive up the real estate market to get more equity in the homes.

     

    Don't you see how this all works together?
    12 Oct 2012, 02:28 PM Reply Like
  • jhooper
    , contributor
    Comments (7238) | Send Message
     
    "If you go out and refinance all these underwater mortgages and delinquent ones at lower rates banks have a much better shot at getting paid vs being stuck with worthless paper "

     

    Whoa there cowboy. There are capital implications for doing that. While in the real world it might make sense for a bank to do this. Remember banks don't live in the real world. They live in the regulated world. Changes to notes requires TDR status and special ALLL reserving. This means capital erosion and even more regulatory action. Its a catch 22, extend and pretend game. If you could get the rules changed to mitigate the impact of modifying notes, you would probably find the banks more amicable about doing it. The banks aren't doing this because the regulators are basically telling them they better not.
    13 Oct 2012, 05:48 PM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    Rates on mortgages have been at record lows for years now if you can get one I know this is a credit economy and I know credit is just as hard to get now to buy a home as it was 5 years ago despite how many trillions of $$ in capital infusion? I'm no genius, but I'm pretty sure these 400,000 people who have filing new unemployment claims each week for the last 4+ years are probably not making as much money now as they were on their old jobs. Today JPM gave "lukewarm" guidance going forward would slow down on loss reserve releases and expected foreclosures to remain high for a while longer they said . See how all that ties together.

     

    This deal remains the largest miss-allocation of capital in history
    12 Oct 2012, 04:14 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    If you can't pass a credit check then giving you another loan is just another mis-allocation of capital.

     

    Credit standards have been raised by the banks and the US Government.

     

    If you are arguing that the government being involved in the mortgage market is a misallocation of capital then I agree. No need to argue with me.
    12 Oct 2012, 05:30 PM Reply Like
  • june1234
    , contributor
    Comments (3831) | Send Message
     
    Not for all the "creative" accounting in place these days for super banks none of these super banks would pass a credit check Net worth is assets - liabilities. They would all be insolvent if they had to use that formula as the rest of us do. Banks use that formula all the time when gagging a consumers credit.
    12 Oct 2012, 05:40 PM Reply Like
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