Much has been written about the trading—not hedging—debacle at JPMorgan. Jamie Dimon’s mea culpa is intended to head off deeper questions. No cover-up on his watch—get out in front, be direct, deal with it, move on. Right? Not so fast.
"If your banker breaks, you snap." - Herman Melville, Moby Dick
During the summer between the day I resigned from JPMorgan after eighteen years, and the horror of witnessing 9-11 up close and personal, I joined a couple of friends on their fifty foot sailboat in an attempt to sail across the Atlantic Ocean. What better time to read Moby Dick, I thought.
One thousand miles into the journey, about a third of the way to England, we were struck by a humpback whale, destroying our rudder and leaving us floundering on the Atlantic.
What does the collapse of MF Global, the Euro crisis, the sub-prime mortgage crisis, the collapse of Fannie Mae and Freddie Mac, and the 1998 collapse of Long Term Capital Management all have in common?
Certainly these crises all shared the following characteristics: too much leverage, lack of transparency, inadequate regulatory oversight, agency problems of misaligned incentives, and failures of leadership at the very least. This is what we know, and we’re frustrated watching inadequate public and private sector responses to these problems.