JP Morgan Chase CEO Jamie Dimon (My Former Boss At SBS) has an interesting piece in the Washington Post today. He is clearly making an opposition to breaking up TBTF. He makes some good points but not enough in my opinion
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/12/AR2009111209924_pf.html
The points he makes are as follows:
"Our company, J.P. Morgan Chase, employs more than 220,000 people, serves well over 100 million customers, lends hundreds of millions of dollars each day and has operations in nearly 100 countries. And if some unforeseen circumstance should put this firm at risk of collapse, I believe we should be allowed to fail."
"But ending the era of "too big to fail" does not mean that we must somehow cap the size of financial-services firms. Scale can create value for shareholders; for consumers, who are beneficiaries of better products, delivered more quickly and at less cost; for the businesses that are our customers; and for the economy as a whole. Artificially limiting the size of an institution, regardless of the business implications, does not make sense. The goal should be a regulatory system that allows financial institutions to meet the needs of individual and institutional customers while ensuring that even the biggest bank can be allowed to fail in a way that does not put taxpayers or the broader economy at risk."
"As we have seen clearly over the last several years, financial institutions, including those not considered "too big," can pose serious risks for our markets because of their inter connectivity."
"And it's not just multinational corporations that rely on such a large scale. J.P. Morgan Chase and others supply capital to states and municipalities as well as to firms of all sizes."
Well, for starters its refreshing to think that Dimon thinks JP should be liquidated in the event he mucks the company up. Surely after he pays out $30B in bonus money of course. Of course this should be the way it is handled. You screw up - You pay the consequences. Thanks for the heads up JD! Dimon knows that as his firm grows bigger and bigger they cant be broken up. That is what he is after, full immunity from reckless risk taking.He is using his firm as the ultimate weapon. Maybe we should have left Bear Stearns to fail as well? Wait! That would have destroyed your firm in the process. Its this inter connectivity and high correlation that has to be broken up.
His approach to a bigger banking model is based on the social responsibilities of banking. He states that scale brings choice to consumers. Choice? Like ARM Mortgages? Pay Option? Negative Am? How in the world is this good for customers? Good for the economy? The growth we have seen since 2003 is fake. It wasn't real growth. It was all structured finance.
Financial regulation before was a joke. Its a bigger joke at the moment. The way to fix a problem is to tackle the problem, not create 5 more agencies to muck the problem up more. We need smart enforceable regulation not more regulation. So what we have seen so far is more and more useless agencies that screw up the process more. On top of that, what ever smart regulation is blind sided by lobbyists.
Like I stated above, TBTF institutions are highly interconnected and the risks inherent in them are correlated and asymmetrical. Its for this one single reason that they need to be chopped down. We cant keep going around in circles every time there is a crisis.
You cant tell me that the entire planet is wrong in moving to decrease bank balance sheets and financial structure. This type of scale and size is something that customers, economy, and the tax payer don't need.
Nice Try!
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