JPMorgan Chase & Co. blundered into a world of hurt, but its own people generated it. And, in an effective crisis management move that is rare in the banking and financial services world, the CEO delivered the bad news first, in person, to media and analysts.
The news is indeed bad, and will likely get worse with more losses expected to follow the $2 billion from bad trades CEO Jamie Dimon announced yesterday. But he admitted that.
He didn’t try to hide it. In fact, he didn’t hide at all; not behind a statement; not behind an office door; not by sending out surrogates to talk; not from the regulatory and political wolves who want more restrictions on banking decisions.
He also acted immediately, with media referring to a “hastily called” conference with large investors, analysts and financial media after the markets closed yesterday. He didn’t hide it, spin it, leak it or try to say it was something it wasn’t. When asked if other banks may have made similar mistakes, he said:
“Just because we’re stupid doesn’t mean everybody else was.”
You have to love Dimon’s blunt language — so refreshing compared to normal American corporatespeak.
He called the losses “egregious,” but also delivered effective messaging in focusing the blame on bad trades by one department. This was not illegal or immoral activity.
“There were many errors, sloppiness and bad judgment,” Dimon said. “The strategy was badly executed and badly monitored.”
The effects of all this are evident this morning. Morgan’s stock is down. Other bank stocks will take hits. Congress is gearing up for hearings. Political leaders are clammoring for more regulation. And this much is also clear: This is already one of the best-handled crises to hit Wall Street in a long time.
JPMorgan’s reputation came into this mess strong, and while it will surely take a hit, reporters are already recounting that the bank earned $19 billion in 2011, up 9 percent. This is a bank that can take a smack down like this.
But more important here is whether the bank will, by its actions in this crisis, maintain investor and borrower confidence. So far, Dimon and his crisis managers get high marks for doing everything correctly.
Critics are swarming, calling the moves “Wall Street hubris,” and coming on the heels of the well-monitored problems of Lehman Brothers, Goldman Sachs, Bear Stearns and others, this doesn’t help.
But Dimon blunted the worst of this crisis by acting smartly and being the one to deliver the bad news first.