JP Morgan CEO Jamie Dimon is willing to pay billions of dollars to the banking police to make all the bad publicity go away. Problem is, the Obama administration and its allies may not rest until they have his scalp.
Yes, the man who just a few years ago was lauded as the King of Wall Street for steering his bank through the worst of the financial crisis now finds himself firmly in the cross hairs of Washington’s fat-cat police.
That Dimon’s job may be in jeopardy is not something Wall Street analysts and executives want to discuss — at least publicly. Most say the chances of Dimon being ousted are remote. This is, after all, one of the most accomplished bank executives, who avoided the worse practices that led to the 2008 financial collapse.
And he continues to have the support of the people who think they’re in charge of the bank: his board and investors. After all, Morgan’s stock price has held up remarkably well, despite all the bad publicity. Shares even spiked on Wednesday’s news that the firm is nearing a deal with the feds to pay $11 billion to settle a bunch of cases, as investors cheered the possibility that the regulatory onslaught was coming to an end.
But the firm’s health is irrelvant to the people who are really in charge — namely the Obama administration and its cronies across the nation’s most powerful law-enforcement agencies (state Attorney General Eric Schneiderman is a prime example).
For them, JP Morgan is worth nothing but scorn, class-warfare envy and lots and lots of fines. And Dimon is, on top of all that, a major nuisance whose ouster would teach a lesson to the rest of the industry.
In private, other big-firm senior executives and banking lawyers concede that investors should at least consider the possibility of forcing Dimon out as the only way to really get the regulators off the big bank’s back.
The feds’ motive? They’ve failed to nail a single top bank executive for a financial-crisis-related crime, and pretty much any big fish they can nab for pretty much anything will do. As an added plus, Dimon has been an occasional critic of the administration’s regulatory policies.
“The government wants to bring Dimon and JP Morgan to heel” is how one prominent banking lawyer describes what’s going down. Another financial CEO told me Dimon’s future depends on just how many fines the firm has to pay to cover all the regulatory issues that began to crop up more than a year ago — just around the time when Dimon, then unscathed by scandal, starting attacking Obama regulatory policies such as the Dodd-Frank banking rules.
Dimon, once an Obama supporter, called parts of Dodd Frank “downright idiotic.” He pointed out the reality that the vast overhaul makes banking more costly and complex — which makes banks less likely to lend and the economy more likely to suffer.
And the economy has indeed kept limping along, kept in motion only because the Federal Reserve continues to print money at a rate never seen before. If the Fed ever does taper off its easy money, expect what the finance guys call “cutting labor costs” — i.e., huge layoffs.
Unfair as it sounds, Dimon is paying for telling the truth. And it’s a problem unlikely to be fixed by a once-and-for-all “global settlement” over the sale of faulty mortgages.
In fact, people at the big bank concede Dimon’s biggest problem may be the unknown: Because he is running the nation’s biggest bank, regulators looking for trouble can probably find it somewhere.
It’s not just that no bank is perfect. Many of the current mortgage-fraud charges involve companies that at JP Morgan took over, often at the government’s insistence, during the financial crisis — such as Bear Stearns and the bank Washington Mutual.
Other scandals involve the misjudgments of traders, such as the notorious London Whale scandal, where a group of traders in London allegedly hid massive losses. Two of the traders involved have been indicted, while JP Morgan paid nearly $1 billion to settle the case.
Put all that together, and a lot smart people on Wall Street tell me that it’s not implausible that JP Morgan is at risk of losing Dimon himself. With that, the Obama administration would finally have its financial-crisis CEO scalp, even though he had nothing to do with the crisis in the first place.
Charles Gasparino is a Fox Business Network senior correspondent.