Call it crazy, but J.P. Morgan’s loss is Jamie Dimon’s gain

May 24, 2012

COLUMNS, Uncategorized

Nancy Anderson, columnist

Jamie Dimon, CEO of JP Morgan, feels really bad about the mistake that occurred on his watch. He felt so bad that he fired a couple people, and he actually apologized to shareholders. I’m sure that an apology from Dimon is like finding a real diamond in the garbage heap — rare, real rare.

Dimon has been vocal about any attempts to rein in bank trading. Speculative trading was the straw that broke the camel’s back and led to the Financial Crisis of 2008. According to Dimon, there is no need to formally limit speculative trading. That Volker Rule? Just another boil on the backside of capitalism. A nuisance. A hindrance. Couldn’t all the bankers just hold hands and agree to play nice?

That mistake cost JP Morgan $2 billion. While that’s chump change for JPM, it’s nothing to sneeze at in my book. And he was sorry, really, really sorry. Dimon promised shareholders it would never happen again, and he even conceded that a few teeny tiny regulations might be in order.

The shareholders responded by awarding him a $23 million pay package for next year. I had no idea messing up could be so lucrative!

A strong financial system is critical for economic development. We need a well-oiled and well-functioning Wall Street, but we don’t need another 2008. Reasonable regulations offer assurance to all participants that the game is not rigged but is fair and that taxpayers won’t find themselves on the hook again for some colossal error.

Financial regulations are typically born out of a crisis. Sometimes, we overreact. Sometimes, we regulate for what happened yesterday and forget to look for the next problem. And sometimes, we don’t regulate enough and end up with a case of history repeating itself. Maybe this little $2 billion dollar mistake will get our attention.

They’re calling the errant trader “The London Whale.” Wonder if Jamie feels like he’s been swallowed whole? Of course, with $23 million to keep him company, he can stay in that belly a long time!

 >> Nancy Lottridge Anderson, Ph.D., CFA, is president of New Perspectives Inc. in Ridgeland — (601) 991-3158. She is also an assistant professor of finance at Mississippi College. Her e-mail address is nanderson@newper.com, and her website is www.newper.com.

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