Posted: 03/01/2013 7:37 pm EST
Jamie Dimon now claims that he and his bank, JPMorgan Chase, labored to prevent the 2008 collapse of Lehman Brothers, according to documents filed in federal court this week. That assertion directly contradicts the conventional understanding that the bank effectively exploited Lehman’s vulnerabilities for its own gain.
“We took huge exposures to keep Lehman alive,” Dimon said during a Feb. 23 deposition conducted as part of a lawsuit filed against JPMorgan by the Lehman Brothers estate, which is seeking $8.6 billion in damages.
Dimon’s characterization during the deposition stands in stark contrast to accounts of executives at other financial institutions , who assert that JPMorgan’s threats to cut off Lehman’s financing sent the bank into a death spiral.
Lehman’s ultimate demise in September 2008 was a seminal event in what proved to be the worst financial crisis since the Great Depression; it turned tightness in credit markets into a global panic that set off years of high unemployment and hardship.
A spokesperson for JPMorgan declined to comment on Dimon's deposition Friday and referred The Huffington Post to previous statements made by bank executives.
The lawsuit filed by the Lehman estate claims JPMorgan took advantage of the investment bank’s precarious state to extract $8.6 billion from its coffers just a few days before it slid into bankruptcy . JPMorgan has denied such accusations.
“JPMorgan did not cut and run but stood by our client,” Barry Zubrow, the bank’s chief risk officer, told the Financial Crisis Inquiry Commission in 2010, adding that throughout the turmoil, JPMorgan “continued to make enormous -- discretionary -- extensions of credit to the ailing bank, and it continued to trade with Lehman.”
But according to the final report from the commission, a congressionally mandated panel whose findings are considered the official history of the financial crisis, JPMorgan continually pushed against others who tried to prop up Lehman during September of 2008.
On Sept. 11 of that year, Federal Reserve and Treasury officials spent most of the day trying to prevent a run on Lehman by convincing hedge funds and other banks to keep dealing with the investment bank. Dimon, the report found, was doing the exact opposite, calling executives at Lehman to demand $5 billion in payments he claimed were due immediately.
When the Lehman executives told Dimon they did not have the cash, "Dimon said Lehman’s difficulties in coming up with the money were not JPMorgan’s problem," the commission’s report states.
"They just wanted the cash. We made the point that it's too much cash to mobilize. There was no give on that. Again, they said 'That's not our problem, we just want the cash,'" Lehman's then-treasurer Paolo Tonucci told the commission in 2010.
With Lehman struggling to raise the money that Thursday night, the report states unnamed officials at JPMorgan sent a midnight letter demanding Lehman post the collateral "by the opening of business tomorrow in New York," threatening to "decline to extend credit" and force the bank into default if the payment was not made.
Lehman eventually did pay $5 billion to JPMorgan, Lehman’s then-CEO Dick Fuld told the commission, based on the understanding that JPMorgan would keep lending the money back to Lehman on a day-to-day basis.
Before Monday morning, Lehman had filed for bankruptcy.
After the bankruptcy filing , JPMorgan did provide $87 billion in loans to Lehman in order to help the investment bank sell a key unit to British bank Barclays. In court filings, JPMorgan has said that in making those loans, "which it was not obliged to do," the bank helped Lehman survive for a few days before it was devoured by creditors.
"Had JPMorgan not done this, the overnight investors would have liquidated the securities pledged to them, Lehman Brothers would have been unable to sell its business, thousands of Lehman employees would have lost their jobs, and the seamless transfer of customer accounts to Barclays would not have occurred," JPMorgan said in a 2010 filing. JPMorgan also continued to provide vital services to Lehman following its bankruptcy.
But in his deposition, Dimon appears to go beyond those earlier claims. He is now suggesting JPMorgan’s actions before the Lehman bankruptcy were also meant to help keep the investment bank alive.
"We took a huge risk on the liquidation of all of that stuff. And I understand that," Dimon said, responding to a question from a lawyer that dealt with the Lehman-JPMorgan relationship prior to the bankruptcy. "That does not mean you shouldn't ask for proper collateral. You're taking huge risk even after collateral."
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