A little over one year ago, I wrote a little article about JPMorgan Chase (JPM) CEO Jamie Dimon. I asked if the JPM board of directors would give their CEO a nice bonus and a raise even though his inept management since at least 2007 had cost the shareholders' of the bank billions of dollars in losses and fines and settlements.
I even wondered whether the SEC or some government agency might step in and force a claw-back of Dimon's bonuses since 2007.
Of course, none of that happened and he got a real nice bump in his pay package last year.
Now, in the fullness of time, we can see what a horrible job Dimon did to protect the bank from many bad business decisions, as well as outright violation of law and regulations. Think of The London Whale debacle, which he first tried to downplay as a "tempest in a teapot" and the immense losses from mortgages that he assumed when he had the bank take over failed thrifts without obtaining any immunity for JPM from regulators for prior bad lending practices. We know now that JPM itself was involved in billions of dollars of bad mortgages and just last week settled a case involving Bear Sterns' bad mortgages when we had assumed up until last week that Dimon had obtained an indemnity when he took over Bear Sterns at the behest of the Federal Reserve.
The London Whale not only lost billions in trading, but also billions more in fines and legal fees and all this happened on Dimon's watch. The bank was also involved in the foreign exchange rigging scandal and the Libor Rate fixing scandal. Let us not forget the mortgage foreclosure scandal either. Then there was a little incident last year of hackers getting information on millions of the bank's accounts.
While all this was happening, the bank's board of directors kept giving him pay raises and bonuses.
I also asked the question, were the big banks like JPM too big to manage effectively within the law and regulations and, in the case of the Whale and the data breach, normal operations? It seems to me that JPM and a few other big banks have made it clear that while it may not be impossible to manage these big banks, the present managements of some of our huge banks are not up to the task.
This is the crux of my point. Why is it that the media and pundits have all called Jamie Dimon the smartest person in the room and the best banker in the world? Until some of his enormous failures came to light, he was also the poster boy for those who hated Dodd-Frank and other attempts to regulate the giant money center banks.
If the SEC had a spine, which it most certainly does not, it would file a civil action to claw back his bonuses and to investigate the supine board of directors at JPM, which has to rank down there with the board at Citicorp (C) during the financial crisis. He even had the nerve to lash out at the regulators in public while he had to know that his own bank was facing billions of dollars in claims from bad practices and violations of law.
The bottom line is that there is still zero accountability at the top of these gigantic banks. When it comes to taking home his pay and bonuses, I guess Dimon is the smartest person in the room to have even kept his job all these years.
Where is the accountability for years and years of mismanagement at JPM? The mortgage problems went on for years and the foreclosure scandal went on for years, as did the Libor and foreign exchange rigging. The Whale even went on for a relatively long time.
I think it is very telling that no hedge fund activist has tried to make a run at JPM. They have gone against PepsiCo (PEP), DuPont (DD), Dow Chemical (DOW), Air Products (APD) and even Apple (AAPL), but for some reason none of them have taken on JPMorgan.
Why is that? Perhaps it is because JPM can only get better if it is broken up and the pieces sold off into businesses that someone can manage and that replacing Dimon will not result in any better result because JPM is not manageable in its present configuration. Moreover, no one but the top people at JPM even know what new lawsuits and fines are coming down the pike. For many years now, people have tried to guess when the big banks, like JPM, will be free of endless lawsuits, gigantic legal bills, fines and forfeitures. So far, it has been like trying to guess when oil will bottom. Every time it looked like the end of the legal problems was at hand, a new scandal appeared.
My bet is on Dimon getting a nice bonus and a raise for all his efforts in 2014 in settling the messes that he himself created or allowed to happen on his watch. The JPM board of directors will not challenge Dimon and lose their sinecures and benefits. So far, only the stockholders of JPM have taken the hits.
