Mitt Romney says he wants to talk about the economy in this presidential campaign, including his call to repeal the Dodd-Frank financial regulation law. JPMorgan Chase & Co.’s $2 billion trading loss in risky transactions isn’t the sort of conversation he had in mind.
So far, presumptive Republican nominee Romney has said little about the transaction that is roiling Wall Street and Washington, prompting an inquiry by the Federal Reserve, a call for a congressional investigation and a demand by Elizabeth Warren, a Democratic Senate candidate in Massachusetts, that JPMorgan Chief Executive Officer Jamie Dimon resign from the board of the New York Federal Reserve.
“Any time you have a development that suggests businesses take unnecessary and unwise risks, you give ammunition to Democrats and cause problems for the Republican narrative,” said Stu Rothenberg, editor of the nonpartisan Rothenberg Political Report. “Romney will have to deal with it.”
Romney, co-founder of private-equity firm Bain Capital LLC, has spotlighted his vow to repeal the Dodd-Frank law that aims to strengthen financial regulations, calling it one of several overly burdensome laws backed by President Barack Obama that costs jobs. Romney hasn’t directly commented on the JP Morgan losses since Dimon disclosed them on May 10; he ignored a reporter’s shouted question about the matter at a May 11 rally in Charlotte, North Carolina.
Campaign spokeswoman Andrea Saul had said in a statement the losses showed “the importance of oversight and transparency in the derivatives market,” and that Romney as president would “push for common-sense regulation that gives regulators tools to do their jobs, and that gives investors more clarity.” she said.
Asked for specifics, the campaign later replied with remarks he made last year while campaigning in New Hampshire, when he said he would favor regulating derivatives and imposing different capital requirements on different forms of securities. The campaign also pointed to Romney’s 59-point economic plan, in which he writes that “some of the concepts in Dodd-Frank have a place.”
For Obama, the JPMorgan difficulties offer an opportunity to contrast the positions of the two candidates.
“It is amazing that there are still those who are out there arguing we should repeal Wall Street reform, that we should let Wall Street write their own rules again,” White House Press Secretary Jay Carney said today.
Obama is in New York today for events including a fundraiser with Wall Street executives.
Obama has sought greater regulation. He signed the Dodd-Frank law and asking for more funding for the Commodities Futures Trading Commission to implement the new rules.
“I would think the president would seek to connect the JPMorgan story with his message of a need for regulators to watch big business,” Rothenberg said.
Saul, the Romney spokeswoman, responded yesterday to the Obama campaign with a statement saying the Republican “believes in a system of sensible financial regulation,” while the president “supported legislation that makes another crisis more likely, thus putting taxpayers at risk for future bad decisions made by Wall Street banks.”
Romney’s economic plan, released in September, argues for the repeal of the Dodd-Frank law while saying some aspects of it should be retained.
“Greater transparency for inter-bank relationships, enhanced capital requirements, and provisions to address new forms of complex financial transactions are all necessary elements of effective financial reform,” the plan says. “But these concepts must be translated into law in a way that creates a simple, predictable, and efficient regulatory system appropriate for our dynamic economy.”
As the presidential race has heated up, Romney has focused on his repeal proposal without elaborating on what parts of the law he backs.
Romney as a candidate also toughened his position on the Sarbanes-Oxley financial accounting overhaul enacted in the wake of the Enron Corp. scandal. After initially saying he would favor amending that law, he sharpened his stance.
Asked by a voter March 3 in Beavercreek, Ohio, if he planned to “basically repeal” the Sarbanes-Oxley measure, along with the health-care overhaul Obama pushed through Congress and the Dodd-Frank measure, Romney responded, “Yes.”
“By the way, when I get rid of Obamacare and I get rid of Dodd-Frank and I get rid of Sarbanes-Oxley, it doesn’t mean I don’t want to have any law or any regulation,” Romney said. “It means I want to make sure it’s modern, it’s updated, it goes after the bad guys, but it also encourages the good guys.”
Repealing financial reforms will be difficult following JPMorgan’s $2 billion loss, which Dimon said could cost an additional $1 billion this quarter or next. Proponents of oversight will be bolstered, said Senator Carl Levin, a Michigan Democrat and chairman of the Permanent Subcommittee on Investigations, on NBC News’ “Meet the Press” yesterday.
“The real problem is, the battle is not just between Washington and Wall Street,” Levin said. “The battle is inside of Washington.”
Dimon, also on “Meet the Press,” said JPMorgan was “sloppy” and “stupid.” He said he didn’t know if his firm broke any laws or U.S. Securities and Exchange Commission rules. “You always make mistakes,” he said.
Dimon has been a critic of Dodd-Frank provisions including the so-called Volcker rule, which is meant to bar proprietary trading by banks with federally insured deposits.
When he announced the losses, almost four weeks after characterizing articles about the transactions as “a complete tempest in a teapot,” Dimon said the trading “may not violate the Volcker rule, but it violates the Dimon principle.”
Warren, who formerly worked in the Office of the President and served as chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program, distributed an e-mail over the weekend calling on Dimon to step down from his New York Fed position.
“He advises the Federal Reserve on the oversight of the financial industry,” Warren said in an e-mailed statement. “Dimon should resign from his post at the New York Fed to send a signal to the American people that Wall Street bankers get it, and to show that they understand the need for responsibility and accountability.”