Growth5 Blog

Monday, April 6, 2009

Jamie Dimon's JPMorgan Chase Shareholder Letter

Jamie Dimon's JPMorgan Chase annual shareholder letter is an excellent read. JPMorgan made nearly $6 billion in 2008, down from $15 billion in 2007.

Here are some highlights from the letter (also embedded below):

1. "We didn't write option ARMs (adjustable rate mortgages) because we did not think they were a consumer-friendly product. Although we made plenty of mistakes in the mortgage business, this was not one of them."

2. "...we deliberately avoided the structured collateralized debt obligation (CDO) business because we believed the associated risks were too high. Structured finance in its most complicated forms has largely disappeared after unleashing a myriad of problems on the financial system. They will not be missed."

3. "Simply put, we still follow the financial commandment: do not borrow short to invest long."

4. TARP: "...while it is easy to criticize the timing, marketing or consistency of the effort - we also recognize how hard it is to act boldly in difficult and dangerous times... We hope that our leaders will continue to be bold and brave in seeking solutions to these once-in-a-generation problems."

Starting on page 14 Dimon comments on the crisis. He tackles its causes, the response and what to do going forward to prevent another one.

5. Dimon goes into detail on what he feels caused the crisis:
  • The burst of a major housing bubble;
  • Excessive leverage pervaded the system;
  • The dramatic growth of structural risks and the unanticipated damage they caused;
  • Regulatory lapses and mistakes;
  • The pro-cyclical nature of virtually all policies, actions and events; and
  • The impact of huge trade and financing imbalances on interest rates, consumption and speculation.
6. "Basically the whole world was at the party, high on leverage - and enjoying it while it lasted."

7. "Clearer heads will understand that much of this was not malfeasance - our world had changed a lot and in ways that we didn't understand the full potential risk. But when the panic started, it was too much for the system to bear."

8. "Perhaps the largest regulatory failure of all time was the inadequate regulation of Fannie Mae and Freddie Mac."

9. "Too many regulators - with overlapping responsibilities and inadequate authorities - were ill-equipped to handle the crisis."

10. "The real measure of strength for a country - or a company - is not whether we have problems but how we learn from them, overcome them and emerge better for it."

Here is the letter:
2008 Jamie Dimon Letter to JPMorgan Chase Shareholders on Scribd

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