Wednesday, September 15, 2010

JPMorgan's Dimon Excoriates Hedge Funds Lack of Intelligence

Unnamed Senior Managing Director at Undisclosed Hedge Fund

JPMorgan's Chairman and Chief Executive Officer, known primarily for his "Fortress Balance Sheet", is also known for his suffer no fools, take no prisoners candor.

They say that many a senior officer of JPMC has been reduced to embarrassed impotence with a curt "If I want your opinion, I'll ask for it.  Just give me the facts".  Though to be fair, "they" are reported to say a lot of things.  Some of which others say are not true.

Today in characteristically blunt fashion, Mr. Dimon assailed Hedge Funds and their staff. 

Commenting on the new financial regulations (which his firm approves in principle but apparently not at the pesky level of implementation), Mr. Dimon was quoted by the Financial Times:
“It is highly ill-conceived, doesn’t reduce risk at all. As a matter of fact, it probably complicates it for some [customers]”.

He said hedge funds and other derivatives users would have to deal with two separate legal entities depending on the type of securities they trade.
As usual the most vulnerable members of our society are made to pay the price of poorly thought out rules.

As we have documented right here on this blog before, most employees of financial firms, including the most senior and highly paid, are really bad with maths

That seems to be the least of their problems.  Today we learn that they have trouble distinguishing between legal entities.  What might seem to those not familiar with the financial world a rather critical skill when buying bonds or equity.

It's unclear what shameful shortcomings are yet to be revealed.  Memory problems?  How does one remember which firm to call when there are so many?  Morgan Stanley, JPMorgan - is that one firm or two? Goldman Sachs, Sachs Fifth Avenue - one for socks, one for stocks, but which one for which? 

"I want to trade a bond. Do I call Goldman, Morgan or JPMC?  Or Staples?"  And imagine the plight of those poor souls who still have the Bear or Lehman on their speed dials.  Spending hours listening to the ring tone as they patiently wait for the answer that never comes.

To the many heartless critics who ascribed problems in the financial sector to greed. I hope you're ashamed of yourselves.  It turns out after all that these problems are all due to a lack of skills.  Rather basic skills.
  1. Excessive bonuses.  A case of greed?  No.  The chap who calculated  them messed up the transformation of the bonus percentage to a decimal.  "Do I move decimal point two spots to the right or the left?   Must be to the right because who but a socialist or worse would go to the left?" "From each according to his ability, to each according to his cupidity" turns out to have been a simple math error.
  2. The Great Recession (almost a Depression).  Again it was a question of not understanding the maths.  "You mean a guy with zero income can't pay back a loan?  Who'd have thought?  I figured that 20 years x 12 months x 0 equaled the loan principal plus interest."
Now, while Sarah Palin isn't my President yet, I have written her pleading that her Administration make its first priority doing something for the most vulnerable among us:  those who work in finance.  I call it the "No Banker Left Behind" Act. 

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