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I understand what the author of the article is stating about J.P. Morgan, I just think he doesn’t fully comprehend the banking industry.

Repurchasing agreements were a major source of liquidity for the markets (which he acknowledges) and the fact that it has been largely runoff has caused the M-multipliers to drop (which is why the Federal Reserve is printing so much money but it hasn’t yet led to inflation - the printing has yet to exceed the amount of money created through the debt markets and activities such as repurchase agreements).

When Lehman Brothers failed, counterparty risk became the prime concern of most investors and institutions. When trust fails, the repurchase market is going to fail even most cases when the collateral covers the full 100% of the “loan” because a receivership would still cause issues and most people, rationally, don’t want to deal with those problems. As a result of the credit market freeze, I currently utilize ZERO repurchase agreements, maintain cash in 30-day T-Bills only or FDIC insured bank accounts at regional banks with excessive tangible equity ratios, and we don’t even lend out our securities, as we did in the past, to short sellers because we want fully custody, paid for in cash, in a third-party custodian in the off-chance that another brokerage fails. This is a rational response for me and those who have an investment in my companies.

Ten years from now, history will show that J.P. Morgan Chase used this time, and very cheap government money, to put together a collection of businesses that will make it one of the most profitable firms in history. The analysis of the cash problem isn’t indicative of a problem in its cash flow, it merely represents the reality that the auction rate securities business, repurchase agreements, and a host of other commonly used financial instruments and securities, have yet to return to the level they were before the crisis (and it’s not certain that they ever will). JPM is still solvent. It’s a non-issue.

The only banks I liked better were Wells Fargo at any price below $15 per share and USB at the same valuation. In the interest of full discloure: We own a lot of these two banks and some JPM but it is a much, much smaller position.

Feel free to disagree with me. If you do, there’s nothing more American than shorting the stock or selling put options on it =) I’m happy to take people’s money.