Amid calls for stricter regulations of the banking industry, JP Morgan CEO Jamie Dimon came under fire Wednesday after telling corporate and political leaders at the World Economic Forum that banks had been wrongly "scapegoated" as the cause of the global economic crisis, and resisted calls for increased regulation of the financial industry.
Dimon's remarks on Wednesday—the first day of the WEF in Davos, Switzerland—came in response to comments by Min Zhu, deputy managing director of the IMF, who argued that the financial sector is too big and greater regulations—including of the "shadow banking" sector—are critical, The Guardian reports.
Sam Mamudi at Barrons writes, "This line of reasoning echoes that of Goldman Sachs CEO Lloyd Blankfein when he told the Times of London newspaper in late 2009 that his bank was 'doing God’s work.' It’s also nonsense, and it shows just how deeply inside their own bubble many bankers live these days."
Lending to “schools, hospitals, governments” is good business for JPMorgan, and that’s why they do it — which is as it should be, but it’s no reason to celebrate. And giving money to organizations which in turn help the economy, and by extension society, grow is a bank’s basic function, as anyone who’s watched It’s a Wonderful Life will tell you.
The fact that we’ve reached a point where these defenses are trotted out by some of finance’s most powerful men is ridiculous, because no one is arguing the opposite.
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The criticisms, rather, are about pay structures and incentives that encourage reckless risk-taking, a system of too-big-to-fail that privatizes profit and socializes losses, and the fact that no-one at the biggest banks ever seems to be punished for malfeasance. Compare Dimon’s umbrage at mild criticism with PBS’ latest Frontline documentary, The Untouchables, about how pretty much the entire financial industry got away scot-free for its role in the mortgage meltdown.
Dimon came out of the 2008 financial meltdown with a better reputation than arguably any banker on the planet. But his attacks on proposed regulations — calling Basel III capital rules “anti-American” for example — and the London whale trading losses have stripped some of the sheen off his image. (As Felix Salmon notes there are still questions about Dimon’s role in that disaster, and still no full explanation of how the losses grew to more than $6 billion.)
His comments at Davos only go to further show that he’s just another Wall Streeter, convinced he’s doing nothing but good, and doing so mostly in the face of unfair and uninformed criticism. If even one of the ‘good guys’ of the banking industry sees the world in this way, then there really is nothing to do but start counting down to the next economy-shredding financial calamity.
"Remarks such as these, coming from the head of JPMorgan, are maddening," Jonathan Weil at Bloomberg writes. "Here he is saying all the right things and making all the right moves from a public-relations standpoint. Of course we should eliminate too-big-to-fail, most of us can agree. Of course we should ensure these monster institutions can fail without harming the public."
Zhu, of the IMF, told the panel at Davos that much more regulation must be implemented.
"Transparency is not there. In this sense, I say the financial sector still has a long way to go. With all the debates going on, the financial market structure didn't change very much," Zhu continued. "We're not safer yet."