The folks in the Obama administration may be unable to run a health-care Web site, but they’re brutally determined and efficient when it comes to squashing those who oppose their policies — as Jamie Dimon is finding out.
Today the JP Morgan chief executive could be putting the final touches on a deal with the Obama Justice Department that would make Don Corleone proud. For various alleged financial “crimes” involving the sale of fraudulent mortgages, the nation’s largest bank is slated to fork over $13 billion, admit some culpability and prepare for a barrage of lawsuits from Wall Street ambulance chasers.
In one fell swoop, President Obama has made up more than half of the $24 billion cost of the government shutdown.
But the story doesn’t fit the typical narrative of fat cats who do bad stuff having to pay for their sins because the allegations against the bank are so warped.
The crimes that were committed occurred largely at banks that JP Morgan took over, at the behest of the government, during the 2008 financial crisis. Most of the other stuff the bank is accused of involves mismanagement, not out-and-out investor rip-offs of the Bernie Madoff variety.
No, Dimon’s real sin, as I’ve pointed out on these pages before, was his withering critique of the Obama economic agenda, which he said was holding back the US economy.
For a while, Dimon (a longtime Democrat) was a rarity in Corporate America in that he refused to be cowed by the Washington political class and keep his mouth shut in the face of the absurdity this administration was administering to businesses in the form of taxes, regulation and now a new health-care system where even something as vital as designing a workable Web site to sign up new recruits doesn’t work.
By speaking out, Dimon became de facto public enemy No. 1.
Sure, some of his wounds were self-inflicted. He initially downplayed a large trading loss the bank had in London, only to have it turn out to be much more costly and not just from a financial standpoint.
By calling the London Whale loss a “tempest in a teapot,” he gave his adversaries just the opening they needed to launch their broader assault on the bank and Dimon himself.
As big as it is, the size of the deal (which could be announced as early as today if talks don’t break down) doesn’t quite describe the damage inflicted on the bank and the banking business by the government’s assault. Dimon has been effectively neutered as a spokesman for the banking industry on ills of over-regulation such as the Dodd-Frank law, which he once called “downright idiotic.”
Meanwhile, Attorney General Eric Holder has refused to end all the investigations into JP Morgan, including a criminal one in California — a sign he’s looking to extort more money from the bank.
And Holder’s demanding some sort of concession of guilt from the bank, which is basically a multibillion-dollar gift to the administration’s buddies in the trial bar, who are waiting anxiously to see exactly how much the bank will be forced to ’fess up to before their lawsuits start to fly.
In other words, the shareholders of JP Morgan are subsidizing Wall Street ambulance chasing.
But why would Dimon, hailed only a couple of years ago as the one bank CEO who navigated successfully through the financial crisis, be willing to give away so much? The short answer is he has no choice; both his job and JP Morgan’s survival are on the line.
While Dimon may not have to step down completely, every top Wall Street executive I speak to says it’s a good bet that he’ll give up the role as bank chairman, a weakening of his stature that the Obama crew will love to see.
Another good bet: Under the regulatory barrage, JP Morgan will also be shrinking its massive size and clout in the markets much more than the small steps already announced.
This wouldn’t be so bad if it were part of a concerted effort to make the big US banks less complex and easier to manage. But it’s not; the administration would also love to hand JP Morgan’s clout to friendlier fat cats like those running Citigroup or Bank of America.
Friends of Dimon I speak to say they can’t believe he’ll take much more of the abuse; he doesn’t need the money and would love nothing more than to become a college professor. Maybe he can teach a course in what it’s like to be extorted.
Charles Gasparino is a Fox Business Network senior correspondent.