Is GNPH the New BRIC?
JP Morgan Chase CEO Jamie Dimon is out with his annual letter to shareholders, and it's full of interesting points.
Sometimes, he sounds almost like a socialist, or just plain confused, defending capitalism with the argument that it's good at serving government: "In 2009, among their many activities, our investment bankers…Raised $102 billion for states, municipalities, hospitals, schools and not-for-profits – to help build roads and bridges, improve social services, renovate local hospitals and train people for employment," he writes. "We were the only bank willing to commit to lend $4 billion to the state of California, $2 billion to the state of New Jersey and $1 billion to the state of Illinois."
The investment bankers also, he says, "Invested in 58 U.S. wind farms spread across 16 states. This portfolio can produce 5,843 megawatts of capacity – enough energy to power some 1.6 million U.S. homes. We also are a leader in sourcing, developing and trading emission-reduction credits."
Mr. Dimon even has a nifty acronym for this business sector: "government, not-for profit and healthcare (GNPH)." Will GNPH replace BRIC (Brazil Russia India China) as the new growth area? Mr. Dimon reports that "As part of more than $384 million in new and renewed commitments to GNPH and educational entities in Ohio, we provided Kent State University with needed financing."
More of the "G" in GNPH is detailed: "We delivered unemployment and other benefits to more than 12 million individuals in 2009, as the national leader in bringing electronic banking services to low-income households through electronic benefits transfer and debit and stored-value cards."
Says Mr. Dimon: "We were selected by the Federal Reserve to serve as custodian for its program to purchase up to $1.25 trillion in mortgage-backed securities in order to provide support to the mortgage and housing markets."
And, "We are the leading cash management provider to the U.S. Postal Service, providing cash and check depository services to nearly one-third of the U.S. Postal Service's 80 districts."
Even the asset management team of private bankers is assessed in terms of how it is serving GNPH: "Asset management distributed more than $100 million to charities on behalf of fiduciary clients."
Other times, Mr. Dimon sounds more like an old fashioned capitalist. "The lack of regulatory clarity is creating problems for banks and for the entire economy. Businesses need confidence and certainty to grow (and to create jobs)," he writes. "When we reduce the debate over responsibility and regulation to simplistic and inaccurate notions, such as Main Street vs. Wall Street, big business vs. small business or big banks vs. small banks, we are indiscriminately blaming the good and the bad – this is simply another form of ignorance and prejudice."
"To thrive, our country and our economy need legal clarity and consistency, the fair application and steadfast enforcement of the rule of law," Mr. Dimon says.
My favorite part of the letter is the chart (page 18 of the pdf) showing compensation as a percent of revenues in a variety of different industries. JPMorgan Chase overall ranked below fast food, healthcare providers, and newspapers, which Mr. Dimon probably included to make the point that the bankers actually take less out of their companies in compensation than do the journalists who are writing all those editorials, articles, and columns complaining that bankers pay themselves too much.
Mr. Dimon also sheds some light on the government programs begun under the Bush administration. "I speak for a number of banks when I say that some of us accepted the Troubled Asset Relief Program (TARP) capital not because we needed it to survive but because we believed we were doing the right thing to help the country and the economy. We were told the government wanted even the healthy banks to take TARP to set an example for all banks and to make it easier for the weaker institutions to accept the capital without being stigmatized. JPMorgan Chase and many other banks were in a position to try to help, and that is what we did."
He goes on, "We did participate in the Federal Deposit Insurance Corporation (FDIC) guarantee program, under which we issued $40 billion of debt with an FDIC guarantee….I do regret having used the FDIC guarantee because we didn't need it, and it just added to the argument that all banks had been bailed out and fueled the anger directed toward banks."
On at least one point, Mr. Dimon struck me as self-serving. "It is these surviving banks that have paid for the cost to the FDIC of the approximately 200 bank failures since the beginning of 2008. Of those failures, the largest one, WaMu (with assets exceeding $260 billion), has cost the FDIC nothing. That is because JPMorgan Chase bought WaMu."
Sure, it may have cost the FDIC nothing. But it cost the owners of WaMu quite a bit – their asset was taken away by the government and sold to JPMorgan Chase. The test of the justice of a policy or action of the government isn't simply whether it costs the government money, but whether it protects private property rights.
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