Lawmakers could soon find themselves increasingly presented with a flimsily constructed paradox in lobbyists’ unrelenting effort to erode financial reforms.
JPMorgan CEO Jamie Dimon, in an annual letter published late Wednesday, said Dodd-Frank regulations make banks “less able to act positively in the next crisis,” and praised the cash injection big banks offered the market through fire-sale acquisitions, as the financial sector was ravaged late last decade by the mortgage crisis it created.
“In the last crisis, banks underwrote (for other banks) $110 billion of stock issuance through rights offerings,” Dimon wrote, in a “thought exercise” exploring the incumbent regulatory framework. “Banks might be reluctant to do this again because it utilizes precious capital and requires more liquidity.”
While the sum cited by Dimon pales in comparison the value of the intervention staged by the US government—at one point in 2009, it was believed to be worth $12.8 trillion—the argument could soon prove to be more frequently employed by Too Big To Fail bank influence peddlers.
The Wall Street Journal called the letter “an inside view of the banking industry from the CEO of the US’s biggest bank by assets.”
Dimon and JPMorgan have, indeed, both routinely been heralded by purveyors of the neoliberal status quo for adeptly shepherding and expanding their corner of the financial sector through the subprime mortgage tumult.
In December, Dimon flexed his clout by working phones to lobby Congress on the so-called “Cromnibus”—annual budgetary legislation signed into law last year that contained policy riders on financial deregulation. The measures, written by Citigroup lobbyists and pushed by Dimon and other Wall Street power players—repeals of restrictions on banks trading derivatives with publicly-backed retail deposits—were largely opposed by House Democrats and Sen. Elizabeth Warren (D-Mass.). The overall bill was carried by a handful of Democrats who receive significant campaign contributions from JPMorgan and Citigroup.
In his letter, Dimon noted he was particularly concerned, in a sharp macroeconomic contraction, that newly powerful non-bank lenders would “not continue rolling over loans or extending new credit except at exorbitant prices that take advantage of the crisis situation.”
The statement was consistent with Dimon’s tendency to completely marginalize the massive role that the federal government played for years after the 2008 meltdown, particularly through quantitative easing. The JPMorgan CEO did not once mention the Federal Reserve’s half-decade $4.5 trillion wholesale money market cash injection once in his shareholder’s letter.
In addition to his analysis, Dimon’s conduct, as head of JPMorgan, also casts into disrepute his ability to make policy prescriptions.
In 2013, the bank was on the verge of being slapped by federal prosecutors in Sacramento with charges related to massive securities fraud, when notoriously pro-Wall Street Attorney General Eric Holder personally intervened to offer Dimon a multi-billion dollar deal.
Bloomberg also reported last month that JPMorgan is believed to be currently talking with federal prosecutors about settling charges over accusations that it–along with Barclays, Citigroup, Royal Bank of Scotland and UBS—manipulated foreign exchange markets.
And in recent years, JPMorgan has been fined by European regulators for conspiring, with many other financial institutions, to rig LIBOR–a key inter-bank lending interest rate benchmark. It has also been hit with penalties by US regulators for manipulating energy markets in California and the Midwest.
In his annual letter, Dimon “blamed legal and regulatory costs for weighing on the firm’s share price but said he expects the firm’s legal costs to ‘normalize’ in 2016,” the Wall Street Journal noted on Thursday. “He said the bank still faces legal uncertainty, highlighting continuing foreign-exchange settlement negotiations, but added that he thinks it will ‘diminish’ over time,'” the paper also noted.
Dimon did exhibit some humility, even if it did contradict his Wall Street triumphalism, somewhat, in the process.
The Too Big To Fail CEO noted that any hypothetical financial calamity today would occur “with a banking system that is far stronger than in the past, which, on its own, could reduce the probability and severity of the next crisis.” He also said that banks “also are far stronger and unlikely, in our opinion, to create the next crisis.”
