This has been a one-word answer to your last question.

Remember that Goldman Sachs also successfully escaped the subprime debacle.

What's also interesting is that the big investment banks that that did get killed on subprime must also have been the ones selling the CDS protection to these astute hedge funds. Might have provided an early clue?

The question I come away with after reading Shawn Tully's Fortune article is not: How was Dimon able to be so smart? It's how come everybody else was so amazingly dumb?

They were so amazingly dumb because of herd mentality and greed. Simple as that.

Then you must consider that these banks live quarter to quarter. They must have felt pressure from shareholders to keep pace with the other guys. So, maybe your common investor's greediness played a small role too. And the morons who bought homes they couldn't afford. And the people that sold it to them. Ad infinitum.

Either way - Jamie Dimon is a hell of a leader.

Good work Andrew! You called it in '05 and made a great post in '05. You really set the performance bar high for yourself back then.

As to the question, are they dumb? No. It is easy to conflate bankers and banks. The bankers are usually in the game to make themselves rich. They are not working for the best interests of the banks. They are in it for their own personal percentage of every deal. It doesn't matter if the deal is good or bad, just that the percentage ends up in the bakers' accounts.

So a bank fails. Big deal. Business shifts to another bank. The bankers shift with the accounts. Everyone keeps their prior year's bonus money. If lucky, get the tax payers to fund a bail out. Write yourself in for a percentage of that too. Rinse and repeat.

JP Morgan is involved in more swaps and has more tier 3 "assets" than any other bank...by far. In fact it's assumed that they got Bear Stearns for the simple fact that they'd be in the worst shape if it collapsed. Sure they look smart now but that's only because none of the events have happened that would trigger the swaps. In reality, they would be gone overnight if that happens, and unless something changes with Fannie and Freddie it looks inevitable.

They are the poster child for why Warren Buffet said that swaps are "financial weapons of mass destruction."