The very high wattage of the Obama inauguration this week has relegated what would otherwise be a high profile news event to the back pages of media attention. Bank stocks have plummeted during the past week to levels that raise concerns about the viability of a private banking system in this country. This is an historic issue because it reaches all the way back to President Andrew Jackson’s assault on a nationalized bank system.
Share prices of Citi Group, Bank of America, Wells Fargo, State Street Bank and lesser known regional banks have imploded. The stock market’s drop yesterday had nothing to do with the inauguration of President Obama but rather was the result of investor concern that no banks would survive the current crisis.
Fortunately, some well known bank executives have put their money where their mouth is:
Jan. 21 (Bloomberg) — JPMorgan Chase & Co., the second- largest U.S. bank by assets, said Chief Executive Officer Jamie Dimon bought $11.5 million of stock last week after it plunged about 27 percent in the first 10 trading days of the year. The shares surged 25 percent today.
Dimon, 52, purchased 500,000 shares in the New York-based lender for $22.93 apiece on Jan. 16, according to a regulatory filing. Heidi Miller, CEO of the treasury and securities services unit, bought $80,802 in stock the same day.
The two executives join those at larger rival Bank of America Corp. in buying shares of their companies. Bank of America CEO Kenneth Lewis and five directors bought more than 500,000 shares in the Charlotte, North Carolina-based company yesterday, according to a filing.
Purchases by insiders are often viewed as a vote of confidence. JPMorgan rose to $22.63 in New York trading today. Bank of America, the biggest U.S. lender by assets, climbed 31 percent. It’s dropped 81 percent in the past 12 months, while JPMorgan has fallen 43 percent in the same period.
It is an accepted rule in investing that insiders will sell stock for a variety of reasons (estate planning, pay for a child’s education or pay debts) but they buy stock for only one reason: they think it’s cheap. That the executives of some this country’s largest banks are actually coming out of pocket to buy their own stocks may be a harbinger that the beginning of the end to this financial mess is within sight.