Friday, December 11, 2009

Dimon Nonplussed by Wall Street Reform

The AP reported:

Prodded by moderates, however, nearly half the Democrats teamed up with Republicans late Thursday to loosen restrictions on derivatives and reject tougher (financial) regulations.

Corporacrats united on behalf of their benefactors. JPMorgan CEO Jamie Dimon spoke on his bank's third quarter performance. They sold trillions in derivatives. Like Lehman Brothers, JPMorgan has enough off balance sheet items to implode the firm in another perfect financial storm. (see JPM's third quarter 10-Q filing, page 169). JPMorgan's net income by segment for the third quarter 2009 is:

Investment Bank--$1.9 billion
Retail Financial Services--$7 million
Card Services--($700) million (loss)
Commercial Banking--$341 million
Treasury & Security Services--$302 million
Asset Management-$402 million
Corporate/Private Equity--$1.3 billion

Nearly 90% of JPMorgan's profits came from two segments, Investment Banking (which includes their high market share derivative franchise) and Corporate/Private Equity.

Private equity underwriters (PEU's) want the benefits of an Uncle Sam backstop without obligations, i.e. regulations or taxing "carried interest" as income. JPMorgan PEU's with the best of them, including the politically connected Carlyle Group.

Dimon spoke to looming consumer protection regulations. He noted any regulatory cost would be paid by customers. Why do highly profitable industries like commercial/investment banking and health insurance make new consumer protection costs a 100% pass through?

Jamie Dimon has been a frequent visitor to Obama's White House, a six time guest. Which items did he discuss with President Obama, Rahm Emanuel, Larry Summers, Tim Geithner or junior staffers? Geithner gifted Bear Stearns to JPMorgan as head of the NY Fed. A Tim Geithner headed FRBNY provided a $28.85 billion loan in the BS rescue (page 160 of the 10-Q).

Congress will not ring fence commercial banks from dangerous financial products. It will not break up too big to fail. Legislation will provide the means for secret Federal Reserve Bank support for "financial holding companies" of any stripe. If you liked Uncle Sam's handling of AIG, you'll love continued financial deform.