You never want a serious crisis to go to waste. Rahm Emanuel
I've written diaries about JP Morgan CEO Jamie Dimon that have been criticized because apparently Jamie is supposed to be a good guy who just happened to be surrounded by bad operators. His supporters on his site state that he wasn't as bad as the others and that he sacrificed to help the country out when Bear Stearns and Washington Mutual were up for sale.
I beg to differ.
First, Jamie Dimon and JP Morgan participated in all of the same vile practices that the other banks did. The only difference between them and the others is, because they had proprietary information, they knew when to get out. It's like when the drug dealer who knows when the cops are coming, (because he called them or because he's a cop(or NY Fed Chairman), lives to deal another day. He's still a drug dealer.
Secondly, Bear Stearns and Washington Mutual(WaMu) were more like white whales than white elephants. They were long sought after targets of acquisition of JP Morgan Chase that were picked up for a song.
The purchase of Bear Stearns did help to fill in several key gaps within Chase's business, most notably the hedge-fund servicing prime brokerage business that the bank had long coveted.
At the same time, the Bear deal strengthened many of the Chase's existing divisions, including its commodities and asset management businesses. In fact, JPMorgan Chase (JPM, Fortune 500) chief executive officer Jamie Dimon told investors in January that the combination of those respective units probably helped soften the blow of the credit crunch during the final three months of 2008.
And this from the WSJ
With the deal, J.P. Morgan is essentially getting Bear's coveted prime brokerage business for free. It is twice the size of Bank of America's prime brokerage, which is on the auction block for about $1 billion, according to a person familiar with the matter.
"J.P. Morgan Chase stands behind Bear Stearns," said J.P. Morgan's Mr. Dimon. "Bear Stearns' clients and counterparties should feel secure that J.P. Morgan is guaranteeing Bear Stearns' counterparty risk."
First, JP Morgan as the cite says, JP Morgan picked up Bear for a song. Second, while JP Morgan did back $1 billion in risks, I'm sure both they and their clients feel more secure that thetaxpayer is backing $29 billion.
WaMu -
WaMu, with $188 billion in deposits, long was top on the list of banks Scharf and Dimon wanted to acquire, Kelly said. Bids for the thrift, which was seized by the Federal Deposit Insurance Corp., were due at 6 p.m. Sept. 24.
JPMorgan's New York-based bankers found out later that evening their proposal to buy WaMu's deposits, branches and some liabilities in exchange for a $1.9 billion payment to the FDIC was accepted.
``We got this at a price that protects us, where if we were wrong, it still protects us,'' Dimon said in an interview Sept. 25....
``We've coveted the franchise for a long time,'' Scharf said on the Sept. 26 call. ``We are very, very excited strategically.''
Lucky you.