Perhaps, I overestimated Jamie Dimon’s ability to recognize what the correct play is under certain circumstances. This is a poker term, and for poker players “correct play” carries almost religious connotations. You always have to play correctly, even if you lose that one hand due to chance. This is because in the long run you always win. You don’t always have to demonstrate your strength. It’s ok to fold every now and then. By folding one hand and saving chips you can get a monster hand the next time. I thought that Jamie Dimon understood this in general, and, with the London Whale fiasco he just had that one bad hand from which he could quickly recover. But this issue drags on for more than a year now and the scrutiny is only intensifying. It just won’t go away, especially if met with more resistance from JPM quarters. Entrenched attitude is the worst attitude in these circumstances. That is why I thought embracing reform is the best next move for him. If he did that everyone would immediately forget about London whale trade.
Well, Jamie Dimon read my article, which was a surprise. I have accomplished getting my point across to the very person it was intended for, and that’s all that matters. He disagreed that embracing breakdown of TBTF is a smart thing to do, because he thinks size gives him the advantage. He’s competing with European banks that are even bigger. A valid concern for a person whose obligation is to shareholders and bondholders. But also a surprisingly short-sighted view. Perhaps, he’s mistaken by attributing the JPM success (stockwise) to the size of the firm. Maybe it’s due to the cheap financing that banks enjoy and other industries (or smaller banks) don’t. Even assuming that JPMorgan doesn’t use the Fed’s window to borrow at 25bps (hard to believe that someone would forgo free cash), the supposed profitability of other banks like his could be directly tied to that window. If we recall, JD did not want to take that cash in 2008 because he thought it would stigmatize him and he had valid reason – JPM was in the better shape (relatively) compared to all other (Citi, BofA). So, it’s likely that he’s misattributing stock performance to his managerial style.
Also, it’s safe to assume that Jamie Dimon spent the last year surrounded by lawyers and consultants and have mastered the art of defending his position in either platitudes or legalese. Defending it to such an extend that he began to believe his own spin. And this is the most unfortunate part of this whole thing. In his daily routines he’s surrounded by sycophants, people who take orders and people who’re paid to tell him what he wants to hear. When everyone around you tells you that you’re doing the right thing you begin to believe it yourself. It’s as if they have their own “unskewed polls”. It’s one thing for politicians or for talking heads or for consultants to fall under such spell. But in a supposedly Darwinian world of business, a world where Dimon has excelled for decades, to lose such perspective is a deadly sin. Losing touch with the outside world is the worst transgression. We did have a short telephone conversation (he spoke mostly) and that is the impression that I got. He had a prepared speech that he has delivered a hunderd times before to hundreds of other people.
Dimon lost perspective. Oh, well. At least I tried.