In his open letter to JP Morgan Chase shareholders yesterday,Simon Johnson suggests Morgan be broken up, and all but calls for Jamie Dimon to be fired:[W]e need to look at breaking up JPMorgan Chase into smaller, more manageable parts. The available independent analysis indicates that smaller financial institutions currently attract substantially higher valuations (e.g., price relative to tangible book value) than do the megabanks. My interpretation is that this is largely because the biggest banks are not run in the full interests of shareholders; the operations of these companies are so complex that no one is fully in control. I would also point out that JPMorgan Chase is operating under an effective size cap; it will not be allowed to grow bigger. And the bank was much better run when it was significantly smaller in the mid- and early 2000s. [Emph. added]Morgan better run in the early 2000s than it is now? Er, no, Simon. Johnson doesn’t mention which specific missteps at Morgan have him so addled, but I presume he’s thinking of the London Whale fiasco and the mortgage underwriting issues behind the bank’s $13 billion settlement with the government. Please. The Whale losses never would have been made public but for the fact that Jamie (to his everlasting regret, I’m sure) initially dismissed the issue as a non-event, then had to walk that back when it turned out not to be. Regardless, Morgan still earned $5 billion the same quarter it took the hit, and ended up reporting record profits in 2012. As for the mortgage underwriting lapses, they mainly occurred at two failing predecessor institutions, Bear Stearns and Washington Mutual, that Morgan acquired at the government’s urging.Meanwhile, Morgan was so poorly run following its supposed early-to-mid-2000s golden era that it sailed through the financial crisis scarcely missing a beat and proved to be an important resource for the government as it resolved failing institutions. As the financial system teetered all around it, JPMorgan Chase didn’t lose money a single quarter throughout the crisis. If this is an organization that’s “so complex that no one is fully in control,” we could use more of them.As for organizational changes Johnson proposes (and they are doozies: he has the chief risk officer and general counsel reporting directly to the audit committee and to “a senior executive who is not responsible for profit and loss”), they would only make an organization he concedes is complex and unwieldy even more so. What’s the benefit in that?Johnson’s real beef with the big banks doesn’t seem to have to do so much with their size or complexity, but rather the venality he imagines he sees in the people who run them. “The biggest banks are not run in the full interests of shareholders,” he writes, and he seems to think CEOs can’t be trusted to directly monitor and listen to their top risk managers. All top management cares about, he apparently believes, are their own paychecks.Sorry, I don’t buy that. For one thing, I know most of these guys personally, have for years, and just don’t see it. Sure, there are some big-bank CEOs whose managerial reach exceeds their grasp, and others who may be overpaid. But canny managements at big banks were a huge plus during a time of great crisis. Dick Kovacevich had the insight to realize he could make Wells Fargo’s shareholders a ton of money and keep taxpayers off the hook by buying an ailing Wachovia. Jamie Dimon did well by his shareholders and the government by acquiring WaMu and Bear Stearns. This is not the work of scoundrels, but rather bright, motivated, honorable individuals. Johnson can make plenty of valid points in his criticisms of the big banks. But his apparent underlying assumption that they’re run by bad guys is just wrong.What do you think? Let me know!