Send a Tweet
Most Popular Choices
Share on Facebook 5 Share on Twitter 2 Printer Friendly Page More Sharing
OpEdNews Op Eds    H2'ed 1/31/14

Jamie Dimon's Raise Proves U.S. Regulatory Strategy is a Joke

By       (Page 1 of 1 pages) (View How Many People Read This)   3 comments
Author 89040
Message Matt Taibbi
Become a Fan
  (13 fans)

Copyrighted Image? DMCA

If you make a big show of punishing someone, and when you're done they still don't think they have a behavior problem, you probably picked the wrong punishment. Every parent on earth knows this implicitly -- but does the Obama White House finally get it, too, now, after Jamie Dimon's raise?

When the board of JP Morgan Chase gave its blowdried, tirelessly self-regarding CEO a whopping 74 percent raise -- after a year in which the Justice Department blasted the bank with $20 billion in sanctions -- it was one of those rare instances where Main Street and Wall Street were mostly in agreement.

Everyone from the Financial Times  to Forbes.com to the Huffington Post decried the move. The Wall Street pundits mostly thought it was a dumb play by the Chase board from a self-interest perspective, one guaranteed to inspire further investigations by the government. Meanwhile, the non-financial press generally denounced the raise as a moral obscenity, yet another example of the serial coddling of Wall Street's habitually overcompensated executive class.

Both groups were right. But to me the biggest news was how brutal an indictment Jamie's raise was of the Obama/Holder Justice Department, which continues to profoundly misunderstand the mindset of the finance villains they claim to be regulating.

Chase's responses to Holder's record penalties have been hilarious. Their first move was to make sure people outside the penthouse boardroom took on all the pain, laying off 7,500 employees and freezing salaries for the non-CEO class of line employees.

Next, Chase's board members sat down, put their misshapen heads together, considered the impact of this disastrous year of settlements, and decided to respond by more than doubling the take-home pay of the executive in charge, giving Dimon about $20 million in salary and equity.

In the end, the fines left the decision-making class of the company not just uninjured but triumphant. Dimon's raise was symbolic of a company-wide boost in compensation following the mass layoffs, as average per-employee expenses rose four percent overall, to $122,653, despite the $20 billion burden imposed upon the firm by the state.

There were a variety of reasons for the board's decisions, but one of the big ones, according to various reports, was that bank honchos wanted to send a message to the government that it believed the company had been unfairly treated. This was a notion Dimon himself snootily trumpeted just before his raise was announced.

So Eric Holder and his lieutenants thought they were getting tough on Chase by dropping a monster settlement on the firm, but actually all they did was a) inspire the company to punish thousands of low-level innocent employees, while b) doubly- or triply-reinforcing the mass-narcissistic delusion gripping the company's management that the bank's serial ethical violations -- which ranged from providing see-no-evil banking services, to Bernie Madoff, to rigging retail electricity prices, to covering up billions in losses in the "London Whale" episode -- were the fault of someone else.

Apparently the bank's board believed the Justice Department was simply caving in to anti-bank sentiment when it targeted Chase, not punishing real offenses. They seem to have decided their only "problem" was that the Justice Department lacked the political will to ignore the public's irrational cries for action.

Again, if you punish a firm, and its executives come out of the episode convinced their only problem was an irrational PR issue, your enforcement strategy probably needs tweaking. It doesn't exactly send much of a message when, mere months after you've imposed record enforcement penalties, the CEO of your target company is being led down Wall Street on a donkey, board members showering him with cash.  

In contrast, when the LIBOR scandal blew up in England, British authorities essentially removed Barclays CEO Bob Diamond from office right away, in addition to levying fines and other penalties. We never heard about Bob Diamond getting a raise after LIBOR because as far as the world is concerned, there is no more Bob Diamond. He could be on the moon for all we know. It's not jail, but it's still more of a punishment than Eric Holder dropped on Chase and Jamie Dimon.

Moreover, when the Royal Bank of Scotland got caught up in the same LIBOR scandal, British and European regulators basically set up a base camp in the bank's backside, forcing the company to disclose all of its dirty laundry via a merciless long-term cooperation agreement that has already led to the exposure of another major scandal, the foreign exchange manipulation case.

Meanwhile, in the U.S., Eric Holder drops a bunch of fines on the Chase corporate entity from 20,000 feet and then watches as bank leaders give themselves raises, force low-level underlings to pay the tab, and publicly denounce the settlements as undeserved. And get away with doing it.

Well done, Justice Department! Way to flex those biceps!

Please go to Rolling Stone to read the rest of this article.

 

Well Said 2  
Rate It | View Ratings

Matt Taibbi Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Matt Taibbi is an investigative reporter for Rolling Stone magazine
Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Writers Guidelines
Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

STAY IN THE KNOW
If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEdNews Newsletter
Name
Email
   (Opens new browser window)
 

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Sarah Palin's Impressively Incoherent "Duck Dynasty" Comments

Matt Taibbi: Give 'Em Hell, Bernie Sanders

Matt Taibbi Explains the Dzhokhar Tsarnaev Rolling Stone Cover

Ripping Off Young America: The College-Loan Scandal

The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet

On Christmas, Republicans Quietly Declare War on Themselves

To View Comments or Join the Conversation: