It just took one phone call but the career of Jamie Dimon "the King of Wall Street" and CEO of JP Morgan Chase is on the line. Following the announcement of his bank's $2 billion loss, former IMF chief economist Simon Johnson says Dimon should resign in disgrace. Bloomberg columnist Jonathan Weil says Dimon is "clueless" and frighteningly aloof. Dan Freed at The Street says hearing him talk yesterday "was like listening to Darth Vader apologize for embracing the dark side." Though the bank itself will likely endure, it netted a first quarter net profit of $5.4 billion, Dimon won't be getting off easy. Here's why he's under fire:
The Buck Stops with the CEO. MIT Sloan School professor Simon Johnson says JP Morgan's board can't tollerate Dimon's errors in this respect. "At any other company in any other industry under these circumstances the CEO would resign," Johnson writes. "If Boeing or Caterpillar or any other reputable company were to lose this much money relative to operations in a haphazard manner on activities that were so contrary to the principles in which the CEO stood? Yes the person in question would resign. If he didn't resign, the board would remove him."
He's still not being forthright. Dimon's announcement yesterday has already alarmed regulators, and will likely attract congressional investigators, yet he refused to be forthright about how the massive losses were incurred. "What Jamie Dimon Doesn't Know Is Plain Scary" reads the headline of Jonathan Weil's Bloomberg column this morning. Dimon said losses at his company happened at the investment office's "synthetic credit portfolio but investors were not clued into how it happened. ". Presumably, these are derivatives of some sort, but even that basic fact was too much for the bank to specify," writes Weil. "If a too-big-to-fail bank can’t disclose what its trading desk is doing for fear of blowing itself up, then the bank shouldn’t be allowed to do it." If Dimon thinks he can let the the bank's PR department take it from here, he's out of his mind. "There really is only one conclusion to draw from all this: Dimon must know he has a lot more explaining to do."
He's trapped by his previous remarks. It was just last month that Dimon dismissed stories about dangerous risk-taking at JP Morgan's investment office as a "tempest in a teapot." Obviously, he was wrong. He's also spent his career rallying against Wall Street regulations like the Volker Rule, which is designed to prevent the type of risky trading that happened under his watch. Now Dimon doesn't have a leg to stand on as the bank moves forward in discussions about regulation. "Dimon’s credibility–and with it, an entire era of Wall Street risk taking and world domination–just proved more hollow than even its staunchest critics could have imagined," writes The Street's Dan Freed.