NEW YORK, N.Y.—JPMorgan Chase CEO Jamie Dimon was expected to face tough questioning at the bank’s annual shareholders meeting Tuesday over a $2 billion trading mistake that has cost one of his senior executives her job.
Shareholders, however, are unlikely to call for Dimon’s head. For them, facing the crisis without him might be a bigger nightmare than the trading loss itself.
“When a bank is dealing with this sort of a challenge, you want someone of his calibre to shepherd it through,” said longtime JPMorgan shareholder Michael Holland, chairman and founder of money manager Holland & Co.
That has not been a universal opinion since Thursday, when Dimon disclosed to analysts that the bank had made a bad bet with so-called credit derivatives. Since Dimon made the announcement, almost $20 billion in market value has evaporated.
On Monday, White House press secretary Jay Carney, without singling out Dimon, said that Washington can’t prevent “bad decisions being made on Wall Street.”
Dimon has built a reputation as a cost-cutting zealot and an expert at keeping risk under control. He led JPMorgan into a stronger position than almost any other bank after the 2008 financial crisis, which brought him more praise than at any other time in his career.
Shareholders rarely lash out against Dimon. Vikram Pandit of Citigroup and Brian Moynihan of Bank of America are not so fortunate: Shareholders at those banks take the slightest opportunity to call for them to step down.
Dimon’s reputation has been severely damaged now. But shareholders still appear to believe he should be given the chance to prove himself again.
“He’s earned enough market respect to have the opportunity to correct this,” said Benjamin Wallace of investment firm Grimes & Co., a longtime shareholder that sold its JPMorgan shares six months ago.
Dimon said on Sunday that the bank had “made a terrible, egregious mistake” and that there was “almost no excuse for it.”
There have been no signs of a shareholder insurrection against Dimon, and no member of the board of directors has spoken out against him since he disclosed the loss.
And while $2 billion was a stunning figure, as the investor reaction demonstrates, JPMorgan is more than big enough to absorb the loss. The bank made $19 billion last year alone.
Dimon has said the bank lost the money in a strategy to hedge against financial risk, as banks often do, not because it was trading for its own profit. Some lawmakers have cast doubt on that portrayal.
On Monday, President Barack Obama said JPMorgan’s loss in high-risk trading shows the need for the Wall Street rules that Congress passed two years ago.
JPMorgan “is of the best managed banks,” Obama said during an appearance on ABC’s “The View,” a daytime talk show. “You could have a bank that isn’t as strong, isn’t as profitable, making those same bets and we might have had to step in. Which is exactly why Wall Street reform is so important.”
Many post-crisis rules governing risk-taking by banks are still being written.
Among them is the so-called Volcker rule, which would block banks from trading for their own profit, a practice known as proprietary trading. Dimon has said the trading in question would not violate the rule.
JPMorgan is holding its meeting in Florida partly because the bank is expanding there. Dimon will address shareholders, who will get to ask questions.
They will also vote their approval or disapproval of his $23 million pay package from last year. The vote is non-binding, and Dimon is unlikely to lose it. The overwhelming majority of votes were probably locked in before the meeting.
Not all shareholders are squarely behind him. An influential union, the American Federation of State County and Municipal Employees, wants Dimon to be stripped of his chairman’s title, which he holds in addition to being CEO.
“The stakes are too high to leave Jamie Dimon unsupervised,” said Gerald W. McEntee, trustee for AFSCME, which owns JPMorgan shares through its pension plan.
Bank annual meetings have been intriguing affairs since the 2008 financial crisis, almost always attended by placard-wielding protesters.
And consumer advocates usually show up to air grievances against the bank’s handling of its activities including foreclosures, credit card debt, and overdraft fees.
But an anti-Dimon revolt is unlikely Tuesday.
“Yes, it happened on his watch, and he is eating humble pie,” Holland said. “But I have seen lots of bank CEOs come and go, and even after a $2 billion fiasco, Dimon is one of the best.”
Original Article
Source: Star
Author: Pallavi Gogoi
Shareholders, however, are unlikely to call for Dimon’s head. For them, facing the crisis without him might be a bigger nightmare than the trading loss itself.
“When a bank is dealing with this sort of a challenge, you want someone of his calibre to shepherd it through,” said longtime JPMorgan shareholder Michael Holland, chairman and founder of money manager Holland & Co.
That has not been a universal opinion since Thursday, when Dimon disclosed to analysts that the bank had made a bad bet with so-called credit derivatives. Since Dimon made the announcement, almost $20 billion in market value has evaporated.
On Monday, White House press secretary Jay Carney, without singling out Dimon, said that Washington can’t prevent “bad decisions being made on Wall Street.”
Dimon has built a reputation as a cost-cutting zealot and an expert at keeping risk under control. He led JPMorgan into a stronger position than almost any other bank after the 2008 financial crisis, which brought him more praise than at any other time in his career.
Shareholders rarely lash out against Dimon. Vikram Pandit of Citigroup and Brian Moynihan of Bank of America are not so fortunate: Shareholders at those banks take the slightest opportunity to call for them to step down.
Dimon’s reputation has been severely damaged now. But shareholders still appear to believe he should be given the chance to prove himself again.
“He’s earned enough market respect to have the opportunity to correct this,” said Benjamin Wallace of investment firm Grimes & Co., a longtime shareholder that sold its JPMorgan shares six months ago.
Dimon said on Sunday that the bank had “made a terrible, egregious mistake” and that there was “almost no excuse for it.”
There have been no signs of a shareholder insurrection against Dimon, and no member of the board of directors has spoken out against him since he disclosed the loss.
And while $2 billion was a stunning figure, as the investor reaction demonstrates, JPMorgan is more than big enough to absorb the loss. The bank made $19 billion last year alone.
Dimon has said the bank lost the money in a strategy to hedge against financial risk, as banks often do, not because it was trading for its own profit. Some lawmakers have cast doubt on that portrayal.
On Monday, President Barack Obama said JPMorgan’s loss in high-risk trading shows the need for the Wall Street rules that Congress passed two years ago.
JPMorgan “is of the best managed banks,” Obama said during an appearance on ABC’s “The View,” a daytime talk show. “You could have a bank that isn’t as strong, isn’t as profitable, making those same bets and we might have had to step in. Which is exactly why Wall Street reform is so important.”
Many post-crisis rules governing risk-taking by banks are still being written.
Among them is the so-called Volcker rule, which would block banks from trading for their own profit, a practice known as proprietary trading. Dimon has said the trading in question would not violate the rule.
JPMorgan is holding its meeting in Florida partly because the bank is expanding there. Dimon will address shareholders, who will get to ask questions.
They will also vote their approval or disapproval of his $23 million pay package from last year. The vote is non-binding, and Dimon is unlikely to lose it. The overwhelming majority of votes were probably locked in before the meeting.
Not all shareholders are squarely behind him. An influential union, the American Federation of State County and Municipal Employees, wants Dimon to be stripped of his chairman’s title, which he holds in addition to being CEO.
“The stakes are too high to leave Jamie Dimon unsupervised,” said Gerald W. McEntee, trustee for AFSCME, which owns JPMorgan shares through its pension plan.
Bank annual meetings have been intriguing affairs since the 2008 financial crisis, almost always attended by placard-wielding protesters.
And consumer advocates usually show up to air grievances against the bank’s handling of its activities including foreclosures, credit card debt, and overdraft fees.
But an anti-Dimon revolt is unlikely Tuesday.
“Yes, it happened on his watch, and he is eating humble pie,” Holland said. “But I have seen lots of bank CEOs come and go, and even after a $2 billion fiasco, Dimon is one of the best.”
Original Article
Source: Star
Author: Pallavi Gogoi
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