By Pam Martens and Russ Martens: December 27, 2019 ~
As Wall Street On Parade has previously reported, JPMorgan Chase has been fingered as the bank that contributed to the Federal Reserve having to intervene in the overnight loan market on September 17 of this year, and every business day since then. The Fed, through its money spigot, the New York Fed, has flooded Wall Street’s trading houses with hundreds of billions of dollars weekly in cheap loans over the past three months. That cheap, pre-announced source of liquidity has not only caused the stock market to set multiple new historic highs but has caused the stock of JPMorgan Chase to set multiple new historic highs as well.
Jamie Dimon is the Chairman and CEO of JPMorgan Chase. Dimon admitted on his quarterly earnings call with analysts that his bank had backed away from lending on September 17. That backing away contributed to the overnight lending rate spiking from an average of about 2 percent to 10 percent on September 17. That rate spike was used by the Federal Reserve to justify its interventions – the first such interventions since the financial crisis.
But as it now turns out, few individuals have personally benefitted as much as Jamie Dimon as a result of the Fed’s actions.
Jamie Dimon is one of the largest individual shareholders in the stock of JPMorgan Chase. Those shares are the sole reason Dimon is a billionaire. On October 10, 2019, the shares of JPMorgan Chase closed at $114.21. On October 11, the New York Fed announced a dramatic escalation in its plans to flood money to Wall Street’s trading houses. It said it would be buying up $60 billion a month in Treasury bills; providing $35 billion twice a week in 14-day term loans; and making at least $75 billion in overnight loans available daily. (That $75 billion was later increased to $120 billion available daily.)
Here’s how the share price of JPMorgan Chase has reacted since the Fed’s announcement on October 11, 2019: On October 10, 2019, the day prior to the Fed’s announcement, the stock price of JPMorgan Chase closed its trading day at $114.21 per share. Yesterday, December 26, 2019, the share price of JPMorgan Chase closed at $139.04 – an increase in less than three months of 22 percent.
According to the 2019 Proxy Statement filed by JPMorgan Chase, Dimon owns 1,493,369 stock options that will expire between January 20, 2020 through January 18, 2022. The strike price on the options range from $35.61 to $43.20. All of the options have vested, meaning that Dimon could sell all of them as the stock sets historic highs. Since the stock has gained $24.83 since October 10, if Dimon had decided to exercise his options and sell the stock yesterday, he would have made an extra $37 million.
But in addition, Dimon owns 8.9 million shares outright of JPMorgan Chase stock according to the 2019 Proxy statement. Those shares have also increased in value by $24.83 – giving Dimon a paper gain of $220,987,000.
Now you may be thinking that perhaps it wasn’t just the Fed’s actions that have been responsible for this surge in the share price of JPMorgan Chase. That’s a tough argument for the following reasons.
First, the precious metals desk of JPMorgan Chase is under an ongoing criminal probe by the U.S. Department of Justice. There’s a former trader cooperating in this probe and multiple employees have already been charged under the Racketeer Influenced and Corrupt Organizations Act (RICO), a first for a major U.S. bank. The bank already has admitted to an unprecedented three criminal felony charges in the past five years, so the possibility of a fourth criminal charge hanging over its head is unlikely to result in a 22 percent surge in its share price.
In addition, this time last year mega bank share prices were tanking because year-end is when they scale back trading and window-dress their books to avoid higher capital charges. The broader market took its cue from the prices of the bank stocks. The Dow Jones Industrial Average plunged 653 points on Christmas Eve of 2018 and business writers declared the month to have been the worst December for stocks since the Great Depression.
One has to seriously wonder just how much the New York Fed can get away with before Congress decides to investigate.