Late yesterday, our Planet Money colleague, Alan Cordova, went to hear J.P. Morgan honcho Jamie Dimon speak at Columbia Business School - Alan's alma mater.

Alan reports that Dimon was more direct about the ins and outs of the credit crisis than he expected from such a high-profile Wall Street CEO.

Here are some of Alan's takes from the hour-long talk:

-- On who's to blame for the current crisis: For one, Dimon said banks have been roundly blamed for the credit crisis, but the ordinary consumer is partially at fault. He noted there was a 30% rate of fraud on subprime mortgage applications in the past few years, and individuals made investment decisions that were bad under any market conditions. More specifically, blame does not lie exclusively with the American banks -- European banks were twice as levered, and they were under no compulsion to buy the subprime products.


-- On regulation of the financial sector: he called for better regulation of the financial sector. He said the current regulatory system is Balkanized and inefficient -- the result of decisions made during past crises but never in anticipation of the next one.

-- On whether Warren's cash is a good thing: Dimon worries that the recent extraordinary capital raises made by banks (e.g. Goldman Sachs and Warren Buffett) may hurt existing shareholders and could cause potential buyers to discount all financial sector equities.

-- On the Fed's recent bailout moves: In the current crisis, Dimon said, Bernanke, Paulson and Geithner moved very quickly -- Dimon remarked that although they received criticism at home for perceived sluggishness, it took the Japanese years to accomplish what they did in weeks. Nevertheless, it was policymaking on the run.

-- On the future: In five years, 'the humility will be gone,' Dimon said. Securitization will still be around, but there will be less leverage. Now is a good time to buy if your perspective is long-term, but many people say this until they are burned once, at which point they quickly exit the market.

--- In the end, some Dimon advice: 'Do what is right when you figure out what is right' -- in other words, don't do it just because everyone else is doing it.

categories: Wall Street

9:46 - November 18, 2008

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