Jamie Dimon’s Deeply Conflicted Role as “Rescuer” of First Republic Bank Requires a Credible Investigation
g at xny.io
Wed Apr 26 07:57:31 PDT 2023
By Pam Martens and Russ Martens: April 26, 2023
Jamie Dimon Sits in Front of Trading Monitor in his Office (Source -- 60
Minutes Interview, November 10, 2019)
Jamie Dimon Sits in Front of Trading Monitors in his Office (Source: 60
Minutes Interview, November 10, 2019)
The Board of Directors and shareholders at the largest bank in the U.S.,
JPMorgan Chase – which has more than 5,000 Chase Bank branches dotting the
landscape from coast to coast – have ample reason to ask themselves where
the loyalties of the bank’s Chairman and CEO Jamie Dimon exactly lie.
Dimon, who has come under withering negative publicity for the bank’s many
years of catering to the cash payoff needs of child sex trafficker Jeffrey
Epstein, had an urgent incentive to want to change the subject. So a media
blitz ensued around his role as rescuer of the sinking carcass of a much
smaller bank, First Republic Bank – which has its own dubious distinction
of being the bank that wired the hush money to porn star Stormy Daniels by
Trump attorney, Michael Cohen.
For just how broadly Dimon’s “rescue” of First Republic Bank has been
reported, scroll down at this link. Only someone living off the grid or in
a coma did not hear that Jamie Dimon was riding to the rescue of First
But as early as Tuesday, March 28, during a Senate Banking hearing, it
became clear that when First Republic finally got around to updating the
public on the severity of its distressed situation (which it finally did on
Monday in a 12-minute earnings call that took no questions from anyone),
the news was going to be devastating to the bank.
At the Senate Banking hearing, the Vice Chairman for Supervision at the
Fed, Michael Barr, explained just how fast deposits can evaporate from a
bank in the new digital age, especially when tens of billions of dollars of
those deposits exceed the FDIC insurance cap of $250,000 per depositor, per
bank. Barr told the Senators that in the case of Silicon Valley Bank, $42
billion in deposits had left the bank on Thursday, March 9, and bank
customers had queued up $100 billion more to exit the following day.
Silicon Valley Bank did not have adequate collateral to post at the Fed to
borrow funds to meet that $100 billion in withdrawals, thus the bank was
put into FDIC receivership on March 10.
No depositor has ever lost a dime of deposits in an FDIC-insured bank if
they have kept those deposits in FDIC-insured accounts and within that
$250,000 FDIC cap.
Both Silicon Valley Bank and First Republic Bank are
California-headquartered regional banks. The contagion from Silicon Valley
Bank had directly impacted First Republic Bank. By the date of that Senate
Banking hearing on March 28, First Republic’s common stock had lost 90
percent of its market value – just in the month of March.
It might be possible to come back from that if one is a start-up tech firm,
or an acknowledged high-risk innovator. But Americans put their money in
federally-insured banks because they want safety; because they want the
peace of mind of knowing their deposits will be protected despite what
happens in the Wall Street casino on any given day. In that vein, Jamie
Dimon was the worst possible choice to head up a rescue of First Republic
Bank as he is the personification of what happens when a trading casino is
allowed to own the largest federally-insured bank in America. Under Dimon’s
tenure at the helm of JPMorgan Chase, it has been charged with losing $6.2
billion of depositors’ money by gambling in derivatives in London; its
precious metals traders have been charged under RICO – the statute used to
prosecute the mob; it has received an unprecedented five felony counts from
the U.S. Department of Justice, including aiding and abetting the largest
Ponzi scheme in history by Bernie Madoff, and on and on.
But Jamie Dimon has a legion of public relations flacks shaping his image
as a titan of Wall Street wisdom and he has clearly gotten high on his own
p.r. supply. So Dimon cajoled three other mega banks on Wall Street to join
his bank and dump $5 billion each of uninsured deposits into First Republic
Bank on March 16. Those banks were Bank of America, Citigroup and Wells
Fargo. In addition, Morgan Stanley and Goldman Sachs deposited $2.5 billion
each; while BNY Mellon, State Street, PNC Bank, Truist and US Bank each
deposited $1 billion, bringing the total infusion to $30 billion.
In addition, according to First Republic, JPMorgan Chase had also provided
a line of credit to the bank. Multiple media outlets also reported that
JPMorgan Chase and Lazard were advisors to First Republic Bank on its
options going forward. (See here and here.)
Yesterday, the share price of First Republic plunged another 49 percent,
closing at an all-time low of $8.10. In response, CNBC is reporting that
there is now a plan afoot to attempt to cajole the 11 banks that sluiced
the $30 billion in temporary deposits to First Republic to convert that
into an equity stake. Seriously? What the devil is going on here and why
aren’t the shareholders of these banks wielding pitchforks?
S&P Global has already downgraded First Republic Bank into junk territory;
excluding the $30 billion in strong-armed deposits from the mega banks,
First Republic lost a staggering 58 percent of its deposits in the first
quarter of this year; and its wealth advisors are leaving and taking
billions of dollars in clients assets with them to new firms.
Since when did it become a rational move for one federally-insured bank to
link its brand and reputation to an imploding bank?
Dimon needs to be hauled before the Senate Banking Committee in a public
hearing, put under oath, and grilled as to what exactly his motivation was
to get so enmeshed in the hot mess at First Republic Bank. Likewise, the
perpetually blind-folded and conflicted Board at JPMorgan Chase needs to
hire an independent, credible law firm to investigate the conflicts
inherent in the many hats Jamie Dimon was wearing in this debacle.
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