The Butler Did It

Andrew Ross Sorkin is generally a with-it sort of pundit. Today, he zigs when he should have zagged. He's crying poor mouth for JP Morgan shareholders, thus:

But look closer and scrutinize the S.E.C.'s 15-page description of its findings. Then think about this: When the S.E.C. says that JPMorgan is "paying" a record fine, where is the money actually coming from?

The answer: shareholders. The same shareholders who were ostensibly the victims of the scandal that already cost them $6 billion. The victims, if you want to call them that, become victimized twice.

Come again, Andy? Are you sure you've not changed your last name to Rooney? Whining voice and all that.

Andy has, conveniently, forgotten Citizen's United. JP Morgan is a *person*, so it gets dinked. The notion that Jamie Dimon, or all of Morgan management, could come up with the moolah to pay the fine is ridiculous. Moreover, it ignores the reality of corporate governance and shareholder responsibility. It was the shareholders, in a kangaroo election let's be honest, who installed these clowns and told them to "do as you will" to maximize the moolah flowing to shareholders. Management is hired to carry out the business for the benefit of the shareholders. Management, technically, is just hired help working at the behest of shareholders. Shareholders are the company, by definition; not managers. If shareholders install crooks, it's shareholders who pay the piper. Good on them. If shareholders want to make the decisions, then change charter to partnership.

Sorkin enlists another kook, one John C. Coffee Jr. (a professor of securities law at Columbia Law School) to state the case. They're both shills for the likes of Dimon.

"It is perversely inappropriate. You are adding injury to injury. All we're doing is punishing the shareholders more," said [Coffee]. "This is a case where the victims are the shareholders."

No. They're "victims" of their own perfidy. They want heads I win (Dimon et al get away with it); tails you lose (no one gets dinked for bad behavior). Where's that moral hazard slippery slope all the Right Wingnuts were bitching about during TARP?

Sorkin ends his piece thus:

Ultimately, Mr. Coffee came up with a simple metaphor to describe the case against JPMorgan and the penalty being paid up by shareholders: "This is a case about imposing a fine on someone who suffered a burglary for not taking adequate steps to avoid the burglary."

But, that's not what happened. This was a case of the butler selling the good silver on ebay, with your tacit approval, with the intent of getting lots more for it than it's really worth. If the gag works, you and the butler split the moolah. If you didn't check that the butler was a crook, then you're responsible. You can't go boo hoo-ing. You hired a crook, and got taken. Your own damn fault.