It's hard to know how these thing actually work, but not difficult to imagine.
JP Morgan Chase appeared on the verge of paying $4 billion to $4.5 billion for the commodity trading firm, RBS Sempra Commodities, up until about two weeks ago.
Then three things happened.
On January 21, on television, President Barack Obama announced that he would ask Congress to amend financial reform legislation to include language that would limit financial risk-taking by banks by barring them from "owning, investing or sponsoring hedge funds, private equity funds or proprietary trading operations for their own profit, unrelated to serving their customers."
In some quarters among the banks and the big energy trading firms, the president's comments flew over people's heads, as though it was just blather on TV. In some other corners, the comments didn't mean much because it was not clear which proprietary trading the president might be talking about. There were also those who just couldn't believe he was making such a proposal.
According to sources, the president's comments did not immediately affect the JP Morgan talks to buy RBS Sempra. In fact, it took several days into the following week for the content of the president's message to cause a pause in the talks.
On Tuesday, January 27, the day before the State of the Union message, Jamie Dimon, head of JP Morgan Chase (and often referred to as Obama's favorite banker), had lunch with the president at the White House, along with five other CEOs: Rex Tillerson of ExxonMobil, James Hackett of Anadarko Petroleum, Edward Rust of State Farm Insurance, Mort Zuckerman of Boston Properties and Shelly Lazarus of Ogilvy & Mather, the advertising firm.
Then, three days later, in the afternoon of Friday, January 29, Dimon met in the offices of US Treasury Secretary Tim Geithner.
This past weekend, numerous press reports emerged suggesting that the nature of the deal that JP Morgan's Blythe Masters, the head of the bank's commodity business, was negotiating with RBS had suddenly changed. It appears that JP Morgan may no longer be looking to buy the proprietary trading books managed in the US by traders from the joint venture.
It's not difficult to imagine that in the two meetings of last week the earnestness of the president's message was driven home to Dimon.
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