Today was a critical day for the banking sector. The country’s top banking chiefs met with President Obama over the recent discrepancies in TARP fund ramifications, paying back the TARP, executive compensation, and how to proceed with the new toxic asset plan from the Treasury. Jamie Dimon of JPMorgan Chase & Co. (NYSE: JPM), John Mack of Morgan Stanley (NYSE: MS), Lloyd C. Blankfein of Goldman Sachs Group Inc. (NYSE: GS), and Ken Lewis of Bank of America Corp. (NYSE: BAC) were only some of the executives today at the White House. The market has rolled over a bit as there are some concerns that the Administration is not going to just roll over.
Erin Burnett of CNBC just got a great quick commentary of a panel of four of the most prominent bankers.
Jamie Dimon of JPMorgan said Obama asked a lot of questions but he set the tone of the meeting with issues facing the country. The TARP came up many times, but this was discussed as a tool to use for the better of the country. Obama did not discuss banks wanting to return the TARP money. JPMorgan is not going to pay back the TARP immediately, but it is going to take guidance from the Secretary of the Treasury on when to pay it back. Dimon said he would pay the TARP back but no time was scheduled. He said that commercial real estate is not the next shoe to drop, but is a function of the recession. President Obama did note that bankers need to be cognizant of the angers over executive compensation. Dimon noted that mistakes were made on compensation that went too far. Dimon said he is pretty clear that Obama is not against all wealth, but it sounded a lot like Dimon was saying he against awarded wealth that may not be deserved. Dimon said that JPMorgan already does restricted stock bonuses and the administration has been in support of that. The only reason JPMorgan addressed the inter-month profitability was to make assurances that the dividend was not dead. He did note though that March was a little tough but wont discuss any single month. On raising equity, Dimon said he did not think the company will need to.
JOHN MACK of Morgan Stanley spoke with LLOYD BLANKFEIN of Goldman Sachs. Mack said there was no tension and the meeting was all about cooperation. There were some issues over regulatory framework, but all in all it was encouraging. BLANKFEIN said everyone was on same page and Obama recognized that we are all in this together and there is not much distant between Main Street and Wall Street. As far as being a seller or a buyer into the toxic assets, Goldman doesn’t have as many assets in that class but they would probably like to buy it. In short, Goldman Sachs will be an investor is what that sounds like. MACK said that he is not sure they would be a seller of assets because they only have the small bank and are not sure if they can sell assets from the bank holding entities. MACK noted that the TARP money was puty there to make sure we had stable banks. That has to be the primary focus. Morgan Stanley can pay it back. BLANKFEIN noted on the TARP that there is no direct planned time to return the TARP money, but they will return it at some point. He has to wait for the stress tests to come out. But he then hinted about the taxpayers as “why wouldn’t that taxpayers want it back if Goldman Sachs doesn’t need it.” MACK said that the return of the TARP and compensation was not the point. He said it was about us all working together to make the situation in America better. Erin Burnett asked if Goldman Sachs would raise equity now that the stock is high. BLANKFEIN said it would want to go through stress tests and would not address anything until then.
KEN LEWIS of Bank of America said the summary is that we are in this together. It was a cooperative and pleasant meeting and Obama was very knowledgeable, but we are not in agreement on every single issue. Lewis said he understood that the golden age of banking compensation is over. Lewis also said that cooler heads will ultimately prevail over compensation or TARP money return. Lewis said he does not know what reaction will be on the return of TARP. He said “we can” on returning the TARP, and he said he’d like to begin that. He also noted briefly that March was tough, but stopped there and said it was too soon to comment on that.
Jon C. Ogg
March 27, 2009
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