Wednesday, January 16, 2013

(Opinion) Jamie Dimon Bonus Cut: finally some reason on wallstreet but not enough

Wall Street is not the most popular street in America but with JP Morgan cutting the bonus of its Chairman and CEO Jamie Dimon, It shows that some wall street institutions are responding to public outrage. In light of making a massive loss in the derivatives market (which played a key role in nearly bringing the US financial system to its knees), Jamie Dimon saw his bonus halved as his company effectively said the buck stopped with him when they cited that Dimon “bears ultimate responsibility for the failures that led to the losses in the CIO and has accepted responsibility for such failures"[1].

However, it is not enough as Jamie Dimon will still have a significant  bonus ($11.5 m) despite displaying terrifying incompetence[2]. According to an article in Forbes, Dimon displayed his shocking ignorance about the company he heads when presented with news of JP Morgan Chase’s loss in the market, responded angrily demanding that he saw “the positions” of the company, or in in other words, the actual trades upon which JP Morgan Chase made losses[3].

Could you imagine incompetence of this kind at your job resulting in a cut of your performance and effectively merit free bonus if you didn’t know what investments your company specifically lost money? A Checkout Operator in Tesco will face the sack for shorting the till by a meagre £40 but a high powered CEO can so ignorant not to know his company’s loss making positions in stock market is just short of being criminally negligent.

This is made worse by the fact that politicians, despite reams of evidence suggesting that strong scepticism being the reasonable approach towards banks, still have faith in financial institution and its leaders as incredibly:

Congress being made up of Congressmen and Congresswomen, no one thought to ask why the CEO of a financial industry leader handling billions a day didn’t know where the money was.[4]
This is because in light of technologies in the marketplace to make JP Morgan’s loss making or profitable trades easier to access, JP Morgan use systems “that were developed in the 1980s, or earlier” making accounting for losses and even profits a taxing proposition[5].
Jamie Dimon is a case that posits the problem of punishing bankers for unwise financial deals besides imprisonment as Kevin Roose of New York Magazine smartly pointed out:

You think the guy who pulled down $40 million in the last two years — and who already gets his black cars, private jet travel, and other perks paid for by his employer  is going to go hungry?[6].
Telling from his reaction to his punishment in the press, he is fully aware of this dreary fact as he confidently demanded to release the report which served as a basis for cutting his bonus as he confidently asserted that losses in the billions “are close to being a “non-issue” for the company”[7].   

[1] The Telegraph, 2013, JP Morgan halves Jamie Dimon’s pay over $6bn London loss,
[2] Ibid
[3] T. Groenfeldt, 2013, Why Jamie and Jon Corzine couldn’t find their money,
[4] Ibid
[5] Ibid
[6] K. Roose, 2013, A Better Way To Punish Jamie Dimon,
[7] D.Kopecki, 2013, Dimon Says Whale Loss Is Very Close to Being a ‘Non-Issue’,

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