Jamie Dimon’s Shameful Spouting about ‘anti-American’ Basel III regulations
Thursday, September 29, 2011 at 9:04AM There are few things more cringe-inducing than a government-subsidized bank CEO spouting self-serving, entitlement-laden idiocy to the world just because he and his bank might be subject to some extra constraints. That hasn’t stopped JPM Chase CEO Jamie Dimon from acting like a spoiled, sociopathic brat while characterizing proposed Basel III capital requirements and regulations as ‘anti-American’ at every opportunity.
They are not ‘anti-American’ but globally risk-mitigating in a time of widespread economic Depression, a point lost in the haze of Dimon’s megalomania.
Basel I and II enabled European banks and townships and pension funds to purchase AAA securities extensively. American banks went into manufacturing over-drive to oblige, creating 75% of the $14 trillion of mortgage-related assets between 2003-2008. Related risk and loss continue to proliferate the globe. Basel III goes further towards refining capital requirements to contain damage.
Dimon doesn’t want a capital surcharge for big banks, or higher capital requirements for US mortgage securities, because that might entail further examination of his bank holdings, not because the excess capital would be a hardship. Nearly $1.6 trillion of excess US bank capital is sitting on the Federal Reserve books right now, doing nothing productive or job-producing.
Here’s what’s really anti-American – big banks receiving extreme federal assistance while the rest of the country is crushed, loan refinancing and other foreclosure reducing negotiations are anemic, and both private and public sectors can’t finance enough job growth to alter our horrific unemployment or poverty situation.
JPM Chase had the government back its Bear Stearns purchase (we’re still on the hook for $29 billion related dollars) in March, 2008 and facilitate its acquisition of Washington Mutual that fall. It took advantage of $40 billion of FDIC debt guarantees in early 2009, and received $25 billion in TARP money that was only repaid after its trading profit got a big enough boost.
The toxic asset and derivatives pyramid that emanated from Wall Street and spread to Europe continues to brutalize the global economy from the United States to Iceland, Norway, Greece, Italy, Spain, Portugal and Ireland.
American banks similarly catalyzed the 1930s Great Depression, forming shady trusts and fraudulent assets (the 1929 version of the CDO) to puff up values galore as the biggest banks cashed out leaving everyone else holding the bag.
The difference is that back then banks were slapped with more than additional capital requirements. The 1933 Glass-Steagall Act forced banks (including the Morgan Bank and Chase) to chose between commercial and investment banking focus, whereby commercial banks received FDIC backing for their customer deposits and access to Federal Reserves loans, but speculative, asset-creating firms were on their own. To be sure, there have been currency and debt crises since, but none reached today’s level, in the wake of Glass-Steagall repeal and government subsidy overload.
Sitting in his prime position as a Class A NY Federal Reserve director before, during and since the fall 2008 crisis period (he was re-elected in 2010, the same year he bagged a $17 million bonus), Dimon’s callous attitude toward global and domestic risk and the banks’ role in it, is particularly heinous.
This summer, JPM Chase settled (with no admission of guilt) fraud charges for its CDO practices for $153.6 million. There are a plethora of class-action suits in the pipeline. No matter. Old habits don’t die without being killed.
So far this year, JPM Chase is the world’s top creator of securities backed by commercial loans (or CMBS) with 19.5% of the market. Absent stricter regulations to the contrary, such as resurrecting the 1933 Glass-Steagall Act, it also happens to be the top loan contributor (or supplier of loans) for CMBS deals. Lending and packaging loans in the same bank is an obviously perilous mix. And if you think CMBS won’t be another subprime, guess again. CMBS delinquencies are at record highs. More dangerous, JPM Chase is second only to Goldman Sachs in credit derivatives exposure and runs a $73 trillion derivatives book.
In other words, Jamie Dimon should be worried about other things besides some extra capital requirements from Basel III. He should shut up and watch his mortgage and derivatives portfolio. And we should be glad there’s even the remotest opposition to his drivel. Basel III isn’t at all perfect. It’s not a new Glass-Steagall. It doesn’t alter the way banks do business and the structure in which they operate. It doesn’t stop the careless outpouring of money from central banks and entities into the hands of eager banks and their investors at the expense of the world’s citizenship and economic security. But, if anything makes Jamie Dimon this irate, you know it can’t be bad.
(Note: A shorter, gentler version of this comment appeared in the NYT Room for Debate section on Sept. 29)
Basel III, CMBS, JPM Chase, Jamie Dimon, Wall Street 