Free Market Fundamentalist Opinion

Public Enemy

With capitalism under persecution and “Wall Street greed” continually blamed for plunging the world economy into financial crisis, many bankers rather keep a low profile these days in order to avoid the crowds and pitchforks. Jamie Dimon, CEO and chairman of JPMorgan Chase & Co., however, is no stranger to the political arena and several remarks in his annual letter to shareholders caused quite a stir recently.

Dimon is known to be a supporter of the Democratic Party and supposedly exerts some influence with the current administration. Although he complains in his yearly report that the credit card reform act which went into effect last February will cost his bank hundreds of millions of dollars in profit this year, he believes “that many, but not all, of the changes made were completely appropriate.”

The chief executive of JPMorgan Chase has always maintained that his company didn’t need the $25 billion in TARP funding (which it repaid in June 2009 along with almost $800 million in dividends). In his letter, Dimon writes that he also regrets tapping into the Federal Deposit Insurance Corporation’s guarantee program, under which JPMorgan Chase issued approximately $40 billion of debt. The program was designed to give struggling banks access to the capital markets but Dimon stopped using the guarantees as early as April of the same year because, he claims, “it just added to the argument that all banks had been bailed out and fueled the anger directed toward banks.”

On a related note, Dimon expresses his dissatisfaction with the current climate in which bankers must operate. Although JPMorgan Chase “made its share of mistakes in this tumultuous time,” the public discourse should not be reduced to “indiscriminately blaming the good and the bad,” even as esteem of both banks and bankers is waning.

Very often, when the public or politicians take punitive efforts against banks like ours, they think they are punishing only the senior management team, when, in fact, they are punishing ordinary shareholders as well. […] Contrary to popular perception, Main Street owns our biggest banks and corporations through savings and retirement funds.

In other words: the financial sector is as indispensable to the economy as it ever was while punishing banks won’t work.

Not according to some on the left though. At The Huffington Post, Simon Johnson virtually tears Dimon apart, writing, “if Machiavelli were a banker alive today, he could not have done better.”

Why is Dimon “the most dangerous man in America”? Because he “runs a big bank and — here’s the danger — makes it even bigger.” The horror!

According to the MIT economist, Dimon “fully understands — although he can’t concede in public — the private advantages of a big bank getting bigger.” Being too big to fail, to Dimon, is a business model, claims Johnson, yet he doesn’t submit much evidence to support this theory. Indeed, Dimon himself notes the very opposite; that he didn’t like his bank being kept on a government leash by bailouts and guarantees.

No bank should be “too big to fail” and Johnson likes to think that reducing banks in size by force is the way to prevent another financial meltdown, as though, in the event of near bankruptcy, government has no choice but to bail out a bank! In fact, no bank is too big to fail. No business is too big to fail. There will always be competitors prepared to take the place of a failing company.

In the end, Dimon “is only doing his job,” writes Johnson, and here the author reveals his true disdain, for that job, he notes disapprovingly, “is to make money for his shareholders” and for himself. “Just making money” — how dare he!