Why What Jamie Dimon Doesn’t Know Is Plain Scary

Tyler Durden's picture


Bloomberg's Jonathan Weil rips the lies emanating from Jamie's mouth, a new one.

What Jamie Dimon Doesn’t Know Is Plain Scary

Could Jamie Dimon really be as clueless as he sounded on the phone yesterday?

Last month, after Bloomberg News broke the story that JPMorgan Chase & Co. (JPM)’s chief investment office had, in essence, become a ticking time bomb, Dimon, the bank’s chief executive officer, called the press coverage “a complete tempest in a teapot.” That explanation no longer works.

Yesterday, Dimon changed tacks. Losses on the investment office’s “synthetic credit portfolio” had reached $2 billion so far this quarter, though he refused to give any meaningful details on how that had happened. Presumably, these are derivatives of some sort, but even that basic fact was too much for the bank to specify.

What Dimon lacked in information, he more than made up for in assigning blame -- to himself and JPMorgan employees. “There are many errors, sloppiness and bad judgment,” he said, as JPMorgan’s stock sank in after-hours trading. “These were egregious mistakes. They were self-inflicted.” He called himself and his colleagues “stupid.”

But there is more to it than that. Either Dimon misled the public about the gravity of the festering trades during his company’s first-quarter earnings call last month. Or he didn’t know what was happening inside the bowels of his own company. History tells us the latter is the norm for Wall Street bosses, though it’s hard to say which is worse.

New Rule

Don’t bother asking JPMorgan how it accumulated all these losses. That information is proprietary, as if the taxpayers who bailed out the bank in 2008 don’t have any business knowing. Here’s an idea for a new rule: If a too-big-to-fail bank can’t disclose what its trading desk is doing for fear of blowing itself up, then the bank shouldn’t be allowed to do it.

It’s not often that a huge company calls an emergency teleconference on short notice to discuss an intra-quarter trading loss that’s equivalent to only 1 percent of shareholder equity. So when a Deutsche Bank AG stock analyst named Matt O’Connor asked Dimon why the company had disclosed it at all, the answer was bound to be revealing.

“It could get worse, and it’s going to go on for a little bit unfortunately,” Dimon replied. The meaning was clear. Worse could mean disastrous.

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Fri, 05/11/2012 - 10:45 | 2417341 Quintus
Quintus's picture

The difference is that those traders get paid if their gambling pays off, but don't suffer the losses if they don't.  Therefore they are incentivised to take excessive risk.

Even if they bring the whole company down, Uncle Bernanke is there with his printing press at the ready to make it all better again.  

Fri, 05/11/2012 - 10:49 | 2417357 CvlDobd
CvlDobd's picture

You can't stop progress!

Fri, 05/11/2012 - 10:56 | 2417397 HarryM
HarryM's picture

Once in a while I watch Bull Riding on TV - none of the riders try to steer the bull - they stay loose and hang on.

Fri, 05/11/2012 - 11:10 | 2417453 CvlDobd
CvlDobd's picture

It isn't a real bull now. It's robotic and is ruled with an iron fist by its owners.

Or so I thought, this glitch in the matrix is some sort of false flag to make us think everyone makes mistakes, even the big boys. Or the markets are so far gone that there is no hope.

I'm slowly learning to accept my nihilistic tendencies. None of this matters. It's all meaningless. As Keynes said, "In the long run, we're all dead."

Fri, 05/11/2012 - 11:28 | 2417505 NotApplicable
NotApplicable's picture

Love is eternal.

Fri, 05/11/2012 - 11:36 | 2417550 Hi Ho Silver
Hi Ho Silver's picture

Until it's not.

Fri, 05/11/2012 - 11:39 | 2417566 CvlDobd
CvlDobd's picture

It's a chemical reaction that dies with the brain. If it's eternal then so are hate, jealousy, lust, and anger.

Fri, 05/11/2012 - 12:00 | 2417617 skepticCarl
skepticCarl's picture

Civil Diso, you're not a poet in real life, are you.

Fri, 05/11/2012 - 12:10 | 2417646 CvlDobd
CvlDobd's picture

Not exactly.

I have a handful of unresolved issues from my past (who doesn't) and was seeing a therapist for $60 a session. I then realized that open mic stand up was free and if I could get a few bookings they would pay me! Getting paid to bitch about my problems. Not a bad deal.

These markets have been a great source of new material. Boiling down things to their core (bullshit) has been remarkably easy.

Fri, 05/11/2012 - 12:06 | 2417637 pkea
pkea's picture

if nothing changes by the end of 2012, the markets are gone, there is a tiny hope though that something may change this fall....if not, it's gone forever:).

Fri, 05/11/2012 - 10:44 | 2417320 Raynja
Raynja's picture

Complicit or complacent, it doesn't fuckin matter.

Fri, 05/11/2012 - 11:00 | 2417405 haskelslocal
haskelslocal's picture

With a little polish, you've just nailed the tag line. I like it as is but seems every time I say FUCK people run for cover and hide under fear rules and inappropriate language clauses. (Pussies).

What you've said should be a mantra. Because we know they know yet if they claim they don't, they're ducking responsibility.

Fri, 05/11/2012 - 10:44 | 2417328 I Am Not a Copp...
I Am Not a Copper Top's picture

Straight to the moon motherfuckers!  Motherfucker!!!!

Fri, 05/11/2012 - 10:44 | 2417329 DRT RD
DRT RD's picture

Damn it Son!

Fri, 05/11/2012 - 10:45 | 2417332 AldoHux_IV
AldoHux_IV's picture

Yet the fed whined that they needed more power in order to properly regulate these institutions and here we have Bernank talking about the healthy balance sheets of banks the same day.

There's more to the story, but as long as Dimon unloads on a "counter trend Friday" then all is rainbow colored unicorns.

Where's Ron Paul right now talking about how the fed missed this big regulatory opportunity?

Fri, 05/11/2012 - 10:45 | 2417333 Zola
Zola's picture

As long as the FED has the back of these clowns, none of this matters, they may as well put on the most idiotic bets, they will never go under.

Fri, 05/11/2012 - 11:30 | 2417519 Al Huxley
Al Huxley's picture

They ARE the FED, so yes, they're covered.  I'm surprised they've even taken the hit they did (unless they front-ran it - oops just caught myself - of course they front-ran it).

Fri, 05/11/2012 - 10:44 | 2417337 piliage
piliage's picture

The DAX should be doing a swan dive. Why the hell did it just jump 1%????!!!?!?!?!?

Who is playing games?

Fri, 05/11/2012 - 10:54 | 2417384 walküre
walküre's picture

Someone lit a rocket.

Fri, 05/11/2012 - 11:16 | 2417469 CvlDobd
CvlDobd's picture

Operation Boilermaker.

He claims they use ICBM, none of that Estes bullshit.

Fri, 05/11/2012 - 12:11 | 2417650 flyingpigg
flyingpigg's picture

The DAX should be doing a swan dive. Why the hell did it just jump 1%?

To shake out the uncivilized people who dared to short the DAX. Margin call Muppetz!

Fri, 05/11/2012 - 10:45 | 2417339 Bill D. Cat
Bill D. Cat's picture

Good time for Moody's to drop the bomb on the rest of these assholes .

Fri, 05/11/2012 - 10:51 | 2417363 Chaffinch
Chaffinch's picture

Bill - I'm just concerned for your health - has it gone down yet?

; )

Fri, 05/11/2012 - 10:56 | 2417398 Bill D. Cat
Bill D. Cat's picture

Schaudenboner still fully erect .

Fri, 05/11/2012 - 11:03 | 2417414 Chaffinch
Chaffinch's picture

Nobody called 911 for you, huh? You could try a cold shower, perhaps, or googling Federal Reserve...?

Fri, 05/11/2012 - 11:39 | 2417563 Al Huxley
Al Huxley's picture

Watch that last interview of Blythe Masters on CNBC maybe?

Fri, 05/11/2012 - 12:45 | 2417783 francis_sawyer
francis_sawyer's picture

I 'butt dialed' 911... The deed is done...

Fri, 05/11/2012 - 10:47 | 2417344 Soda Popinski
Soda Popinski's picture

What do you expect?  The only way JPM knows how to make a profit is from TARP and shorting silver.  Dimon should go hang himself.

Fri, 05/11/2012 - 10:47 | 2417345 sumo
sumo's picture

Nice observation here:

"There is a tantalizing clue in this language. Read the statement carefully and you can see this wasn’t a bona fide hedge. That means it probably was no different, in substance, than a speculative wager. The definition of an “economic hedge,” literally, is an investment that doesn’t qualify for hedge accounting, meaning its effectiveness at offsetting a given risk isn’t sufficiently reliable. Otherwise the wiggle word “economic” wouldn’t be needed. It’s also conceivable that Dimon didn’t understand the details of the trades, and simply declined to discuss them rather than admit this."

What's going on at Bloomberg? This is the sort of sharp-edged analysis I expect on ZH, not an MSM organ (your choice of organ). Strange times indeed.

Fri, 05/11/2012 - 10:47 | 2417346 the not so migh...
the not so mighty maximiza's picture

national securty requires markets be green.

Fri, 05/11/2012 - 10:48 | 2417348 LawsofPhysics
LawsofPhysics's picture

100% regulation or  100% transparent mother fuckers, take your pick.  Can't have it both ways.  If what the Fed has done isn't treasonous then why can't the taxpayer get a complete audit?

If people want you to invest, but won't give you the details, chances are that it isn't a good thing.

Fri, 05/11/2012 - 22:38 | 2419275 StychoKiller
StychoKiller's picture

Next you'll be wantin' the recipe for Soylent Green!

Fri, 05/11/2012 - 10:49 | 2417351 firstdivision
firstdivision's picture

Fed hitting every ask out there in equities, the BIS double downing on long EUR.  What a total farce of a market.

Fri, 05/11/2012 - 11:03 | 2417425 DeadFred
DeadFred's picture

Give it some time. I think today will be the end of the AM dip and PM ramp. The switch is toggled in the other direction. Sell in May is still in effect so they don't get to ramp both halves.

Fri, 05/11/2012 - 10:48 | 2417354 ziggy59
ziggy59's picture

No one is this stupid. He, Corzine, and the rest of them are pathological liars. They make their fortunes lying

Fri, 05/11/2012 - 10:51 | 2417355 semperfi
semperfi's picture

Betting against Vegas, Devil, JPM is a fool's bet.  Vegas, Devil, JPM are all still there and always will be.   160 billion market cap?  Hahahaha!  Good one.  Real market cap = INFINITY via Uncle Bennie's back door CTRL-P facility.  Jamie D  a dupe?  Hahahaha!!!  You're killing me!!!  The dupes are those suckered into The Grand Master's paper lair.   Gold & Guns.

Fri, 05/11/2012 - 10:51 | 2417365 adr
adr's picture

The panicked calls to the Fed last night has caused the most unprecedented run for cover in the history of the market. Under any circumstance the next Bear Stearns must never see the light of day. Whatever happened hundreds of billions were sent directly into the accounts of the big banks to buy up the stock market this morning. With no retail traders left it is easy to fake a rally. Reuters is in on it and was told to fake a report that could give the market cover to hide the JP Morgan problem.

Fri, 05/11/2012 - 11:12 | 2417458 semperfi
semperfi's picture

Obama's Energy Policy Lowers Gasoline 20 Cents YOY - Markets Respond Positively - Reuters.

Markets responded positively this morning with a jump up on lowered inflation expectations due to lower YOY gasoline prices.  Traders snapped up shares across the board in response expecting all sectors to benefit from the reduced cost of energy.  Consumer sentiment also rose in likewise manner. 

Fri, 05/11/2012 - 10:52 | 2417370 LULZBank
LULZBank's picture

A good time for Jamie and Blythe to release a sex tape to divert attention and get their popularity ratings high. Works for celebs.

Pay per view and it can even cover their losses.

Fri, 05/11/2012 - 14:22 | 2418110 semperfi
semperfi's picture

Since Blythe has a wanker under that dress, who is going to be poking who ?

Fri, 05/11/2012 - 10:52 | 2417373 Hedgetard55
Hedgetard55's picture

Incompetent AND a liar, a great combo.

Fri, 05/11/2012 - 10:54 | 2417378 crawl
crawl's picture

After witnessing the work of 33 Liberty Street this morning, I have doubts about JPM and Dimon being upfront with clarity and full disclosure.

Trial lawyers will no doubt be enriched from the announcement of losses previously kept secret.

As for Dimon, when the dust settles, it would not be a shock to read the board gave him a massive bonus for saving the bank from a worse outcome.

Fri, 05/11/2012 - 10:54 | 2417382 LetThemEatRand
LetThemEatRand's picture

As Leslie replied, Jamie Dimon made $100 million in bonuses working from his basement losing money for his shareholders.

Fri, 05/11/2012 - 10:55 | 2417388 pissing_excellence
pissing_excellence's picture

Speak to him as you would a golden retriever.

Fri, 05/11/2012 - 10:55 | 2417393 i love cholas
i love cholas's picture

I have a stupid question. How the hell are they going to unload these positions?

Fri, 05/11/2012 - 10:59 | 2417403 piliage
piliage's picture

Wait for QE3 to boost the market, and woosh, no more loss. Clean new money smell...

Fri, 05/11/2012 - 11:43 | 2417577 The Swedish Chef
The Swedish Chef's picture

Or QE is the Fed buying what ever crap derivative they made the losses on...


If JP Morgan has bought so much toxic paper that it can roil the market, that means that there are other people with the same crap position that are equaly or worse off. 


We just took a giant leap towards QE me thinks.

Fri, 05/11/2012 - 11:05 | 2417429 hack3434
hack3434's picture

Easy...LSAP of IG9

Fri, 05/11/2012 - 10:56 | 2417399 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Silly people,


You ASSUME Ben can or will bail JPM out. Not so. Lots of reasons why that won't happen.


JPM is having its cage rattled for a reason. The fun story is who is in on the copy cat trade and can they take the heat as long as JPM can? You can't tell me that others aren't doing the same as JPM. I wonder who that be?


You can't always frak with the Infinite.

Fri, 05/11/2012 - 11:49 | 2417588 Seasmoke
Seasmoke's picture

you are correct ......i have seen a whale at the racetrack who a bunch of guys like to follow and he lets them as he likes the attention .....well when all is going good , everyone is cocky however when things go bad, the low men on totem pole always get wiped out and he is able to sustain and get thru to the other side and make the losses up......all the other guys are busted out and miss on the next hot streak.....seen it happen way too many times !

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