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JPMorgan Chase CEO Jamie Dimon

JPMorgan Chase Shareholder Letter Burnishes Dimon’s Sparkle

April 14, 2009 02:00 PM
by Anne Szustek
Some financial pundits are dubbing JPMorgan Chase CEO Jamie Dimon “the next Warren Buffett” for his witty prose and acuity in assessing the financial crisis.

Jamie Dimon Sets Himself Apart in Latest Shareholder Letter

This year’s edition of JPMorgan Chase CEO Jamie Dimon’s letter to shareholders went beyond the typical numerical breakdown of the company’s performance during the past year. It was 29 pages of policy analysis, a diagnosis of the world’s financial ills and suggestions to get the world out of its economic funk.

Among Dimon’s assertions is that derivatives, financial instruments that include the now-infamous credit default swaps, were not to blame for the recession that officially began in December 2007. Rather, Dimon argued, greater consumer borrowing during the earlier years of this decade, in addition to hedge funds and private equity, played roles in pushing up asset prices.
“Basically, the whole world was at the party, high on leverage—and enjoying it while it lasted,” he asserts.

Dimon also casts blame on the U.S. trade deficit; namely, how it bolstered demand for U.S. Treasury and mortgage-backed securities, and kept interest rates low: “Excess consumption could be financed cheaply. And adding fuel to the fire, in the summer of 2008, the United States had its third energy crisis—further imbalancing capital flows.”

He continues from his analysis of trade gaps to calling out risk regulatory gaps, arguing that hedge funds and private equity firms of a certain size should be required to file auditing reports and disclose major trades. A systemic “regulator might have been in the position to recognize the one-sided credit derivative exposures of AIG and the monoline insurers and do something about it,” he writes. The CEO also insists that his company watches its derivatives exposures “like a hawk.”

Under Dimon’s tutelage, JPMorgan Chase, worth some $2.2 trillion in assets, “has escaped much of the debilitating fallout affecting other financial institutions,” reports Bank Investment Consultant magazine. This has lent Dimon credence as a financial sector guru—and garnered comparisons to Berkshire Hathaway chief Warren Buffett, who includes economic analysis and candor in his shareholder letters.

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Key Player: Jamie Dimon (1956-)

Analysts agree that JPMorgan Chase Chairman and CEO Jamie Dimon is at the top of his game, keeping his company afloat while other institutions flounder.

Dimon has been with JPMorgan Chase since 2004, following its merger with Bank One Corporation, where he had been chairman and CEO since 2000.

Before that came Dimon’s infamous ouster from Citigroup following a power struggle with that institution’s then-chairman and Dimon mentor Sandy Weill. Weill, then at American Express, had hired Dimon in 1983, when Dimon was 26 years old and just out of Harvard Business School. Despite rumors that he would never recover from that downfall, Dimon is not only thriving 10 years later,, he has ensured JPMorgan Chase’s success in the most hazardous economic situation the United States has seen in decades.

Related Topics: Warren Buffett’s shareholder letter; U.S. trade deficit

In his annual letter to shareholders, released February 2009, Buffett describes the spiral of paralyzing fear and declining business activity in 2008 that “led to a dysfunctional credit market that in important respects soon turned non-functional.” He describes the credit environment by referencing the familiar sign seen on the walls of restaurants: “In God we trust, all others pay cash.”

The letter generally supports the actions of the U.S. government to counteract the crisis but glumly notes that “one likely consequence is an onslaught of inflation.” Referring to the many industries and local governments that have turned to the federal government for a bailout, he predicts that “weaning these entities from the political teat will be a political challenge. They won’t leave willingly.”

Commerce Department numbers indicated that the U.S. trade deficit was down in February, at its lowest levels seen since November 1999, when the economy was robust. This suggests, writes Reuters, “that the drop in first-quarter gross domestic product was probably not as steep as the previous period's 6.3 percent annual pace of decline.”

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