JPMorgan Chase & Co. (NYSE:JPM) is making its share of headlines this week. And the news involves some controversy, both on the trading floor and in the board room. First of all, the bank is looking to be the first large bank to get back into a trading market that contributed to the 2008 financial meltdown, and CEO Jamie Dimon is being targeted by some stockholders about his role as chairman of the board of directors.
MORTGAGE IN-SECURITIES?
JPMorgan Chase & Co. (NYSE:JPM) is finalizing a request to begin selling some new mortgage-backed securities to get back into the market in hopes of increasing returns on its money thanks to loose money policy by the central bank which is encouraging more risks. The deal is due to close by the end of the month, though there has been some lively debate over contracts designed to protect investors should the securities not live up to promised quality – which was a a factor in the prior market collapse. Redwood Trust and Credit Suisse have been the only non-agency BMS issuers since the crash in 2008, with Redwood posting $3.5 billion of these securities in 2012 and launching a new $1 billion batch in January.
Does 36 to 60 months represent not just the term of the warranties on the securities, but could it also be an over-under on CEO Jami Dimon’s tenure on the board? There are some pension funds who don’t think the bank can wait anywhere near that long.
PULL OUT THE CHAIR FROM UNDER HIM
While JPMorgan Chase & Co. (NYSE:JPM) has been battling through some tough situations in recent years, CEO Jamie Dimon has been navigating the bank through. However, there are some pension funds which wrote a letter to stockholders saying that the bank could be coming through much better if the board of directors wasn’t being run by a chairman who is also the chief executive. Those who oversee several pension funds, including that of the American Federation of State, County and Municipal Employees (AFSCME), have written a resoltion calling for Dimon to step down from his chairmanship – saying that the board is having a hard time leading the bank when the person to oversees the missteps is also overseeing the “cleanup.”
The resolution comes in the wake of JPMorgan Chase & Co. (NYSE:JPM) losing about $6 billion in bad derivatives deals involving a London trader. The resolution’s supporters stated “mounting investor concerns” over the ability of the board of directors’ to oversee the operations when the chief executive is leading the board.
“It is impossible to imagine how board oversight of the company’s affairs will be strengthened while CEO Jamie Dimon leads the very board that is charged with overseeing his own shortcomings,” said Denise Nappier, Connecticut state treasurer who oversees the state’s retirement and trust funds, who is part of the group that supports the resolution to remove Dimon from the board chairmanship.
What do you think? Should mortgage-back securities again be part of the trading marketplace? If so, would you put some parameters or guidelines for trading? Is Jamie Dimon the guy for JP Morgan Chase & Co. (NYSE:JPM), and is there value in having a fully independent board of directors? We’d like your thoughts on these stories in the comments section below.
DISCLOSURE: I own no positions in any stock mentioned.
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