Common wisdom says that JPMorgan Chase has had a relatively “good” financial crisis. Did it lose money? Yes, lots and lots. Did it get bailed out? Yes, to the tune of $25 billion. (Although some say that they had no choice in the matter and were just taking one for the team.) But as the dust settled from the worst financial crisis in modern history two things became clear:
- JPMorgan was in much better shape than its nearest competitors, Citigroup and Bank of America.
- Lloyd Blankfein, CEO of Goldman Sachs, would play the biggest bad guy in this drama. Jamie Dimon, on the other hand, was the man. (Or the least-hated banker, as the New York Times put it.)
Now that JPMorgan has just disclosed a loss of $2 billion from a trading “blunder” we are left to wonder: is it time for Jamie Dimon to bow out gracefully?
In a very broad sense you can see the mortgage crisis as one of levered beta: lots of people, from the biggest global banks to the humblest subprime homeowners, borrowed money in a bet that the housing market would continue to go up. When it didn’t the losses they suffered wiped out whatever own money they had put in, and then some. JPMorgan’s ability to escape the worst of this pointed to the existence of a pretty sharp skill in risk management. A skill which many lay at the feet of Jamie Dimon, himself.
But now JPMorgan Chase has lost a great deal of money on a trade:
- that it insisted was not a bet, but rather an insurance strategy needed as part of its regular course of business
- of which Dimon, himself, was fully aware
- and which seemed so abnormally large and so potentially risky that traders from other firms apparently tattled about it to the press
then what other choice is there but for the CEO, which is in essence always a bank’s chief risk officer, to step down?