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Jamie Dimon: The King and His Court

Posted by Larry Doyle on May 22, 2013 5:06 AM |

Little surprise that Jamie Dimon will remain as both CEO and chairman of JP Morgan.

Was there really any doubt? There wasn’t.

While shareholder groups might pretend they can exert influence over the management of large corporations and especially banks, there is little meaningful resemblance to a democratic process in proxy voting.

Disgruntled individual shareholders can try to rally the troops and force change, but with an institution such as JP Morgan, who really carries the weight?

The largest institutional shareholders. Who are they?

Top Institutional Holders
Vanguard Group, Inc.
State Street Corporation
BlackRock Institutional Trust Company, N.A.
Wellington Management Company, LLP
FMR, LLC (Fidelity)
Price (T.Rowe) Associates Inc
Northern Trust Corporation
Bank of New York Mellon Corporation
Capital World Investors
Massachusetts Financial Services Co.

These ten institutions collectively own approximately 25% of JP Morgan’s outstanding shares.

Do you think Jamie may have reached out to the respective heads of these institutions to tell them how much he wanted to remain in complete control of JPM?  Of course he did. Do you think these respective heads may have voiced some of their wants and needs to Jamie? Come on, of course. You scratch my back and I’ll scratch yours. That is how the game is played.

What about the following issues, though:

London whale: tempest in a teapot, right?

Money laundering in the midst of the Madoff operations at JPM: why bother bringing that up?

Manipulation of the electricity markets in selected states: should we simply disregard as many are wont to do?

Blythe Masters lying to regulators: leave the women and children alone, perhaps?

Rigging Libor: are we still talking about this issue?

All yesterday’s news, right? Perhaps in a world of captured regulators and a banking oligopoly, these stories may be easily dismissed but they do little to inspire any sort of trust or confidence on behalf of individual investors and consumers. But the little people only get a token voice when it comes to addressing who really runs the show inside our major financial institutions.

In the incestuous dynamic of Wall Street and Washington, King Jamie and his court really run the world and we just get to live in it.

Navigate accordingly.

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Tim Favero

    Larry, I also believe that J.P. Morgan played a huge role in the MF Global debacle, of which you have written extensively about Jon Corzine. According to MF Global’s bankruptcy filing, some of the firm’s biggest unsecured lenders include: JP Morgan Chase (JPM), a bondholder trustee with a claim of approximately $1.2 billion.

    http://finance.fortune.cnn.com/2011/11/01/mfglobal-bankruptcy-investors/?iid=EAL

  • LD

    Unqualified board members do not ask hard questions. And, five years after the largest financial crisis in almost 80 years, one can count the number of properly qualified board members – across all megabanks – on the fingers of one hand.

    As a result, megabanks’ senior managers are not pressed to remove layers of opaqueness that shield their risk-taking from effective scrutiny. This helps to keep board members in the dark – and gives them a convenient excuse for not really understanding how the business works.

    Which board members are willing and able to stand up to CEOs? That has certainly not been the recent experience at JPMorgan Chase.

    Finally, regulators, too, have been rendered docile in the face of the megabanks’ CEOs. Regulators have the power to require that boards become more powerful – or at least minimally effective. For example, they could tighten the qualifications needed to become a bank director (in the United States, for example, the requirements are not serious).

    Instead, regulators stand idly by while bank boards remain self-perpetuating clubs, with membership regarded as little more than so much social plumage.

    The regulators acquiesce because, simply put, they are afraid. Mostly, they are afraid that being tough on bank governance will somehow disrupt the flow of credit. It is a silly and baseless fear, but that is how modern regulators think and act – in a state of constant, irrational anxiety.

    The banks in question are so large and so central to the functioning of economies that each of them is too big to regulate. Whenever small groups of individuals acquire that much power relative to the state and the rest of us, there is big trouble ahead. Power corrupts, and financial power corrupts the financial system.

    The biggest banks were badly run in the years leading up to the crisis of 2008 – exhibiting a toxic mixture of hubris, incompetence, and excessive leverage – and their governance problems today are worse than they were in 2005 or 2007. The 2008 crisis was followed by a long, hard recession; we should not expect a different scenario now.

  • fred

    LD,

    Two issues I’d like discussed, 1)why are voting rights controlled by mutual fund companies rather than by investors, 2) in the late 1990’s I remember the argument for “too big to fail” American banks; “if we don’t get larger we will not be able to compete on the global stage”, is this argument still valid? If not, why not just limit the size of a banks balance sheet through mandatory asset sales or establish more progressive reserve requirements.

    The issues developed in “too big to fail” are quite similar to the debate over QE and size of the Feds balance sheet, how big is too big?

    Historically, America has been able to distinguished itself through vibrant pluralistic democracy and laissez faire capitalism, maybe we need to revisit the principles of the Sherman Antitrust Act?

  • LD

    Fred,

    Not being a lawyer but I would gather that investors own a share in the fund and not necessarily in the underlying company stock held by the funds. A matter of legalese and semantics perhaps but very real when it comes to situations such as these.

    Indeed we do. The oligopolistic complex within finance, big oil, health care, and military might be enriching the industry insiders but they are not doing much for the rank and file…and this stated by one who largely leans right but more prefers the truth than the charades currently being perpetrated.






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