President Barack Obama said the specter of a well-run bank such as JPMorgan Chase & Co. suffering a $2 billion trading loss demonstrates the need for closer regulation of the financial services industry.
On a day he raised cash from Wall Street donors at the New York apartment of Blackstone Group LP President Tony James and his campaign took aim at Republican Mitt Romney’s private-equity experience, Obama extolled free-market capitalism and risk taking while also arguing that tough Wall Street rules are needed to protect taxpayers and the banking industry.
“JPMorgan is one of the best managed banks there is. Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2 billion and counting,” Obama said yesterday in an interview with the ABC program “The View” scheduled for broadcast today.
Obama questioned whether a weaker bank might have required government help in the same circumstances. “That’s why Wall Street reform is so important,” he said.
With the economy the dominant issue in the 2012 presidential campaign, Obama is emphasizing his efforts to tighten scrutiny of the financial industry, saying the rules are needed to prevent a repeat of the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. in 2008. He also is seeking to draw contrasts with Romney, the presumptive Republican nominee who has called for the repeal of the Dodd-Frank financial regulation law.
Warning on Bailouts
At the fundraiser at James’s Park Avenue apartment, Obama warned big-dollar donors from the financial services industry that Congress wouldn’t provide another bailout if banks faced a liquidity crisis, according to an attendee who spoke on condition of anonymity to discuss the portion of the event closed to the media.
The president told the 60 donors, who paid $35,800 apiece, that regulators have to correctly implement Wall Street rules to prevent another financial catastrophe, the attendee said.
During public remarks at the fundraiser, Obama said it’s critical to ensure that there are “basic rules of the road in place so that the markets function in a transparent, clear way.”
“Risk takers and innovators should be rewarded,” he said. “I think all of us benefit from the freedom of free enterprise.”
In the wake of the loss, JPMorgan, the largest U.S. bank, said Chief Investment Officer Ina Drew will retire. The bank may lose an additional $1 billion or more as it winds down the position.
Dimon, JPMorgan’s chief executive officer, announced the loss May 10 and has criticized his company’s handling of trading in synthetic credit securities as “flawed, complex, poorly reviewed, poorly executed and poorly monitored.”
Dimon has been a critic of the Dodd-Frank law, including a provision named for former Federal Reserve Chairman Paul Volcker that is meant to restrict proprietary trading by banks with federally insured deposits.
Dimon has said the trade that spurred JPMorgan’s loss wouldn’t have run afoul of the Volcker rule restrictions, which are scheduled to take effect on July 21.
Romney, the former governor of Massachusetts, has said little about the transaction that is roiling Wall Street and Washington. Obama’s campaign yesterday sought to turn Romney’s business background against him as Republicans assail the president for the sluggish recovery from the recession
A television advertisement scheduled to run in five swing states features interviews with former workers at a Kansas City, Missouri, steel mill that was taken over in 1993 by Boston-based Bain Capital LLC, the private-equity firm co-founded by Romney.
“Bain Capital was the majority owner. They were responsible,” said David Foster, who is identified in the ad as the lead negotiator for workers at GST Steel, which filed for bankruptcy in 2001.
Romney’s campaign spokeswoman said the former Massachusetts governor welcomes a debate about the economy.
“Mitt Romney helped create more jobs in his private sector experience and more jobs as governor of Massachusetts than President Obama has for the entire nation,” Andrea Saul said in an e-mail. “If the Obama administration was less concerned about pleasing their wealthy donors and more concerned about creating jobs, America would be much better off.”
The Romney campaign posted a video to its website crediting a Bain investment during Romney’s tenure in Steel Dynamics Inc., a Fort Wayne, Indiana-based steelmaker, with helping to create jobs.
Bain Capital, which Romney left in 1999 to serve as chief executive of the 2002 Olympics in Salt Lake City, Utah, released a statement saying GST Steel was slated to close without an outside investor and that Bain had an “ambitious plan” to turn it around even as the U.S. steel industry was under pressure.
“We understand that in a political campaign our exemplary 28-year record will be distorted and complex business situations will be portrayed in a simplistic way,” Bain said in the statement.
Obama also has ties to Bain Capital. Jonathan Lavine, a managing director at Bain, has raised between $100,000 and $200,000 for Obama’s re-election effort, according to the Center for Responsive Politics, a Washington-based research group that tracks campaign donations.
The Obama advertisement will run in Iowa, Ohio, Pennsylvania, Virginia and Colorado, said campaign spokesman Ben LaBolt, who declined to say how much airtime was reserved for the spot.
The criticism in Obama’s campaign ad mirrors attacks leveled at Romney by his rivals during the Republican primaries. Former House Speaker Newt Gingrich and Texas Governor Rick Perry, who have since endorsed Romney, previously called the Republican front-runner a corporate raider who stripped businesses, loaded them with debt and fired their workers for profit.