"More Tarnished Heroes"
Sydney M. Williams
Last week I wrote a piece in which I expressed my dismay that Warren Buffett had let down his admirers when he failed to mention that his lieutenant, David Sokol had, in buying Lubrizol stock a week before recommending the company to Mr. Buffett, violated the standards that Berkshire Hathaway had implemented regarding “insider” trading.
Perhaps it is indicative of the times or, more likely, it reflects my age and a reduced willingness to compromise, but two recent incidents reflect badly, in my opinion, on two other people I have always regarded highly – JP Morgan CEO, Jamie Dimon and General David Petraeus.
Mr. Dimon guided his firm through the shoals of the financial crisis better than any other major bank leader. According to an article written by Roger Lowenstein last December for the New York Times magazine, JP Morgan, unlike most of its competitors, remained profitable throughout the meltdown. Of course, without government assistance in late 2008, JP Morgan may not have survived – but, in that case, without governmental assistance it is unlikely our credit markets would have survived. In his interview with Mr. Lowenstein, Jamie Dimon claimed he would like to see JP Morgan (with assets in excess of $2 trillion – and nine percent of all US deposits) become even bigger, by expanding globally. “Too big to fail risks becoming “too big to save.”
Banks have always had inherent conflicts of interests, in that the needs of clients can intersect with the demands of the corporation. In Monday’s New York Times, Louise Story explains the consequences of this conflict in discussing a lawsuit brought against JP Morgan by some of their clients. In June 2007 a Morgan unit placed $500 million of client money into notes issued by a SIV (Structured Investment Vehicle) named Sigma. The investors allegedly were told their investments were safe. According to Ms. Story, two months later executives from other departments within the bank made CEO Jamie Dimon, among others, aware of their rising concern regarding SIVs in general, including Sigma. In her article, Ms. Story writes that the bank’s chief risk officer suggested that “JP Morgan needed to protect its own position and not worry about what its clients were invested in.” Apparently all of this was known to Mr. Dimon.
The lawsuit implies that the bank made $1.9 billion from fees and the purchase of assets from the SIV at greatly reduced prices – assets sold to them by mangers of JP Morgan Asset Management on behalf of their clients. The suit further suggests that those clients recouped only $30 million of the $500 million they had invested.
Banks have erected “Chinese Walls” to prevent the flow of information from one department to another, so as to avoid even the appearance of conflict. But the banks senior management, including Jamie Dimon stands astride all departments, so they breach the “Wall.” His decision to protect his bank at the expense of his clients says something about the man and speaks volumes about the wisdom a dozen years ago to dismantle Glass-Steagall.
(It is worth noting that insiders at JP Morgan own less than one percent of the stock, so one can conclude they were principally interested in protecting their jobs. In the seven years Mr. Dimon has been CEO of JP Morgan, the stock has risen 20% - in line with the S&P 500. The dividend, though, was cut 95% in early 2009 and is still 75% below where it was in late 2008. Mr. Dimon and his managers, however, have extracted hundreds of millions of dollars in compensation.) Mr. Dimon, in failing to look after the bank’s clients, did the wrong thing.
General David Petraeus has been widely – and deservedly – acclaimed for his success in the Iraq surge and for his handling of a difficult situation in Afghanistan. As the U.S.’s commander in Afghanistan, he has a responsibility to protect his troops the best he can even while deploying them in “harm’s way.” However, even the best people can fall victim to political correctness.
On March 20, a failed and emotionally disturbed Florida pastor, Terry Jones, burned a Quran after a mock trial in which he found Islam responsible for 9/11. (In the United States, the burning of any book, no matter how inappropriate, including the Quran or the Bible is not against the law.) Two weeks later deadly riots in Kandahar left 22 dead over a three day period. As Dorothy Rabinowitz wrote in last Thursday’s Wall Street Journal, General Petraeus “delivered an impassioned rebuke of the publicity-hungry Florida pastor” who had burned the Quran. The act was, in the general’s words “hateful, extremely distasteful and enormously intolerant.” It was dangerous to his troops. But, as Ms. Rabinowitz writes, “nowhere in any of that condemnation was it possible to find a mention of the merciless savage [retribution] that had taken place in the name of devotion to God and the Quran.”
Acts such as those committed by the nut in Florida are reprehensible and indefensible, but that act does not compare to the heinous bombings, beheadings and mutilations of innocent people by extremists, no matter their heritage. General Petraeus’ failure to condemn such retaliations in language he reserved for the Florida pastor is an insult to concerned people everywhere, and especially to the victims of 9/11 and their families.
What these incidents demonstrate is that men are fallible. While all three – Warren Buffett, Jamie Dimon and General David Petraeus – have been tarnished, they remain unusually accomplished and respected men. Perhaps it should be reassuring to learn they are as human as the rest of us, but I find myself disappointed.
Thought of the Day
"More Tarnished Heroes"
April 12, 2011Last week I wrote a piece in which I expressed my dismay that Warren Buffett had let down his admirers when he failed to mention that his lieutenant, David Sokol had, in buying Lubrizol stock a week before recommending the company to Mr. Buffett, violated the standards that Berkshire Hathaway had implemented regarding “insider” trading.
Perhaps it is indicative of the times or, more likely, it reflects my age and a reduced willingness to compromise, but two recent incidents reflect badly, in my opinion, on two other people I have always regarded highly – JP Morgan CEO, Jamie Dimon and General David Petraeus.
Mr. Dimon guided his firm through the shoals of the financial crisis better than any other major bank leader. According to an article written by Roger Lowenstein last December for the New York Times magazine, JP Morgan, unlike most of its competitors, remained profitable throughout the meltdown. Of course, without government assistance in late 2008, JP Morgan may not have survived – but, in that case, without governmental assistance it is unlikely our credit markets would have survived. In his interview with Mr. Lowenstein, Jamie Dimon claimed he would like to see JP Morgan (with assets in excess of $2 trillion – and nine percent of all US deposits) become even bigger, by expanding globally. “Too big to fail risks becoming “too big to save.”
Banks have always had inherent conflicts of interests, in that the needs of clients can intersect with the demands of the corporation. In Monday’s New York Times, Louise Story explains the consequences of this conflict in discussing a lawsuit brought against JP Morgan by some of their clients. In June 2007 a Morgan unit placed $500 million of client money into notes issued by a SIV (Structured Investment Vehicle) named Sigma. The investors allegedly were told their investments were safe. According to Ms. Story, two months later executives from other departments within the bank made CEO Jamie Dimon, among others, aware of their rising concern regarding SIVs in general, including Sigma. In her article, Ms. Story writes that the bank’s chief risk officer suggested that “JP Morgan needed to protect its own position and not worry about what its clients were invested in.” Apparently all of this was known to Mr. Dimon.
The lawsuit implies that the bank made $1.9 billion from fees and the purchase of assets from the SIV at greatly reduced prices – assets sold to them by mangers of JP Morgan Asset Management on behalf of their clients. The suit further suggests that those clients recouped only $30 million of the $500 million they had invested.
Banks have erected “Chinese Walls” to prevent the flow of information from one department to another, so as to avoid even the appearance of conflict. But the banks senior management, including Jamie Dimon stands astride all departments, so they breach the “Wall.” His decision to protect his bank at the expense of his clients says something about the man and speaks volumes about the wisdom a dozen years ago to dismantle Glass-Steagall.
(It is worth noting that insiders at JP Morgan own less than one percent of the stock, so one can conclude they were principally interested in protecting their jobs. In the seven years Mr. Dimon has been CEO of JP Morgan, the stock has risen 20% - in line with the S&P 500. The dividend, though, was cut 95% in early 2009 and is still 75% below where it was in late 2008. Mr. Dimon and his managers, however, have extracted hundreds of millions of dollars in compensation.) Mr. Dimon, in failing to look after the bank’s clients, did the wrong thing.
General David Petraeus has been widely – and deservedly – acclaimed for his success in the Iraq surge and for his handling of a difficult situation in Afghanistan. As the U.S.’s commander in Afghanistan, he has a responsibility to protect his troops the best he can even while deploying them in “harm’s way.” However, even the best people can fall victim to political correctness.
On March 20, a failed and emotionally disturbed Florida pastor, Terry Jones, burned a Quran after a mock trial in which he found Islam responsible for 9/11. (In the United States, the burning of any book, no matter how inappropriate, including the Quran or the Bible is not against the law.) Two weeks later deadly riots in Kandahar left 22 dead over a three day period. As Dorothy Rabinowitz wrote in last Thursday’s Wall Street Journal, General Petraeus “delivered an impassioned rebuke of the publicity-hungry Florida pastor” who had burned the Quran. The act was, in the general’s words “hateful, extremely distasteful and enormously intolerant.” It was dangerous to his troops. But, as Ms. Rabinowitz writes, “nowhere in any of that condemnation was it possible to find a mention of the merciless savage [retribution] that had taken place in the name of devotion to God and the Quran.”
Acts such as those committed by the nut in Florida are reprehensible and indefensible, but that act does not compare to the heinous bombings, beheadings and mutilations of innocent people by extremists, no matter their heritage. General Petraeus’ failure to condemn such retaliations in language he reserved for the Florida pastor is an insult to concerned people everywhere, and especially to the victims of 9/11 and their families.
What these incidents demonstrate is that men are fallible. While all three – Warren Buffett, Jamie Dimon and General David Petraeus – have been tarnished, they remain unusually accomplished and respected men. Perhaps it should be reassuring to learn they are as human as the rest of us, but I find myself disappointed.
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