This, I think, is a story to follow. It isn’t going away, and neither I think is Elizabeth Warren. ~J
by Mark Gongloff
Posted: 07/12/2013 1:17 pm EDT
Updated: 07/12/2013 5:32 pm EDT
Shocking news: JPMorgan Chase is not exactly jazzed about some recent plans to regulate banks, including Elizabeth Warren and John McCain’s bill to reinstate the Glass-Steagall law splitting investment and commercial banks.
Even more shocking: JPMorgan seems to think it will probably be able to water down or avoid these plans.
In a Friday conference call to discuss the bank’s second-quarter profits, an analyst asked whether the Warren-McCain bill to reinstate the Depression-era Glass-Steagall law would hurt business at the biggest U.S. bank by assets.
JPMorgan’s chief financial officer, Marianne Lake, dismissed the whole idea.
“Glass-Steagall didn’t have anything to do with the crisis,” Lake said, “and our business model allowed us to be a port in the storm. Our customers like doing business with us in the model we have now, so …” She trailed off, took a long pause, and then added: “We don’t spend time thinking about that.”
In another not-exactly-stunning development, JPMorgan CEO and Chairman Jamie Dimon grumbled just a bit about new rules proposed by U.S. regulators this week limiting how much risk big U.S. banks will be allowed to take on. Specifically, he grumbled about how those rules are stricter than proposed global rules, and how that gap could make U.S. banks less competitive.
“If you have a world where some businesses have to have two times as much capital as other companies, over time that can create a huge competitive disadvantage,” Dimon said. “We have interest in a safe and sound system, but not for a hugely imbalanced competitive playing field.”
But Dimon also suggested that regulators are aware of these discrepancies and are trying to “harmonize” their efforts — and who doesn’t love harmony, especially when it makes it easier for banks to get more leveraged and dangerous?
Similarly, Lake suggested there were “fundamental issues” with proposed new rules limiting banks’ riskiness and forcing them to seek out more capital. She suggested that regulators seem to be willing to consider having mercy on the banks and loosening up some of those fetters.
What is ironic is that the new capital and leverage proposals don’t seem to create all that much of a hardship for banks, at least not for JPMorgan — as DealBreaker’s Matt Levine points out, the bank admits that about the worst that might happen is that it will not be able to shovel cash out the door to shareholders quite as quickly as it had hoped. Not exactly the econopocalypse bank flaks are predicting.
Anyway, seeing regulators back down on these rules would hardly be shocking. We have already seen aggressive bank lobbyists water down, muddle and delay implementation of the Dodd-Frank financial reform law. JPMorgan alone spent $8 million last year lobbying on financial reform and other issues, according to the Center for Responsive Politics.
As for the Glass-Steagall revival, the consensus on Wall Street and in Washington is that it stands pretty much no chance of becoming law. JPMorgan argues that its own size and complexity is super-attractive to customers, and that argument will probably win the day. The competing argument – that the country enjoyed decades of relative financial calm after the segregation of bank activities after the Great Depression, and that it fell into a financial crisis not long after the removal of those safeguards — is not taken seriously.
For what it’s worth, Former Rep. Barney Frank — the Frank in Dodd-Frank — basically agreed with JPMorgan’s Lake about Glass-Steagall, telling CNBC on Friday that he didn’t think reinstating the law was nearly as important to the safety of the financial system as reforming the trade of the credit derivatives that nearly helped bring down that system the last time. And of course JPMorgan is lobbying hard on that issue, too.