Buffett: JPMorgan Chief Had to 'Bare Throat' to Watchdog

Tuesday, 22 Oct 2013 06:08 PM

 

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Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has little room to bargain as regulators probe the sale of faulty mortgage bonds.

“If you’re a financial institution and you’re threatened with criminal prosecution, you have no ability to negotiate,” Buffett told Bloomberg Television’s Betty Liu in an interview Tuesday. “Basically, you’ve got to be like a wolf that bares its throat, you know, when it gets to the end. You cannot win.”

Dimon reached a tentative $13 billion settlement to resolve civil disputes between JPMorgan and the U.S. government. The bank won’t be released from criminal liabilities, according to a person familiar with the talks who asked not to be identified because they were private. Some of the practices under the probe relate to Bear Stearns Cos. and Washington Mutual, which JPMorgan bought in 2008 as the housing bubble burst.

“I think $13 billion is a lot of money, and I think Jamie has done a very good job of running JPMorgan,” Buffett said. “He helped out the economy enormously when he took on Bear Stearns and he didn’t get an indemnification clause,” he said. “There wasn’t even time for that sort of thing.”

U.S. Attorney General Eric Holder said this month that it is a priority for his department and President Barack Obama to aggressively pursue misdeeds by banks. JPMorgan won’t be penalized for wrongdoing tied to Bear Stearns and WaMu, a person familiar with the talks said. Rather, the portions of the settlement related to those institutions will be compensatory.

Financial Licenses

Because financial companies need to maintain licenses in U.S. states, they will make concessions to avoid a criminal indictment, Buffett said. The billionaire was interim chairman and CEO of Salomon Inc. in 1991 and 1992 as the company sought to recover from involvement in a Treasury debt auction scandal.

Buffett has praised Dimon in the past, saying he would be the best person to run the U.S. Treasury Department in a financial crisis. The billionaire has also said he has a personal stake in New York-based JPMorgan.

Dimon concurred with Buffett’s assessment of banks’ inability to sway regulators during a conference call with analysts this month. Still, he vowed to push for outcomes that would be fair to investors.

“It is very hard to fight with your regulators or the federal government, but we want them to be fair and reasonable,” Dimon said. “We have shareholders.”

‘Hungry World’

Buffett, 83, appeared alongside his son Howard Tuesday to promote “40 Chances: Finding Hope in a Hungry World.” The book describes lessons the billionaire’s son learned from his years working to improve food security around the world. It was written with Buffett’s grandson, also named Howard, and includes a foreword by the Berkshire chairman.

The elder Buffett has committed most of his wealth to charities overseen by his family and to a foundation run by his friends Bill and Melinda Gates. He said Tuesday that Bill Gates, the Microsoft Corp. co-founder, is so busy with philanthropic work that he won’t return to run the software company.

“The chances of that are zero,” Buffett told Liu. “He is doing exactly what he wants to do in life, and he’s doing it well and it takes his full-time energy.”

Microsoft is searching for a new CEO after Steve Ballmer said he would step down. Gates, 57, is chairman of the company and also serves on the board of Omaha, Nebraska-based Berkshire.

One of the messages of “40 Chances” is that charities missed opportunities to cooperate with for-profit enterprises, Howard Buffett said.

Recognizing Failure

“It’s changing today and that’s a good thing,” he told Liu. “Business has to be part of the solution. I think for a long time we failed to recognize that.”

Philanthropies should try to make themselves unnecessary and spend the money they have on tough problems rather than build an endowment, he said. His organization has set a goal of giving away more than $3 billion in 40 years as it works on mitigating conflicts and providing food and water security for some of the world’s most impoverished people.

“If you think about being out of business then you have more urgency to it, you focus better, you’ll select things that you’re best at and not try to be everything to everybody,” Howard Buffett said. “An endowment to me is really, in a way, a waste of money, because you ought to be spending it and using it and changing things.”

© Copyright 2014 Bloomberg News. All rights reserved.

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