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| NEW YORK, NY - MAY 03: JPMorgan Chase & Co. chairman and CEO Jamie Dimon looks on while speaking at Simon Graduate School of Business at the University of Rochester's New York City Conference on May 3, 2012 in New York City. Dimon spoke about the state of the economy and regulations in the banking industry. (Image credit: Getty Images via @daylife) |
It’s clear, then, that we need to restore the sorts of safeguards that
gave us a couple of generations without major banking panics. It’s
clear, that is, to everyone except bankers and the politicians they
bankroll — for now that they have been bailed out, the bankers would of
course like to go back to business as usual. Did I mention that Wall
Street is giving vast sums to Mitt Romney, who has promised to repeal
recent financial reforms?
Enter Mr. Dimon. JPMorgan, to its — and his — credit, managed to avoid
many of the bad investments that brought other banks to their knees.
This apparent demonstration of prudence has made Mr. Dimon the point man
in Wall Street’s fight to delay, water down and/or repeal financial
reform. He has been particularly vocal in his opposition to the
so-called Volcker Rule,
which would prevent banks with government-guaranteed deposits from
engaging in “proprietary trading,” basically speculating with
depositors’ money. Just trust us, the JPMorgan chief has in effect been
saying; everything’s under control.
Apparently not.
What did JPMorgan actually do? As far as we can tell, it used the market
for derivatives — complex financial instruments — to make a huge bet on
the safety of corporate debt, something like the bets that the insurer
A.I.G. made on housing debt a few years ago. The key point is not that
the bet went bad; it is that institutions playing a key role in the
financial system have no business making such bets, least of all when
those institutions are backed by taxpayer guarantees.
For the moment Mr. Dimon seems chastened, even admitting that maybe the
proponents of stronger regulation have a point. It probably won’t last; I
expect Wall Street to be back to its usual arrogance within weeks if
not days.
But the truth is that we’ve just seen an object demonstration of why
Wall Street does, in fact, need to be regulated.
Thank you, Mr. Dimon.
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