Friday, June 15, 2012

Jamie Dimon’s Apology Disappoints Both Sides Of the Aisle

In testimony Wednesday before the Senate Banking Committee, J P Morgan Chase CEO Jamie Dimon apologized for that bank’s $2 billion loss of its shareholder’s cash in a unit that was created to monitor and reduce the company’s investment risk, but his mildly toned testimony did little to soothe the ongoing political wrangling over forthcoming rules enforcing Dodd-Frank bank regulation legislation. “We made a mistake. I am absolutely responsible. The buck stops with me,” Dimon said.

However, when questions from Rebuplican Senators attempted to provoke repetition of Dimon’s often fiery critique of regulatory intervention in the banking industry, Dimon failed to oblige. He refused to characterize Dodd-Frank as a “marginal” improvement in banking safety, and to deny that the legislation has had a lauditory effect on banking practices. Likewise, when New Jersey Democrat Robert Mendez asked provocatively, “Wouldn’t J P Morgan have gone down without the massive federal intervention, both directly and indirectly, in 2008 or 2009?” Dimon’s response didn’t satisfy Democrats. “I think you were misinformed,” he replied. “and I think that misinformation is leading to a lot of problems we’re having today.”

While Dimon still opposes the Volcker Rule banning bank speculation with paid in capital, he did acknowledge that the supposedly conservative investment strategy in J P Morgan’s $350 billion Chief Investment Officewas “not carefullt analyzed” and “should have gotten more scrutiny from both senior management and the firmwide risk control function,” he continued his attempts to spin $2 billion in losses as a minor problem. “We have let a lot of people down, and we are sorry for it,” his prepared remarks concluded. “We will not make light ofthese losses, but they should be put into perspective. We will lose some of our shareholders’ money – and for that, we feel terrible – but no client, customer or taxpayer money was impacted by this incident.”

Damon’s remarks reinforce his steadfast refusal to recognize that a bank’s paid in capital is the only bulwark standing between customer deposits and the sort of losses which brought about the Great Depression, and which today threaten the health of FDIC and FSLIC depositor protections. Despite Dimon’s trumpetinf about no depositor having lost a penny, J P Morgan customers did lose $2 billion worth of that protective bulwark, and that is a very, very real loss to them.

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