JPMorgan Has A Whale Of A PR Problem

While I can’t say I wished I was in the room as Jamie Dimon and his advisors crafted their explanation yesterday of what has gone so very wrong at JPMorgan Chase recently, I’d love to listen to the tape of their strategizing about how to tell the world that some character straight out of a 19th Century seafaring novel named “the London Whale” wasn’t the minnow “in a teapot” as  he’d previously dismissively indicated during an earnings call on April 13.

Bloomberg News’s Stephanie Ruhle and the Wall Street Journal’s Gregory Zuckerman and Katy Burne reported earlier last month that a low-key, French-born, London-based trader Bruno Iksil –- dubbed “the London Whale” or “Voldemort” by other traders but “admired” by most sources -- had taken positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market. Iksil reportedly had earned around $100 million a year for the bank's Chief Investment Office, or CIO. During his apology, Dimon admitted yesterday that “we” had initially “acted a little bit too defensively” to those media reports.



“The bank's strategy was ‘flawed, complex, poorly reviewed, poorly executed and poorly monitored,’ Mr. Dimon said Thursday in a hastily arranged conference call with analysts and investors after the stock-market close,” reports the Wall Street Journal. “He called the mistake ‘egregious, self-inflicted,’ and said: ‘We will admit it, we will fix it and move on,’” report Dan Fitzpatrick, Gregory Zuckerman and Liz Rappaport.

CNBC listened in to parts of Dimon’s “heated” conference call with analysts and reporters. Business Insiderrecaps the bullet points.

“Dimon was handed a piece of humble pie,” writes the Journal’s Robin Sidel in a sidebar focusing on how the “characteristically blunt” and “detail-oriented” CEO’s original assessment was half-baked. The New York Post’s Mark Decambre and Kaja Whitehouse add the main ingredient of the pastry in their lede: “A $2 billion slice of humble pie.”

“I’ve been an analyst for a long time and I just don’t understand how this could go so bad, so fast,” Nancy Bush, an independent bank analyst at NAB Research tells them.

The gaffe is creating a PR and lobbying crisis on Capitol Hill for both JPMorgan and its cohorts in the big banks industry. Decambre and Whitehouse write that the “embarrassing mea culpa adds fuel to the defenders of the proposed Volcker Rule” -- which would limit the amount of bets banks can make with their own funds -- just as it’s going through the legislative wringer. 

Sen. Carl Levin, co-author of the Volcker rule and chairman of the Permanent Subcommittee on Investigations, pounced on the disclosure: “The enormous loss JPMorgan announced today is just the latest evidence that what banks call ‘hedges’ are often risky bets that so-called ‘too-big-to-fail’ banks have no business making.” 

“A Shock from JP Morgan Is New Fodder for Reformers” reads the headline on a “DealBook” piece for the New York Times. And, Nelson D. Schwartz reports, Dimon knows it: “It plays into the hands of a bunch of pundits but you have to deal with that and that’s life,” he told analysts.

 “They’ve now just provided some ammunition, one would suspect, to the legislative and regulatory personnel who will just point at this and say, ‘It seems to me that these people don’t really have a good handle on what they’re doing,’” Satyajit Das, author of Extreme Money: Masters of the Universe and the Cult of Risk, somewhat understatedly tells Bloomberg’s Phil Mattingly and Bradley Keoun. 

In taking the hit squarely on his bank’s chin, Dimon is also deflecting the blows of the pundits and regulators from the larger target, one suspects. 

“Just because we’re stupid doesn’t mean everybody else was,” he says. “There were huge moves in the marketplace but we made these positions more complex and they were badly monitored. This may not have violated the Volcker Rule, but it violates the Dimon Principle.”

My initial reaction as I heard the news breaking in radio reports yesterday was to admire Dimon’s bluntness. But, on reflection, what else is there to do with a beached whale except extract the blubber? 

 “It’s classic Wall Street hubris, which we’ve seen so many times before,” Simon Johnson, a former chief economist at the International Monetary Fund who now teaches at MIT, tellsBloomberg’s Dawn Kopecki, Michael J. Moore and Christine Harper. “What’s particularly ironic here is that Jamie presents himself as, and is believed by others to be, the king of risk management.”

1 comment about "JPMorgan Has A Whale Of A PR Problem".
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  1. Len Stein from Visibility Public Relations, May 11, 2012 at 9:47 a.m.

    the "king"- you mean the "emperor's new clothes"

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