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JPMorgan vs. Bank of America, Financial Regulation Debate Showdown Between Bernanke and Dimon

Stock-Markets / Market Regulation Jun 10, 2011 - 05:03 AM GMT

By: Bloomberg


Best Financial Markets Analysis ArticleBruce Berkowitz of Farholme Capital spoke with Bloomberg Television's Erik Schatzker this afternoon from the Morningstar investor conference in Chicago.

Berkowitz said that financial services companies are "stronger and better than they have been in a very long time" and that Bank of America CEO Brian Moynihan is "doing a good job."

Berkowitz on owning JPMorgan vs. Bank of America:

"The investment process is about comparing what you give versus what you get. So it's the intrinsic value of an organization versus the stock market price. I think Bank of America right now is the kicking boy for the whole real estate, residential mess. I think Brian Moynihan is doing a good job and will continue to do a good job. I think they are head of the curve in reducing late fees. They have some very great properties in terms of Merrill Lynch and BNA. They are being killed for being patriotic, taking over Countrywide. One day it will serve a good purpose of making loans. It's there. They have a balance sheet. They are selling below tangible book value. They have 30,000 extra people working the residential mortgage issue to get it over as quickly as possible. They are making all the right moves. The price of Bank of America reflects an extreme pessimism that JPMorgan's price does not have. When you compare what you have to pay to what you get, I'm with Bank of America."

On financial regulation debate and the showdown between Bernanke and Dimon:

"Let me put it this way. Clearly it is time to move on. And everyone has to settle up their differences and for the sake of the country, move on. You cannot punish new people for past acts. You cannot tighten things too hard right now. It has to be phased in. I think Jamie [Dimon] has points. I don't know if his points should be given to Bernanke or others, but he has points. For the sake of the country, move forward…Everyone had a hand in this and everybody can help out to move us forward."

On whether he has the same level of conviction on owning financials as he did when he purchased them:

"More so because I have been able to see their earnings for the past few quarters. The trends are getting better. The balance sheets are building. Tangible book value is growing. Cash flow and pre-tax, pre-provision income is there to take care of the problem. The problems from 2007-2008 still have a ways to burn through, but I would say we are more than half way through the problem now. Now we just have to get rid of the uncertainty in the environment and give people confidence to move forward."

On how long it will take for the economic problems to subside and for stocks to turn around:

"I think Winston Churchill had it right when he said we go through every alternative, and finally on the last possible alternative we get it right. Sometimes we seem to do extremely well during times of extreme crisis, like I hope think we can move a little faster this time, but everyone knows what needs to be done. [The economy will turn around] before the next election."

On what will happen if the economy turns south:

"I do know that our financial system, the banks that I own, the brokers that I own, insurers I own--they are the financial system of the United States. I've been to the United States Treasury, I've seen the Federal Reserve--they are not that big of a place. Companies are the financial system of the United States and they will be fine. They are stronger and better than they have been in a very long time."

Copyright © 2011 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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