JPM's Dimon Builds Fiscal Cliff Bunker As CFO Exits "Balance Sheet Fortress"
Jamie "The Europeans have the will, but no way; The US has the way, but no will." Dimon had a very open and wide-ranging discussion with the Council on Foreign Relations today. The conversation ranged from the unfairness of the Bear Stearns' deal (poor chap - all that very limited downside from $2/BSC share, at least initially) to the immediate threat of the pending Fiscal Cliff - and his $100mm-debt-ceiling-preparedness war-room bunker, and America's longer-term fiscal profligacy (vigilantes moving against the US bond market is virtually assured - question is when and how). He also discussed the London Whale 'error' and went on to discuss the Greeks and the Eurozone's political and economic debacle in general. Some significant anti-administration rhetoric (ironic really), summed up with the veiled threat "Hey folks, if you think Washington and American Business can go to war with each other and it ends good - terrible error!"
Below are a few points Dimon made during the event:
On Investing in America: “The president, whoever he is next year, recognizes one thing for certain, they’re going into that office with a royal straight flush. I think this attitude, somehow, ‘how woe is me, how terrible, how America is lost. It’s just not true, folks. …This is still the best economy in the world. If you can invest in one place in this planet, it would be here.”
On JP Morgan’s London Trade Error: “We made a stupid error. I mean, we’re pretty disciplined risk people. But we made an error. We had a gap in the line. And, you know, we didn’t have this gap elsewhere. We have other flaws elsewhere, but, you know, we had a gap. We screwed up. By the way, that quarter, we made $5 billion. So yeah, it was a stupid error. … I should have caught it also. I didn’t. But it isn’t going to sink our ship.”
On Fiscal Cliff: “We have formed now a fiscal cliff war room, command center, all that kind of stuff going through to make sure we understand it all. We’ll be prepared. JP Morgan will survive the fiscal cliff. I just think it’s terrible policy to allow it to get close. ...There are all these potential outcomes and I would defy anyone to know what they are.”
On Greece and the Future of the Eurozone: “From an economic standpoint, Greece is not the issue. Greece is a couple of billion of dollars in debt. …The catastrophe is the default of Greece before you have a firewall to Italy and Spain, you’ll have a very good likelihood of a run on the banks in Italy and Spain. Italy and Spain don’t have the wherewithal to stop a run on the banks.”
At the same time, the WSJ reports that Douglas Braunstein (51 year old CFO) will be stepping down...
J.P. Morgan Chase's chief financial officer is expected to step down and is likely to move into a different job at the bank, according to people close to the company.
Douglas Braunstein, 51 years old, has been finance chief at the largest U.S. bank, by assets, since 2010. Before that, the longtime deal maker ran J.P. Morgan's investment-banking operations in North and South America and was heavily involved in the bank's acquisitions of securities firm Bear Stearns Cos. and the failed banking operations of Washington Mutual Inc. WMIH +1.69%
Mr. Braunstein's status was diminished as part of an executive shake-up in July. Since then, he has reported to Matt Zames, 41, the company's co-chief operating officer, rather than Chairman and Chief Executive James Dimon.
It isn't clear where Mr. Braunstein will land at the bank, but the possibilities include J.P. Morgan's recently combined corporate and investment bank, these people said.
Mr. Braunstein declined to comment on his position as chief financial officer.
Mr. Braunstein is among J.P. Morgan executives facing outside scrutiny over the bank's handling of the trading mess in its Chief Investment Office, or CIO, a unit that manages the bank's cash. J.P. Morgan suffered a trading loss of $5.8 billion in the first half of 2012, and about a dozen regulatory or law-enforcement agencies are conducting inquiries into the trades, internal accounting and risk controls at the bank, and the adequacy of its public disclosures, according to people with knowledge of the probes and securities filings.
"Jamie is a big fan of Doug's and any potential move Doug decides to make would be unrelated to the CIO issue," said a senior person at the bank.
Mr. Braunstein and other executives dismissed initial news reports about a trader known as the "London whale," who was roiling debt markets with his large bets. On an April 13 conference call, Mr. Braunstein told analysts, "We are very comfortable with our positions as they are held today." He described the bets placed by the Chief Investment Office as part of a "very long-term" strategy to hedge the bank's risks. Mr. Dimon referred to outside concerns as a "complete tempest in a teapot."
J.P. Morgan in July said that Messrs. Dimon and Braunstein relied on the assurances of others at the bank when making those statements. Mr. Dimon has said he was "dead wrong." J.P. Morgan has said it could have additional losses of $800 million to $1.6 billion from the trades. J.P. Morgan might update investors on the status of the trades when it reports third-quarter results Friday morning.
Great Stuff - Bear Stearns And The Whale Trade - only a 91% target bonus for you then...