Jamie Dimon, Banking Crisis Action Hero?

Also: Pope Francis "deepfake" proves how easily artificial intelligence can fool millions, and will a grand jury vote to criminally charge Trump, or nah?

Jamie Dimon, Banking Crisis Action Hero?

Scenes from the latest banking crisis assigned a starring role to JPMorgan’s CEO, but the bank also received billions of dollars of new deposits during the scare.

Now that contagion fears are subsiding somewhat, more stories of the white-knuckle decision-making behind closed doors as banks foundered across the nation are starting to surface.

At the center of them is 67-year-old JPMorgan Chase chief executive Jamie Dimon, the only remaining boss at a major investment bank who weathered the 2008 global financial crisis. Back then, JPMorgan was the third-largest U.S. bank by assets. Now it is the biggest of them all. 

Dimon was still a relatively new CEO when he timorously dialed into an early morning conference call in 2008 to level with his top brass about the mounting risks of an overleveraged global financial system, just as it began to crater.

His staff didn’t fully grasp the magnitude of the predicament, so he did not mince his words. “I want you all to know that this is a matter of life and death. I’m serious.” Dimon ticked off a list of potential catastrophes – specifically the names of monster banks that might soon file for bankruptcy. 

“We need to prepare right now for Lehman Brothers filing. And for Merrill Lynch filing. And for AIG filing. And for Morgan Stanley filing,” he said. “And, potentially, for Goldman Sachs filing.”  

According to the blow-by-blow account given by Andrew Ross Sorkin in his book, “Too Big to Fail,” there was “a collective gasp on the phone” as the shock of Dimon’s statement sank in. Of the banks Dimon named, Lehman went under; Merrill sold itself to Bank of America; AIG filed for bankruptcy; Morgan Stanley survived only after receiving a $107 billion bailout from the Federal Reserve; and Goldman received a $5 billion bailout from Warren Buffett (on which he scored a $3 billion-plus return).

This time around, the crisis was not triggered by overleveraged big banks, but by panicked runs on smaller, regional ones fueled by pervasive financial uncertainty. As the crisis unfolded, stories emerged of Dimon springing into action: Here, he was speaking on the phone with Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell as they raced to find a way to bolster Americans’ confidence in the banking system; there, we found him huddling in his New York office with deputy Treasury secretary Wally Adeyemo and mulling over Yellen’s suggestion that the nation’s largest banks could possibly band together to save smaller ones.

It still took days of wrangling for both Dimon and Yellen to persuade Wall Street CEOs to contribute $30 billion to rescue First Republic, the San Francisco bank that was losing tens of billions of deposits in the bank run that had already toppled Silicon Valley Bank and Signature Bank. The first banks that agreed to help were Bank of America, Citigroup and Wells Fargo, in addition to JPMorgan, each of which contributed $5 billion of uninsured deposits to First Republic.

It was telling to see how much the other top banks gave to the cause. For instance, Goldman and Morgan Stanley each gave $2.5 billion – far less than the bailouts they helped themselves to 15 years ago. BNY Mellon, PNC Bank, State Street, Truist Bank and U.S. Bank each contributed $1 billion.

“It’s what bank CEOs do now, save the financial system,” says David Tawil, a former bankruptcy lawyer who also traded distressed debt at Credit Suisse and witnessed the 2008 global financial crisis. “They can see what’s coming and they don’t want it to last. That’s why you see all these banks stepping up.”

In a bit of a silver lining for Dimon, JPMorgan also became the bank to which many spooked, if very well-capitalized, customers fled, with the majority of tech founders and entrepreneurs reporting they favored moving their deposits there. Other banks that became a safe haven during the crisis included Bank of America and Wells Fargo (whose CEO is Dimon’s former protege, Charles Scharf), which received billions of new deposits.

“Everybody was trying to move their money,” Tawil says. “It was incredibly scary in retrospect. I got calls from people banking at Signature, trying to move money over a weekend – and we all know you can do no such thing. People were freaking out.”

Befitting his title of “America’s Banker,” Dimon began sounding the alarm months before U.S. banks started to totter. In October, he observed that the Fed and other central banks raising interest rates to combat inflation could force the U.S. and other global economies into a recession. “These are very, very serious things which I think are likely to push the U.S. and the world – I mean, Europe is already in a recession – and they’re likely to put the U.S. in some kind of recession six to nine months from now,” he warned.

Even though rate hikes have stalked markets for more than a year, banks have been caught utterly flat-footed. “Banking is purely about trust, unlike nearly every other industry,” notes Tawil. “People are entitled to their deposits at any point in time, but no one ever expects that everyone will want their deposits all at once.”

Smaller banks will really have to think about what they are offering their customers that they can’t get more securely – and in greater quantities – elsewhere. “I really don’t know what value proposition a regional bank brings,” Tawil says. “The idea that you keep your money in a bank just to support your bank makes no sense. You’re going to go ahead and support your bank and you get what? There’s no reason to take that risk.”

“These banks all offer awful rates of return on checking and savings accounts, so everybody is moving their funds to money market accounts. The federal government is paying more money on its debt than you can get from a bank. It’s really something. Banks are in trouble. They are still charging people just to hold their money and we’re moving toward a recession. There will be dislocation and opportunity ahead.”

Pope in A Puffer Ignites Fresh Debate on ‘Deepfakes’

An amusing photo turns into a stark reminder of how easily technology can manipulate our understanding of what is real.

That’s Pope Francis in a luxurious snow-white puffer jacket, with matching tunic and zucchetto.*

But what’s a swagged-out Pope without some ornament? A giant, blingy, silver crucifix certainly does the trick.

The 86-year-old Pope’s unusually stylish look went viral on social media in recent days, drawing headlines and fawning adulation from fans around the world who dubbed him “Balenciaga Pope.” As one Twitter user put it, “The boys in Brooklyn could only hope for this level of drip.” (For those confused about the word “drip,” in this context it means to be enviably fashionable.)

It is true that this Pope is known for eschewing the traditional fancy red slippers and stuffy ermine of past leaders of the Catholic Church, so it seemed entirely plausible he might have taken another leap into what GQ has called “papal athleisure.”

Except this image was generated by newly released artificial intelligence software from San Francisco startup Midjourney, posted on Reddit and then blasted out across social media channels, fooling millions of people and resulting in what some are describing as “the first real, mass-level AI misinformation case.” 

The response was staggering. “I thought the Pope’s puffer jacket was real and didn’t give it a second thought,” wrote supermodel Chrissy Teigen on Twitter. “No way am I surviving the future of technology.”

The revelation comes just days after another set of AI-generated images, which seemed to be real-life photos, hit the internet depicting Trump being pursued by law enforcement, arrested, tried, imprisoned and forced into menial labor, such as mopping jailhouse bathrooms. The images, which were also produced using Midjourney software, were created and posted online by Eliot Higgins, founder of open-source investigative journalism website Bellingcat.

In an era of rising misinformation, fake news and endless debate over what does and does not qualify as fact, it has been heartening to think one can still trust their own eyes – but how long will that remain the case?

While free-speech advocates have pressed for careful consideration of how so-called “deepfakes” are regulated, the U.S. Senate Committee on Homeland Security and Government Affairs is not waiting. Late last year, it pushed ahead with a bipartisan vote to approve the Deepfake Task Force Act, which will aim to counter the potential threats of deepfake technology.

“For most of human history, seeing meant believing, but now that is becoming less and less true, thanks to deepfakes,” said Republican Senator Rob Portman of Ohio, one of the task force sponsors. “Combined with the network effects created by social media, fake videos or pictures can travel around the world in an instant, tricking citizens.”

*A zucchetto is the white, beanie-looking cap the Pope wears. While other leaders of the church  may wear beanies of many hues, only the Pope can wear a white one. 

Whither the Trump Indictment?

Until a grand jury votes on whether to criminally charge the former president, it seems America is caught in an endless cycle of guessing games.  

The March 18  announcement by former president Donald J. Trump that his arrest was imminent has proven to be perhaps a little hasty. Yet he once again managed to hustle the press and own the news cycle, touching off a media storm that likely won’t die down until he is indicted, or the case is dropped. Either way, the situation has already become an international embarrassment.

It is unclear whether Trump’s faulty prediction of his arrest last week was the result of some bad information or a just compulsion to whip up his fans. But the media circus on Centre Street in downtown New York, where a grand jury is hearing from witnesses in a hush money case against Trump, has already reached cinematic proportions, with protesters and journalists alike jostling for a closer look.

As Power Corridor has already reported, the case against Trump turns on allegations that the former president failed to properly account for a $130,000 payment to former stripper and pornographic film actress Stormy Daniels (real name: Stephanie Clifford). Any criminal charges brought by Manhattan district attorney Alan Bragg could be upgraded from a misdemeanor to a felony if they extend to the falsification of business records to cover up an illegal campaign-finance donation.

Crucial to the indictment will be how much Trump really knew about the use of funds and the handling of his business records. Trump has admitted to authorizing the hush money payment to Daniels ahead of his 2016 election as president of the United States, but denies her claims they had a sexual relationship.

The grand jury could vote to indict Trump within days, but the Manhattan grand jury process can be highly unpredictable, so determining the exact timing is difficult. A grand jury, which comprises a group of citizens given substantial legal powers, is set up by a prosecutor to determine if there is probable cause to believe a person has committed a crime and should be put on trial. If the jury finds there is enough evidence, an indictment could be issued against Trump.

Earlier this week, Trump appeared on Fox News to tell more of his side of the story (we will dispense, for the moment, on how he and Fox managed to stay cozy even as the network’s grandees denounced Trump in private messages leaked amid the ongoing $1.6 billion case between Dominion Voting Systems and Fox). During the interview, he called the possible criminal indictment against him another way to obstruct his chances of being re-elected as U.S. president. “It’s a new way of cheating in elections,” he said. “It’s called election interference.”

This came after Trump posted on his social media channel, Truth Social, in the wee hours of Friday morning attacking Bragg as a “degenerate psychopath that truly hates the USA” and predicting “potential death and destruction” that could be “catastrophic for our country,” if any charges against him go forward.

Trump also shared a photo of himself late last week wielding a baseball bat with another photo alongside it of Bragg holding his hands up, as if to block the blow. Legal analysts suggested the image crossed the line from free speech to a threat, or an incitement of violence, raising the possibility that it could also be seen as an obstruction of justice.

The image has since been taken down. Trump denied calling for violence and blamed the news media for creating the image, claiming he had no part in it. “We posted the story, but they had the picture up,” Trump told Fox News. When questioned whether he understood how such a post could be interpreted negatively, Trump shrugged it off. “That’s the fake news media show, that’s what they do.”

In a surreal twist, the grand jury deliberations on Centre Street, which have attracted all manner of Trump activists, onlookers and television crews, is also reportedly the location for filming a follow-up to the Hollywood blockbuster “The Joker.”