June 12, 2012
JPMorgan Head Should Support Financial Reform, Not Thwart It
Statement of Bartlett Naylor, Financial Policy Advocate, Public Citizen
Note: The Senate Committee on Banking, Housing & Urban Affairs will hold a hearing with JPMorgan CEO Jamie Dimon at 10 a.m. Wednesday, June 13, in Room 538 of the Dirksen Senate Office Building.
JPMorgan Chase CEO Jamie Dimon should serve the public by marshaling the harsh lesson of his bank’s massive trading loss into support for stronger regulation, including a clearer Volcker Rule restriction on casino-style investments.
To date, however, JPMorgan has lobbied to stifle reform, through $1.6 million in campaign contributions for the 2012 election cycle, $9 million in direct lobbying expenditures/spending in 2011 and 2012, and dozens of meetings with regulators.
In a 67-page letter sent to regulators on Feb. 13, JPMorgan devoted five pages to the need to protect the type of trade that led to the $2 billion loss reported May 10.
But Dimon’s recent statements and actions point to a “teachable moment.” The once-venerated bank may have escaped the financial crisis in better shape than its peers due more to luck than skill. In May, the firm terminated the chief investment officer, despite the fact that she had overseen the bank’s investments since 2005 and through the financial crisis. And Dimon acknowledged a failure of management when he said that the multibillion-dollar loss resulted from an “egregious” trade that was “badly conceived,” contradicting his earlier dismissal of criticism of the trade that he minimized as a “tempest in a teapot.” In addition, shareholders have devalued their collective estimation of the bank by $25 billion in market value, or more than 20 percent.
At the June 6 congressional hearing, U.S. Sen. Robert Menendez (D-N.J.) established that JPMorgan’s primary regulator, the Office of the Comptroller of the Currency (OCC), “screwed up” when it first examined the trade following news reports. Comptroller Thomas Curry testified that owing to his agency’s lapse, he has ordered “a critical self-review.” Sen. Menendez noted that the OCC has “a well-deserved reputation for being too cozy with the banks.”
The OCC and JPMorgan have been key obstacles to obtaining the strong prudential regulation that America deserves. It’s past time for them to stop obstructing reform. Americans are watching – but not with bated breath.