July 18, 2012 Leave a comment
These days financial scandals happen with increased frequency. While it is not clear what changed, the sky has once again redefined our limits. It seems that JP Morgan Chase and CEO Jamie Dimon have a rather unique ability to turn $2 Billion into $5.8 Billion. Good skills to have if you are the nation’s largest financial institution, right? If you said yes, guess again because Jamie & Co. have recently disclosed that their previously-disclosed “trading mistake”, originally valued at $2B during a previous apology, is now trading just a little bit higher – right around that $5.8B mark.
JP Morgan said its internal investigation yielded results that have led its top brass to “question the integrity” of the previous $2B mistake valuation. “Dear Shareholders: Oops. Please accept our updated apology and revised valuation. Please do not let it affect your confidence in our management team.” This language probably would not fly, but then again, these days-who knows? .
There may be no limits to the amount of mind-numbing financial scandals that we are being conditioned to interpret, digest, and ultimately accept as some kind of “new normal”. This stuff literally runs from “trading mistakes” (code for hedging gone awry) to LIBOR-fixing at Barclays while covering just about anything and everything in between. Nothing is sacred, and little seems safe.
Interestingly, an AP article from last week offered, “JPMorgan could not necessarily hide behind the actions of its employees. Regulators could decide that its oversight or risk management contributed to the problematic statements.” Seems like a good bet there.
It is somewhat paradoxical that this increasingly-no limits run of financial scandal is occurring at a time when corporate treasurers indicate that they now park more cash in bank accounts. See AFP’s (Association for Financial Professionals) annual liquidity survey findings for details. The next step for corporate money managers may well be to build underground vaults within the perimeter of well-guarded corporate campuses. It used to be that treasurers were dinged on their performance reviews for having “excess cash on hand”. Now they receive high marks for the same behaviors, now termed “effective risk mitigation”.
It’s getting hard to know who or what to trust. Disclosures are no longer even accurate. For the times they are a-changin’. It appears that there are no limits.