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JPMorgan, you will feel the wrath
JPMorgan Chase, which got $25 billion in TARP money, is going ahead with plans to buy two luxury corporate jets and build a state of the art airplane hangar to house them, according to ABC News. A spokesman for the bank says no TARP money will be used to make payments on jets or hangars. Are you people that clueless? THAT IS NOT THE POINT.
JPMorgan's plan calls for the $18 million renovation of a hangar at the Westchester Airport outside New York City. Westchester Country holds a public hearing on it tonight.
The bank's architects say it'll be the "premier corporate aircraft hanger on the eastern seaboard," built with reclaimed wood, quarry tile and even a "vegetated roof garden." In other words, it's a green building. That's nice. Give back every cent of the green you took from taxpayers and you can have your environmentally-friendly hangar.
The jets are Gulfstream 650's that cost $60 million each. The manufacturer describes them as the "fastest," "widest" and "most comfortable" private jet ever.
I'm speechless. But as Vanity Fair points out, it's time to turn the populist anger into action. It's time to form a commission, like the Pecora Commission of the 1930's, to sort out who did what and to make heads roll.
From Vanity Fair:
When the governors of the New York Stock Exchange refused to send a questionnaire to its 1,375 members that Pecora wanted filled out, he threatened to subpoena every last one of them...
Pecora began at the top and worked down. He questioned J. P. Morgan Jr., the son of the legendary financier and one of the wealthiest men on earth, and got him to admit that he hadn't paid income tax the two previous years.
And all these decades later, his company is still trying to fleece the people.
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The fact is that Gulfstream puts millions of dollars in the US ecomony annually. The aircraft are predominately made in the US, assembled in manufacturing facilities in Georgia and other completion centers throughout the US. This money from the government was intended to stiumlate the economy; what better way than to put the money into domestic businesses!! The CEOs that use these aircraft make millions and their time is worth a lot of money; aggreed they should use discretion, but would it be logical for them to fly commercial and spend an entire day or longer maneuvering through that, losing valuable time at thier salary!?!
In addition to all the points that Chris made, JP Morgan had to make the decision to move forward with the planes or lose millions of dollars in non-refundable deposits they'd already paid.
Firms like JP Morgan say they never wanted the loans in the first place and will pay them back ASAP. However, the govt wants to keep that money in play because it feels it will loosen the tight credit market.
The govt is being like the uncle who loans his nephew $50 on a payment schedule then won't accept early repayment of the loan so he can reserve the right to continue to scrutinize every purchase the kid makes.
Face it Scott, you don't have all the information that the executives at these companies have, how can you advise them on what makes the best sense for their business?
Furthermore, it's easy to be a Monday Morning QB, doling out hindsight advice. It doesn't take a genius or any courage whatsoever to do that.
I guess that's why you are merely reporting the decisions others make instead of having the courage to put yourself in a position where you have to make tough decisions yourself and face the scrutiny of others.
Jim, I'm not a consultant to JPMorgan Chase. I'm not advising them on anything. But I have the right as a taxpayer to voice my opposition to what I think is a poorly-timed decision. Sure, the gov't should shoulder the blame as the enabler, but JPMorgan can give the money back anytime it wants.
If the taxpayer opinion doesn't matter, why did JPMorgan issue a statement yesterday to assure people that it wouldn't get the jets until after the TARP money was paid back? Why is that necessary if opinions like mine don't count?
And as for the other, I accept your criticism, however wrong, ill-informed and cheap it might be.
Dimon may indeed be a courageous guy, but he doesn't sound like it when he whines about the "vilification" of corporate America after what Wall Street has done to this economy. Courage would be accepting some responsibility for it.
"...The CEOs that use these aircraft make millions and their time is worth a lot of money..."
This is exactly the screwed-up idea that's gotten us where we are - no CEO's time is worth that much. These guys and their boards are stealing wealth from corporations, convincing themselves (and somehow us) that sitting on their butts reading the WSJ entitles them to $20-, $50-, $100-million a year.
Tax the hell out of these ridiculous salaries. If you want to get really rich, start your own damn company and make money by creating wealth.
I'm fascinated by the comments so far. Many good points have been made. But I have to put my two cents in about Scott's initial commentary.
I'm increasingly concerned about the growing trend of having news "reporters" blatantly adding their opinions to their reports. News should be reported as news without opinion, and that doesn't change just because the venue is a blog.
Now, if the idea is to tap Scott's impressive knowledge of business and finance and have him offer his views, then the blog should be labeled as opinion. Otherwise the line between news and opinion are blurred. Once that happens, credibility is eroded.
Scott did a good job of laying out the details and quoting other news sources. That should suffice. Let the readers who comment make the case whether the move is good or bad.
I was hoping the mainstream media would learn a lesson from very public and justified humiliation of CNBC by The Daily Show's John Stewart. It's ironic that a comic and satarist such as Stewart "gets it" while multi-million-dollar news organizations don't.
Bring me the facts about JP and it's planes and hangars, then let me decide if it's an outrage or just business.
BTW, I do enjoy Marketplace a great deal, but what's with all the puns by Kai Ryssdal?
Robert, I understand your concern and you raise an important issue. But blogs do generally include opinions from the writer, and in this case, what I'm doing is finding business/economic news and commentary from many different sources and then adding my two cents when I have something to add. We are working up a description that will go right at the top of the blog, something along the lines of what you suggested.
I work in a related business to those jets. We provide maintenance to everything from the common Cessna to the beautiful Gulfstream G650. In Savannah they're laying off over 1,200 people by May and I'm extremely worried that my division is next.
We have 44 people, not including execs, each making at least $50k. I don't know for sure, but I am betting the top end (again, not including execs) is around $150k.
Is the picture becoming clear yet? These are the exact types of jobs Obama et. al. said are the future: highly skilled, highly specialized, highly paid workers that drive our local economy. Most of us have never attended a day of college, though I would dare any collegian doctoral candidate to sit in on a few of our technical spec. updates and understand five minutes of what's being said.
This war on the upper class is killing the middle class. I am sure Scott and some people on this discussion board have a lot of glee in their hearts that this is happening to those 'rich guys' who run these banks, but those 'rich guys' run businesses that indirectly support thousands of families.
Personally, I am amazed that it has taken less than 100 days for me and many of my coworkers to regret twenty years of political support for the party that has always been a champion of the little guy.
Ioseb, thanks for your perspective, and you make very good points. This whole discussion is an excellent fleshing out of the issue, and I appreciate and respect all these viewpoints. For the record, I don't have glee in my heart about any of this. I want JPMorgan to run its business however it sees fit and to prosper if its business strategy works. What I don't want, as Don suggests, is to find out five years later that we have to bail them out.
Wall Street and our government have put us in the position of having to be involved. That $25 billion is our money.
You're saying the war on the upper class is killing the middle class. What about Wall Street making billions on the backs of middle class homeowners? And then when it all collapses, taking their jobs and their tax money? If we're going to move past the class warfare, how difficult is it for the banks to show a little respect for the money the people have given them - especially when every company in America is making sacrifices to stay afloat.
If your job only exists to support corporate jet travel, then you should start looking for another job. Not because of a war on the upper class, but the upcoming war on excessive spending (AKA cost-cutting) sure to come as companies, banks in particular, have to produce real profits to fill the holes created by spending the imaginary profits in the past. Lucky for you, you are highly skilled and can certainly pick up a well-paying job in manuafacturing. That is, if you can find one that wasn't sent to China.
I have thought about this JPMC situation: JPMC is a bank and they work with finance. Why cannot JPMC put the TARP money into a rainy day account and let the money earn interest and when this recession is over return it to the U.S. government? If JPMC needs the money use it and if not then return the money with interest from their rainy day account. I know my first statements and questions are a sweet dream that will never come true. I have wondered about the U.S. government setting up a part of Sallie Mae to collect the TARP money back just like student loans? Why should the banks get government money and not have to pay it back? I have to pay my student loans back. As far as the jets are concerned, fix the old jets or be more modest about the purchases they (JPMC) makes until the recession is over.
Now I know why the overdraft fees are so high.
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