A former colleague of mine, Cato Institute’s Michael Tanner, has a screed in National Review Online today asking this question. “Where’s the accountability?”
The point of his piece is to compare the accountability that was visited on J.P. Morgan Chase by its $2.3 billion loss as a consequence of poor investment decisions. The bank saw its share price drop, suffered damage to its reputation and a senior executive was forced to retire early.
Michael then goes on to list several government failings from his point of view and then asks, “Where’s the accountability?”
I don’t happen to agree with Michael’s rather over-wrought list — it strikes me that some things listed as “failures” are nothing of the kind but programs we should expect in a modern, civilized democracy — but that’s irrelevant because the answer to his question is pretty simple: in democracies the people at elections hold governments accountable. Or would you rather do away with our system of government, Michael?
And some accountability over at J.P. Morgan! And I write as shareholder in the bank (although my position wouldn’t get me a transatlantic flight). Despite the loss in what he likes to call a bad hedge, Jamie Dimon was reelected this week as chairman and CEO of the bank. Most shareholders, of course, had voted by proxy before the loss was announced.
Few serious observers of J.P Morgan believe that Dimon, who’s a very hands-on chief executive, wouldn’t have been aware of the big bet that was being made and went wrong.
What happened was a bet pure and simple – bankers like to call this a hedge, of course. The bank bet on U.S. corporate bonds and got it seriously wrong. So we are back with casino banking – and a casino banker in control at J.P. Morgan.