Jamie Dimon, CEO of JP Morgan Chase, got Rock Star treatment on Capital Hill the other day. I really didn't mind the wet kisses that were handed out. Okay, really, I did mind. It was as if the financial industry, including Mr. Jamie Dimon, didn't cause the financial collapse of 2007/2008.
The crappiness of Jamie Dimon's answers cannot be understated. When you add stupid, undereducated and misinformed questions you have the soup of absolute nothingness. The hearing was a huge waste of time. The purpose of the hearing was to figure out exactly what went wrong in this $2 billion loss that J.P. Morgan Chase took on a single trade deal. Since J.P. Morgan Chase is a bank and an investment house, we, the American people, ensure their survival. Basically, we are underwriting their risky bets. This is the whole reason for calling him to Capitol Hill. Yet we got nothing. No answers.
More from Matt Taibbi:
Merkley, who offered the key Volcker rule amendment in the Dodd-Frank negotiations, was the only member who pointed out the lunacy of this argument. Nobody is saying participation in the capital markets should be cut back; nobody’s trying to ban investment banking or hedge funds. The only thing anyone is suggesting is that you shouldn’t be able to bankroll a risky hedge fund with federally-insured money.
You can either be a commercial bank, with all the federal support that entails, or you can be a high-risk gambler. But you shouldn't be allowed to be both. We could have Chase Commercial Bank, and Chase Investments Inc., and they can each be as big as they want, but those companies should be separate. Why do we need companies like Chase that are both things, under one tent?
The real answer, from Jamie Dimon’s point of view, is simple – there’s no way he could have a $350 billion hedge fund if he didn’t have mountains of federally-insured money to play with, and a steady stream of low-interest loans from the Fed. Merkley points this out:
"How many companies on the planet have been offered half a trillion dollars in low-interest loans? Not many," he says. "But the basic concept of the Volcker rule is that banks are in the lending business, not the hedge fund business. Would you agree?"
Dimon, taking his time with this dangerous question, answers: "We’re not in the hedge fund business."
This is an obvious lie – that’s exactly what Chase’s CIO unit is, a giant hedge fund. Merkley goes on to point this out, noting that executives at CIO had already admitted that they were told to change their strategy and accumulate high-yield assets, and specifically risky credit derivatives, instead of safer, government-backed securities. Moreover, this was all at Dimon’s specific direction.
"That sounds like operating a hedge fund," says Merkley, "and doing so at your direction, with government-insured deposits."
Dimon tries to dismiss this observation by pointing out how safe CIO supposedly is. "Here are the facts," he says haughtily (as if what Merkley was talking about were not "the facts"). "We have $350 billion … the average rating is double-A plus. The average maturity is two or three years, not twenty or thirty …" Etc. etc. In other words, CIO isn’t a risky fund, except of course when it unexpectedly loses many billions of dollars overnight. Dimon seemed very put out that he had to explain this to Merkley.
Read more: http://www.rollingstone.com/politics/blogs/taibblog/senators-grovel-embarrass-themselves-at-dimon-hearing-20120615#ixzz1xzCo3omO