JP Morgan CEO Jamie Dimon (JPM) is usually a font of wisdom, but if he actually means what he’s quoted as saying on Charlie Rose, he has gone temporarily insane:
Reuters: JP Morgan Chase & Co Chief Executive Jamie Dimon said U.S. regulators should investigate whether people betting on Bear Stearns’ stock falling deliberately brought down the investment bank.
“Where there is smoke, there’s fire,” Dimon said in an interview with Charlie Rose on PBS, televised on Monday. “I think the Securities and Exchange Commission should investigate it, OK? I think if someone knowingly starts a rumour or passes on a rumour, they should go to jail.”
Should the SEC investigate what happened to Bear Stearns? Of course. Did “rumours” actually bring the firm down? Give us a break. Companies are slammed by rumours every day of the week. The only ones that fail are those that are vastly overleveraged and have already destroyed the market’s trust.
We assume what Dimon means is that people who knowingly start or pass on FALSE rumours should go to jail, but even that seems a stretch. Where, exactly, does a hunch or an opinion become a “rumour”? When you think a CFO is lying to you but you don’t have proof, is it criminal to tell your trader friend? What if your friend then tells his friend? Should you all go to jail? Should we all hire fact checkers before we pick up the phone? Should every conversation and IM session include seventeen paragraphs of disclosure language?
And back to Bear Stearns, when, exactly, were those “rumours” that Bear was having liquidity issues false? Specifically, how many hours before the firm ran out of cash would it have been criminal to say, “I hear the firm is having a liquidity problem.”
With all due respect to Jamie Dimon, it sounds as though he’s been hanging out with former Bear CEO Alan Schwartz too much. We understand why Schwartz desperately needs to believe that Bear’s failure was caused by Goldman Sachs, et al, but Dimon needs to rethink this one.