Saturday, May 12, 2012

Did Jamie Dimon Botch the PR on the $2 Billion Trading Loss?

In this post, I am not going to be discussing the nutty programs that were likely used to end up with a $2 billion (and counting) trading loss at JPMorgan Chase, and I am not going to be discussing the insane Federal Reserve/FDIC backed banking structure in the United States, but merely looking at things from the perspective of JPMorgan and Jamie Dimon.

Bottom line: Dimon did not play this off as the big swinging dick that financial reporters have viewed him as. He played it like a chump who was taking advice from a "crisis pr advisor" that, ultimately, could result in Dimon losing is job (Somewhere Sandy Weill is walking around with a knowing smile.)

Here's how I think Dimon played it wrong.

In the first quarter of 2012, JPMorgan Chase had net income of $5.4 billion. Thus, a hit of $2 billion is not likely to result in even a loss for a quarter.

It really isn't a life or death situation for JPMorgan, but Dimon is playing it as it is, which is putting media focus on the losses.

Consider, Dimon called a special press conference at an odd hour (5:00PM ET) to announce the loss. This only is going to get the attention of reporters, as indeed it did. The twitter feed I follow suddenly lit up with comments about the news of the press conference. Then once the press conference started, Dimon started apologizing to everyone in the world, including the Bank America president because he hadn't told the BA prez about the losses during a recent dinner (WTF?).

In other words, Dimon was making the loss into a big deal. He was feeding the press gallery. It almost strikes of Dimon trying to create his own Shakespearean drama. 

How should have he handled it?

First, no special drama press conferences. Play it like a big swinging dick. You announce what you have to in regular required SEC filings (and accompanying press releases). When reporters discover the loss, you then react to their queries, rather than dramatizing the losses before queries. And, you respond with a shrug and say something like this:

"Yes, we suffered losses in one of our trading units. We are an aggressive bank and that is going to happen on occasion. That said, JPMorgan Chase is a huge bank and the losses, while lowering earnings in the quarter, has not prevented JPM from being a multi-billion dollar extremely profitable bank in the quarter.

"Naturally, we don't like losses, so we are reviewing our trading programs to see what can be done to eliminate these kinds of losses in the future."

No major drama about we made dumb mistakes etc. You play it like JPM is a big boy and has things under control. By dramatizing the losses as a big event, Dimon has magnified by an exponential number the amount of focus on the loss, (which is really only equally to roughly 10% of JPM annual earnings). The drama is what is doing the damage here and it may cost Dimon his job.


  1. Dimon has done pretty good for himself in his accomplishments and resume. This doesn't make complete sense, especially how it is being handled as you have pointed out. I think what's going on is some special interests somewhere would like further government regulation into financial markets and this would be the perfect time. Dimon was just complaining about regulations that could hurt profitability to the FED not too long ago.

    And look... More supervision from the FED a possibility.

    I normally don't make such outrageous claims or buy into the shadowy assumptions but this is just out of character and with people like Krugman etc. saying we need more FED this may be the most publicly acceptable, and welcomed, way of doing it.

    Don't be surprised if the FED does start getting their hands a bit more dirty, and while we are distracted with them fixing the situation, don't doubt they won't be trying to 'fix' the situation ; if you catch my meaning.

    Hello publicly welcomed Fascism.

    I can only pray that I am a raving lunatic, I seriously don't buy into the bull, but there are some social economic trends here...

  2. JPM is in the middle of a $15 billion multi-year share buyback program. Between this manufactured bargain discount and the DVA benefits from his corporate paper, Dimon's job is not in jeopardy. It's Barnum's white salmon (guaranteed not to turn pink in the can), Robert, not Lear's promontory.

  3. OK, so Dimon wanted the press to pick up on this story. Perhaps this is actually pre-emptive damage control to reduce fallout when the actual losses turn out to be much larger than $2 billion. Just a hunch.

  4. Are you saying Dimon staged this drama and JPM actually made money from this move? Does this make JPM a buy here?

  5. Lost over $10b of market cap on a $2b trading loss; they must be using that $15b buybcak program aggressively here.

    CHK seems like a better short