The 5 Dumbest Things on Wall Street This Week: Aug. 23

5. Bove's Beef

Back off Bove! We here at the Dumbest Lab totally agree with you that the SEC's reported inquiry into JPMorgan Chase's ( JPM) Chinese hiring practices is inane and pointless. We're down with you on that, Dick.

Still, your conspiracy theory that "the government, along with its press free-riders" are methodically plotting to deconstruct the nation's biggest bank, well, sorry to say, that makes you sound insane and paranoid.

Bove, who joined Rafferty Capital Markets as an equity research VP after his previous company Rochdale Securities imploded last fall as a result of an unauthorized trade, accused the United States government of making it "a priority" to break up JPMorgan Chase Monday in response to the The New York Times article that the bank had illegally hired the children of Chinese officials to help it gain business in China. Shares of the bank fell nearly 3% Monday to $51.83.

JPMorgan is said to have hired the son of a former Chinese banking regulator who is the chairman of the China Everbright Group, a state-controlled financial conglomerate, according to the Times. After the son's hiring, the bank won assignments from the Chinese conglomerate. In another case, the Times said JPMorgan's office in Hong Kong hired the daughter of a Chinese railway official just as a state-controlled construction company that builds railways for the Chinese government was selecting the New York-based bank to advise it on going public.

"This would be a first since it is not illegal for a company to hire a child of a prominent official. Moreover, it is interesting since this is a normal practice in China and I believe, for that matter, the United States," said Bove.

No argument there, Dick. We can't remember the last time we've heard regulators go off on a goose chase so shockingly stupid. Next thing you know the SEC will tell us that there is gambling going on at Rick's Café!

Not that we're crazy about the practice of JP Morgan CEO Jamie Dimon hiring well-connected kids to win him favors mind you. We do believe in merit.

However, we also do live. And we do breathe. And we do know that this is the cost of doing business and not a terribly onerous one compared to some of the other nasty things going on out there.

(Oh, and if you are reading this Laura Dimon, then definitely give us a call. We loved your poop piece in The Daily Beast and we would love to interview your dad ... sorry, excuse us ... we would love to talk to you about doing some work for us.)

All that said, the rest of Bove's assertion that Uncle Sam is hell bent on breaking up JPMorgan is positively cockeyed. If the government wanted to bust up the bank, it could have and it would have. But it hasn't and it won't and we've seen the campaign contributions and lobbying cash to prove it.

Let's be serious. All Uncle Sam is trying to do is put a leash on the monster it helped create. The bank has done nothing but grow in the past five years with the blessing -- and outright boosting -- of its benefactors in Washington, DC. The stock is up 36% since August 2008 and now sports a $194 billion market cap. The Fed essentially fed Bear Stearns and Wamu to Jamie Dimon during the depths of the financial crisis, vowing to absorb any losses and wave anti-trust actions, so Bove should cut the hysterics. Jamie and the government are doing just fine by each other.

Even sillier is his claim that the press has served as the Obama Administration's lap dog to accomplish its goal of cracking up the company.

"One wonders when the press will decide to provide a balanced look at the actions of the government against this company. It clearly misled investors when the "London whale" story broke causing investors to lose of millions of dollars under the theory that this company is mismanaged and that its earnings were likely to fall. Both arguments, of course, have been proven to be untrue," railed Bove.

Um, excuse us Dick. But we members of the press didn't lose $6.2 billion dollars in what is now being characterized as a rogue trade. JPMorgan's unsupervised, free-trading gang in London created that "tempest in a teapot" themselves and the bank's CEO back in New York didn't have a clue as to what they were up to. Dimon seemed to think there was risk management going on across the pond, just like the folks at AIG ( AIG) probably thought there was somebody over there keeping tabs on Joe Cassano's disastrous derivative trades.

Moreover, simply because JPMorgan Chase is big enough to easily absorb a hit that big doesn't mean the general public is better off because of it. In fact, it means the exact opposite.

One would think that Dick would be less dismissive of the London Whale trading scandal considering his former firm was smashed to bits last year over a rogue Apple ( AAPL) trade gone awry. That's apparently a lesson he has chosen not to learn.

On that same note, one would think the bank analyst named Bove who called Lehman Brothers "one of the best companies on Wall Street" and reiterated his "buy" rating on the stock in September 2008 when it was $7.25 a share and sinking would be a bit more concerned with the consequences of another Too Big To Fail bank. Both on the global economy, as well as his reputation.

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