— Read Yves Smith on the case against one-time press favorite Jamie Dimon and JPMorgan Chase. She writes, correctly, that “bank CEOs have a powerful and largely compliant messaging apparatus in the financial media.”
Dimon’s frequent repetition of his claim that JP Morgan has a “fortress balance sheet” is a pure and simple Big Lie. The best he might be able to argue is that he’s won what the Japanese call a height competition among peanuts, that he’s better than his peers, but they are all at such a low level that these distinctions aren’t as meaningful as he’d like the great unwashed public to believe. But as the discussion above indicates, Dimon’s PR leaves out the tri-party repo risks, which none of his main competitors have. As banking industry expert Chris Whalen noted, “JP Morgan is running a $2.4 trillion bank attached to a $75 trillion derivatives clearing operation.” And the bank can get away with that precisely because regulators haven’t demanded that JP Morgan hold additional capital in order to cover the risk it runs in its clearing operations…
It’s simply routine for JP Morgan to completely ignore regulations. Here’s another example. Remember the brouhaha about how Goldman was manipulating the aluminum market via its ability to control inventory levels by virtue of owning a large number of warehouses used for clearing and storage? Financial holding companies aren’t supposed to be involved in the physical aspects of commodities dealing, but Goldman had its broader freedoms from its days as an investment bank grandfathered for five years, and had the nerve to thumb its nose at the Fed by buying the warehouses during that period. But that was better than JP Morgan’s conduct. The Fed has never permitted financial holding companies to own commodity infrastructure. But JP Morgan went ahead and bought warehouses from Henry Bath warehouses, without permission. I’m told that Fed officials have said off the record that nobody at the Fed has been able to explain under what authority JPM owns warehouses.
Read the whole thing.