Time for Jamie Dimon to Step Down

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Amid reports that JPMorgan’s (JPM) losses on its botched credit bet could climb to more than $8 billion, nearly quadruple its original estimate, some are arguing it’s time for Jamie Dimon, the firm’s chief executive, to leave.

“[Dimon] has shown that he does not understand the statistical properties at risk, and that’s a pretty scary thing in a financial institution with multi-trillion dollars derivatives exposure”, James Rickards of JAC Capital told CNBC. “The derivatives exposures dominate what’s on the balance sheet ; they are high multiple on what’s on the balance sheet. Now I don’t expect him to know how to build a jet engine, but i do expect Jamie Dimon”, said Rickard, “and any other too-big-to-fail bank CEO to understand derivatives risk.”

Rickards believes that Dimon’s employees would not have been able “to blow smoke in his face and hide the risk in the trade if he understood it or had a trusted party who could explain it to him.”
“For a guy to be on top of the bank with that much risk….and not understand the risk is not acceptable”, said Rickards.

Asked by CNBC’s Bartiromo about the bank’s claims that the London unit hid the extent of the losses and the risk they were taking on, Rickards responded by saying: “It should not be possible. If you understand any of it you can ask hard questions. Ask what’s the long, short, the measure of volatility of the trade, how much you lose on every basis point if the spread widens. You could have asked a set of questions, or if [Dimon] didn’t understand it, he should have brought someone in that was independent.”

According to Rickards, the losses themselves came to live because they were too great to hide.
“[Dimon] should have been on top of them a lot sooner,” said Rickards. “If he doesn’t understand it, why is he running this bank?”.

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