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.
