By Bethany McLean
(Reuters) - So today is the day.
After weeks of near-constant coverage of the big decision — will JPMorgan Chase shareholders keep Jamie Dimon as chairman and CEO or relegate him to just CEO? — the verdict came at JPMorgan's annual meeting in Tampa, Florida.
Dimon gets to keep both titles.
The next question is whether the result will get as much press as the original question did.
The subject has gotten so much coverage in part because Dimon is so divisive.
To his supporters, he's the personification of everything that's best about the financial system. Those who defend Dimon, like New York Times columnist Andrew Ross Sorkin, point out that JPMorgan Chase hasn't lost money in any quarter while Dimon has been in charge.
Others, including Warren Buffett, Jack Welch, Michael Bloomberg and Rupert Murdoch, praise Dimon, who is often called "America's most famous banker," for his management skills.
But to detractors, he's the personification of all that's wrong with modern banking — the arrogance, the resistance to new regulation, the astronomical pay in the face of obvious mistakes. The way he acted — threatening to resign entirely if his chairmanship was taken away — is proof that he's no more than a spoiled child.
But I wonder if the vote has gotten so much attention for another reason, which is that it's easier to chew over Jamie Dimon than it is to think about the right structure for our financial system.
Sure, the management, and the structure of that management, at JPMorgan matters. But if I were a conspiracy theorist ‑ and really and truly, I'm not! ‑ I might even suspect that all the fuss about Dimon is supposed to make us "watch the birdie." It's a distraction, meant to deflect attention from the real point, which is how we structure a financial system that best serves the needs of consumers and businesses in as safe a way as possible.
We've been getting close to having that conversation lately.
In late April, Senators Sherrod Brown (D-Ohio) and David Vitter (R-La.) rolled out the Brown-Vitter bill, which some have called the "break up the big banks" bill because the capital requirements it would impose on large banks, those with over $500 billion in assets, are so onerous as to force a breakup. At the least, the bill is a start to a much-needed conversation — or it was until Dimon began to dominate the headlines.
JPMorgan, which is the nation's largest financial holding company with $2.4 trillion in assets, is not only one of the central targets of Brown-Vitter, it's also a cause of the bill.
That's not just because JPMorgan is big. Last summer, as most people know, JPMorgan lost more than $6 billion because of a trade in credit derivatives gone wrong. (The bank still made money that quarter.) Dimon, who initially and famously dismissed rumors as a "tempest in a teapot," was forced to testify twice in Washington, and to offer a rare mea culpa, not once but repeatedly, for what he called a "terrible mistake."
Just before Brown and Vitter produced their bill, in mid-March, the Senate Permanent Subcommittee on Investigations finished a report on JPMorgan's big loss.
The trades "provide a startling and instructive case history of how synthetic credit derivatives have become a multi-billion dollar source of risk within the U.S. banking system," wrote the PSI. "They also demonstrate how inadequate derivative valuation practices enabled traders to hide substantial losses for months at a time; lax hedging practices obscured whether derivatives were being used to offset risk or take risk; risk limit breaches were routinely disregarded; risk evaluation models were manipulated to downplay risk; inadequate regulatory oversight was too easily dodged or stonewalled; and derivative trading and financial results were misrepresented to investors, regulators, policymakers and the taxpaying public who, when banks lose big, may be required to finance multi-billion-dollar bailouts." OK, then!
Around the same time, Joshua Rosner, a managing director at independent risk consultancy Graham Fisher & Co., wrote a report called "JPMorgan Chase: Out of Control." He noted that since 2009, JPMorgan has paid more than $8.5 billion in settlements for various regulatory and legal problems. That amount represents almost 12 percent of the net income the firm has produced from 2009 to 2012, according to Rosner, who also alleges that "many of JPM's returns appear to be supported by an implied guarantee it receives as a too-big-to-fail institution."
These are huge issues that everyone should be concerned about. But inadequate risk management, derivatives exposure, incentives to put excess money to work by making trades rather than loans and a torrent of legal issues aren't — unfortunately — unique to JPMorgan Chase.
We've created a Frankenstein of a financial system, one that is manmade but often so complex that it can eclipse our ability to measure or manage it.
Add to that the constant pressure for profits and the opportunities to arbitrage an increasingly prescriptive, expensive set of rules and regulations. It's a toxic combination. Plus, we live in a world where size and money equals political power, making effective oversight difficult.
Would replacing Jamie Dimon as chairman help? A Wall Street Journal story quoted Michael Garland, who is an assistant comptroller for New York City and a co-sponsor of the shareholder resolution to split the roles, saying that an independent chairman would have more time than Dimon to deal with unhappy regulators.
Great: more placating and handholding. Garland also says that it would send a strong message to the bank that the board needs to strengthen its oversight. Raise your hand if you think there's a board out there that truly can oversee a modern financial institution.
It would be nice if all of this were fixable by adding or swapping the players at JPMorgan. But does anyone believe that if JPMorgan had had another chairman during this period — say, Bill Harrison, who was the bank's CEO before Dimon — that last summer's derivatives losses wouldn't have happened? If JPMorgan had a different CEO, that wouldn't make the issues go away. Arguably, it would make things worse.
Dimon certainly hasn't navigated the fraught world of big banking perfectly. But name one person who has. The world's next great banker might be being groomed inside or outside JPMorgan, but for now, if we're going to live with the banks we've got, I'll take Dimon over Dimon-lite.
The problems with JPMorgan aren't a result of who the people are or aren't at JPMorgan. They're a result of the system. And while it may or may not make sense to change the people, don't be deluded: That's not changing the system.
(Bethany McLean is a Reuters columnist but her opinions are her own.)
(Bethany McLean is a contributing editor at Vanity Fair, and co-author with Joe Nocera of "All the Devils are Here: The Hidden History of the Financial Crisis." Her first book, "The Smartest Guys in the Room," co-written with Peter Elkind, became an Academy Award-nominated documentary. )