One of America’s largest banks is facing a regulatory attack so insidious and overbearing that it might even be un-American, according to the head of that bank.
“Banks are under assault,” JP Morgan CEO Jamie Dimon told reporters on a conference call Wednesday, explaining that his company now faces too much oversight. “In the old days, you dealt with one regulator when you had an issue, maybe two,” he added. “Now it’s five or six. It makes it very difficult and very complicated.”
“You all should ask the question about how American that is,” Dimon said to the reporters, according to Forbes, which notes that Dimon has a habit of invoking patriotism in his attacks on financial regulation.
But Dimon’s firm exemplifies the sort of unregulated financial industry abuses that prompted tighter oversight in the first place. In Dimon’s tenure, regulators have exposed JP Morgan’s involvement in numerous scandals. Three of those scandals are particularly instructive.
The bank joined other financial firms in an elaborate scheme to rig interest rates, an affair commonly known as the LIBOR Scandal, which had negative effects on a huge range of consumer credit products and hurt the financial outlook of many cities who had made bond deals tied to the rates JP Morgan helped manipulate. A rogue JP Morgan trader known colloquially as the London Whale was able to gamble the bank into a multi-billion-dollar loss on complex derivatives trades without any of his managers noticing and putting a stop to the highly risky behavior, which could have triggered a chain reaction within the global financial system. And Dimon’s firm has paid tens of billions of dollars in legal settlements over the bank’s role in mortgage-related financial market activity that helped exacerbate the financial crisis and ensuing recession.
None of these are dead matters. Each of the three illustrates a live question for how society will regulate the financial sector’s activity and its relationship to the real economy of goods and services and middle-class jobs.
Since the LIBOR rate-rigging scandal, numerous other markets have been investigated over concerns that insiders in the finance industry are rigging them in ways that harm consumers. The London Whale scandal offers a case study in the utility of a Dodd-Frank reform known as the Volcker Rule, which continues to be disputed by lawmakers and regulators nearly five years after Congress passed the law calling for it to be created. While JP Morgan’s mortgage finance misdeeds have been largely resolved through legal settlements, the broader impact and legacy of the housing-related misconduct that swept the lending and investing industry last decade is still unfolding — and similar activity is on the rise in other types of debt markets.
What’s more, there is reason to believe the regulatory response to JP Morgan’s scandals has been too weak rather than too heavyhanded. While headlines touted the deal Dimon made with Attorney General Eric Holder over mortgage finance abuses, the fine-print reality of that settlement was far less punitive and costly than the $13 billion figure from the headlines made it seem. Dennis Kelleher, president of a financial watchdog called Better Markets that sued to block that mortgage settlement, called it “a secretive backroom deal” that “appears to have been written more to conceal than to reveal” facts about how the bank behaved. (Dimon has called that settlement “unfair” despite the many ways in which it was tailored to be gentle to his company, and the company’s top legal counsel has said the government should have been kinder to the bank.)