Jim Armitage: Relief at Goldman Sachs as scandal stories abate…thanks to JPMorgan
Blankfein’s PR team have possibly suggested the “trust-me” beard he’s sporting this year
Goldman Sachs high-ups can’t believe their luck. Leaving aside the small matter of its trader “Fabulous” Fab Tourre being found liable for fraud, negative stories about the Vampire Squid appear to have abated, for now at least.
Senior management in Manhattan are, one hears, attributing the lull in public loathing in part on a rejig last year at its communications division. In truth, however, it is mainly the fact that skeletons have been falling from the well-stocked cupboard of its arch rival JPMorgan at such a pace that Goldman’s misdemeanours barely get a look in.
The latest bag of bones to tumble out of the JPMorgan closet is the inquiry by US regulators into its decision to employ the son of the former Chinese banking regulator, now head of the giant investment firm China Everbright. The hiring of so-called “princeling” children of China’s elite by Wall Street and European banks has been going on for years as firms seek influence and contacts in the country. Goldman Sachs, for example, hired the grandson of the former Chinese president Jiang Zemin.
So quite why JPMorgan snapping up Tang Xiaoning appears to have prompted the interest of the US Securities and Exchange Commission remains to be seen. Perhaps it is the fact that the bank reportedly went on to do a series of deals with daddy’s China Everbright after the hire.
But suffice to say that the very fact of an inquiry highlights yet another regulatory headache for JPMorgan, which is famously paying Tony Blair more than $1m (£638,000) a year as a senior adviser.
The firm, which had enjoyed extremely warm relations with the White House throughout the financial crisis, increasingly gives the impression of being one which lurches from scandal to scandal.
The China hiring affair comes little more than a week after US prosecutors charged two of its London-based employees over the London Whale trading fiasco, where duff derivatives investments ran up losses of more than $6bn.
Then there was the $410m fine for allegedly manipulating US energy prices; its alleged involvement in Libor fixing and its failure to spot the Bernie Madoff fraud despite being the Ponzi schemer’s primary banker for two decades. Not to mention the smaller affairs like its transfer of $546m from MF Global when the trading firm was collapsing and allegedly misleading investors about the quality of mortgages behind mortgage backed securities it was peddling. The Daily Beast website in the US has usefully totted up a guide to its fines and settlements, which total $7bn in the past two years alone.
The bank is, it seems, fast becoming the opposite of TS Eliot’s mystery cat, Macavity: “For when you reach the scene of crime, JPMorgan is always there”.
It would argue that this is merely due to its vast size: being a global bank means it is present, in significant force, in most major markets. That vastness is not in doubt, by the way: take a look at its presence in the derivatives market, where figures for March showed it has some $75 trillion – trillion! – of gross notional contracts.
This may not be a moral argument, but, to an extent, it holds water. JPMorgan simply behaves like all big banks who have been hit by megafines in the past few years. That is to say, on depressingly regular occasions: badly.
But surely part of the reason behind the flurry of investigations has been the arrogance and hubris of its chief executive Jamie Dimon, whose regular high profile boasts of his firm’s brilliance won him few friends in the upper echelons of rival banks and regulators.
Who can forget his typically brazen dismissal of the London Whale scandal as being a “tempest in a teapot” before the extent of the losses spiralled? Or his repeated aggressive attacks on attempts to increase regulation of firms like his? Such egotisitical comments simply act to goad the legions of underpaid staff in the offices of the regulators and the US Justice department.
Coincidentally, the flurry of JPMorgan scandals to emerge in the past year or so coincides with Goldman chief executive Lloyd Blankfein’s re-emergence on the TV talk shows. So far, Mr Blankfein hasn’t committed any “doing God’s work”-style gaffs as he has in the past – despite taking occasional high risk stances like supporting gay marriage. But his PR team seems to have been giving him humility lessons, possibly even suggesting the “trust-me” beard he’s been sporting this year.
Mr Dimon should eat some of the same humble pie, apologise more, and stop shaving. Oh yes, and work harder on driving out his bank’s alleycat ethics.
Kentz’s share price rise should be investigated
The rise in the share price of the engineering group Kentz in the weeks before yesterday’s takeover offer announcement should be investigated by the Financial Conduct Authority. While it could be put down to mere good fortune for wily punters, that looks unlikely.
In the week prior to Amec’s first approach on 11 July, Kentz’s shares jumped from 380p to 412.5p. Then, in the subsequent weeks to Amec’s offer on 5 August, they jumped to 436.2p, rising to as much as 475.9p last Friday – the last trading day before the approach was reported in the media.
This could, of course, all be coincidence. If it is not, and those with knowledge of the talks traded on the information, it is unlikely they will be caught – insider traders hardly ever are.
But, if we cannot prosecute the insiders, we can at least make it harder for them to profit at other investors’ expense by insisting companies inform the markets sooner about serious bid approaches. Kentz said nothing about either approach (not to mention those from other suitors) until yesterday, after a Sunday newspaper reported them. Apparently the Takeover Panel was kept informed throughout the process. It got this one wrong.
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