Would Jamie Dimon Do Bear Stearns, WaMu Deal Again?

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Oct. 21 (Bloomberg) -- Bloomberg’s “Market Makers” anchor Erik Schatzker and Mike Mayo, bank analyst at CLSA, examine the tentative agreement by JPMorgan to pay a $13 billion settlement to end civil claims over its sales of mortgage bonds and whether CEO Jamie Dimon would do the Bear Stearns, Washington Mutual deal again. They speak on Bloomberg Television’s “Bloomberg Surveillance.”

Will have to pay to settle their claims on mortgage backed securities.

A bill that no ceo wants to pay.

Jp dimon questioned whether this was fair and reasonable to the bank.

Mike mayo, the top ranked analyst at the bank, and erik schatzker, who cover the bank for us, they have been watching this case closely.

Tell us what you found about this deal.

Trying to determine whether or not is -- whether or not it is reasonable is very difficult to answer.

If jamie dimon new in 2008 what he knows now, for obama to and bear stearns added to his business, would he have been willing to pay the additional money?

80% of $13 million?

A very difficult question.

We do know now that jpmorgan is a firm transformed to a certain degree.

A much bigger bank, much more profitable, greater book value.

Investigators have clearly gotten something out of it, what would it have been worth $14 billion knowing then what you know now?

We have ground hogs day where we get to go back in time and change what took place.

If jamie dimon were both -- were bill murray.

[laughter] if we knew then what we knew now, changing nothing, there is no way they would have done those deals.

But he got those deals at a great price.

That was because of the uncertainty.

Looking back to the past, a nice environment for the capital market business, the federal reserve has to make it easier for the remaining players.

They had a flight to quality benefit.

Everyone knew that jpmorgan was the port in the storm with additional affirmation by the government.

It is a tough question and they have certainly gotten some benefits from these applications a scale.

What about the fact that jpmorgan was asked to take over bear stearns by the government?

It is unfair that they are now paying the price for this.

No one asked jamie diamond to be a financial messiah and share the world at the expense of shareholders.

Is that not kind of unfair to him?

Look, they got bear stearns for $1.5 billion.

And then they got washington mutual for $1.9 billion.

Those were bargains.


You cannot ask me to run them numbers sitting here next to mike mayo, but they both seemed reasonable at the time.

In the past two years look at what has happened.

Clearly they did not have time to conduct a due diligence the way they normally would, but that is not new information.

Did they get the dealings in writing?

Did they have the adequate protection?

I spoke to a few dealmakers over the last few days and they said there were several ways that they could have protected themselves.

They are one of the biggest merger advisers in the world.

This is their day job.

In other words, why did they not take their own advice?

Of course these are all details to be worked out, but it appears that this deal is not going to include protection from criminal prosecution.

I am surprised that they could pay that much money and not it that protection.

Lacks the department of justice wants a trophy on their mantle, largest corporate settlement in history, jpmorgan can go and say that they put the issues behind them.

That is not what the at california attorney general said afterwards.

Is that not to just create the impression that they are constantly on the case?

Regulators and prosecutors looking at every move going forward?

And new environment?

The new environment is big brother banking and the big brother was asleep on the couch leading up to the financial crisis and now perhaps big brother is overreacting.

Some of it makes sense in terms of additional surveillance, some of it seems arbitrary.

Any other bank ceo would have to pay $13 billion plus in fines if you had the london whale trading, or any other bank ceo would be out the door by now.

Why is jamie diamond still safe?

He has gone from iron man two tin man.

On wall street he is perceived as ironman because shareholders have done very well under him.

That is the problem, people look at that and they say -- all that matters is the shareholder.


People say that and say look at how the share price has done, a testament to how well run the company is, but should we be using better metrics than share price?

There is the expectation in earnings power and that it will continue to earn in the future.

Maybe this settlement to some degree makes it easier for the bank, because you do not have the regulatory clout of the civil claims hanging over it.

Jpmorgan is big and has a balance sheet of excess of $2.2 trillion, making an excess of $22 billion per year.

On a relative basis it is not that much.

It would be different if it were u.s. bancorp or suntrust, for example.

80% of the losses seem more like that deal rather than bad ceo.

What other metric do we want to use or long-term share price?

You give your money to someone, maybe $100,000. 10 years from now they say it is worth only $50,000, but look at how well i did with these other metrics.

I question that.

Long-term performance should be related to these other factors.

If there is a problem with share price going up, with the strength of legal enforcement action, maybe they should be tightened more.

Maybe the character should involve the ceos of bear stearns as opposed to the jpmorgan.

Thank you for joining us.

Thank you to erik schatzker.

From wall street to washington,

This text has been automatically generated. It may not be 100% accurate.


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