Cut Jamie Dimon's Pay

 | Jan 08, 2014 | 2:00 PM EST  | Comments
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Last January, the Federal Reserve handed over $88.9 billion to the U.S. Treasury, i.e., to taxpayers. That was nearly all of the $91 billion that the central bank earned during 2012. The other $2.1 billion went for its own operating costs.

The Fed's earnings came mostly from interest on assets it holds in its portfolio. Those assets are mainly U.S. Treasuries. At the end of 2012, the total amount of assets that the Fed had on its books was around $3 trillion. It's a lot larger now. Actually, the figure has grown to more than $4 trillion. Earnings of $91 billion on $3 trillion in assets means the Fed earned a 3% return on assets.

Now look at JPMorgan Chase (JPM). The bank has about $2.3 trillion in assets and it earned $17 billion. That's a mere 0.7% earned on assets.

It's no contest; the Fed wins hands down.

Yet all we hear is how JPMorgan is such a great company and how Jamie Dimon is such a great CEO. Dimon was paid nearly $20 million in 2012 to steer the bank to miniscule returns.

On the other hand, Ben Bernanke, the departing Fed chair who guided monetary policy over the past eight years and who brought in that respectable 3% return (not to mention his work saving the financial system from a major meltdown a few years ago), earned just $199,900.

The Fed's a bank just like JPMorgan is. Its investments are similar: securities and loans. However, Bernanke's returns are more than four times greater than Dimon's, yet Bernanke makes about $200,000 while Dimon makes $20 million. To top it off, Bernanke hands all of his bank's profits over to taxpayers. And where does JPMorgan's profit go?

People scream that we don't need the Fed. How about screaming that we don't need JPMorgan?

Forget, for a moment, all the allegations of wrongdoing by prosecutors: Violating bank secrecy laws, the fraudulent sale of mortgage securities, bid-rigging, currency market manipulation, money laundering, operating without proper controls, and so on.

What is the need for a bank of this size that delivers such poor returns? And this is held up as a shining example of our financial industry? Am I missing something here?

Jamie Dimon knows how to manage his bank's vast assets in such a way that ordinary people can basically outperform him by putting their money in a CD. When you break it down, that's an amazing statement, but true nonetheless.

This year the Fed will hand over about $120 billion to taxpayers, assuming the same rate of return as last year.

And JPMorgan? Still around $17 billion if it's lucky, because the bank is going to be paying out a lot in fines to the government and that could have a negative impact on earnings. It's also worth noting that JPMorgan's earnings were at least partially the result of this questionable activity. It looks like a highly ineffective business model, if you ask me.

Some people say this is extortion by the government and it only hurts JPM shareholders. I say that if you put your money in a shady enterprise, you risk losing it.

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