JPMorgan Might Lose Dimon to a Geithner Flameout

Discussion in 'Wall St. News' started by Lightningdog, Mar 20, 2009.

  1. JPMorgan Might Lose Dimon to a Geithner Flameout

    Commentary by David Reilly

    March 20 (Bloomberg) -- It was like Treasury Secretary Dimon said the other day.

    Whoa. Back up there. Treasury Secretary Dimon?

    Well, it may only be a matter of time before we’re using that honorific when talking about JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon.

    Current Treasury Secretary Timothy Geithner’s hold on the position weakens by the hour. If the need arises for a replacement, Dimon might be a leading candidate.

    The JPMorgan chief is one of the few financial leaders who could restore confidence among investors, business leaders and, importantly, foreign governments and central banks.

    For JPMorgan, such a scenario could prove worrisome. Shareholders have relied on Dimon’s steady hand during the crisis, while the chief executive has achieved rock-star status among the bank’s staff.

    A Dimon departure would also test his organization’s bench strength at a time when banks face a slew of challenges.

    Of course, talk of a Geithner departure, never mind a Dimon appointment, may be a stretch. Dimon hasn’t expressed interest, and Geithner has been on the job less than two months.

    Replacing Geithner would signal an administration in disarray. Plus, the president earlier this week said he had “complete confidence” in the Treasury head.

    ‘On Thin Ice’

    Support is often fleeting in Washington, though, and Geithner is “on thin ice,” Republican House leader John Boehner said this week.

    Fairly or not, a part of the American International Group Inc. bonus debacle is coming to rest on Geithner’s shoulders. That is a heavy burden given his earlier tax troubles and the tepid response to his still-to-be-detailed bank bailout plan.

    Some Republicans are already calling for Geithner’s resignation. The odds of him being ousted by the end of the year rose this week to about 40 percent, as measured by online prediction site

    It hasn’t helped that Geithner has had trouble filling several senior spots within Treasury that must be confirmed by the Senate.

    Contrast this with Dimon, who has kept JPMorgan from foundering even as survival prospects have dimmed at rivals such as Citigroup Inc. and Bank of America Corp.

    Dimon’s Missteps

    Not that he hasn’t stumbled. When the housing collapse started, for example, Dimon viewed it as an opportunity to expand in the California market for jumbo mortgages. He was also slow to exit the business of purchasing mortgages originated by outside brokers.

    Nevertheless, Dimon has maintained a stronger balance sheet than rivals. JPMorgan’s tangible common shareholders equity was 3.4 percent of assets at the end of last year. This has become a key measure of balance-sheet health for investors. While not necessarily stellar, JPMorgan’s level compares with about 2.7 percent at Wells Fargo & Co., second biggest after JPMorgan in market value among U.S. banks.

    From the start of the credit crunch in August 2007 until this week, JPMorgan’s stock has fallen about 45 percent, while Wells is down about 58 percent, Bank of America Corp. is off about 88 percent and Citigroup Inc. has fallen about 95 percent.

    On a personal level, Dimon has a sense of self-assurance that Geithner lacks. That stage skill was on display a week ago when Dimon gave a speech to the U.S. Chamber of Commerce.

    Looking the Part

    Whereas Geithner often looks uncomfortable in the spotlight, Dimon basks in it. And his televised speech went beyond banking - - Dimon scored political points, perhaps auditioning for the secretary’s post, talking up Obama priorities like health care and energy conservation.

    A long-time Democratic Party donor, Dimon didn’t make the cut last fall. Timing may have played a role, though. Lehman Brothers Holdings Inc. had just collapsed, and the future of the financial system was in doubt.

    That’s not to say Dimon would necessarily do better than Geithner or his predecessor Henry Paulson. The problems of this crisis have proven deeper and more complex than anyone fathomed.

    Dimon is also a banker and may not have the stomach to force upon his former industry some of the tougher medicine that may still prove necessary. Given the populist mood in Washington, a Wall Street banker, no matter how respected, may not be the ideal candidate. Then again, Dimon isn’t from Goldman Sachs Group Inc.

    And Geithner’s attempt to revive the financial system, even if it isn’t yet understood by markets, may still work. If that happens, his support would strengthen.

    Still, Geithner has to restore his reputation, quickly, if he hopes to survive. In the meantime, JPMorgan’s board might want to start thinking about succession plans.

    (David Reilly is a Bloomberg News columnist. The opinions expressed are his own.)
  2. timmy will never have a problem getting new work.

    tax preparer.