Mitt Romney, saying business losses are part of “the way America works,” urged caution in adopting new regulations in response to the $2 billion trading loss by JPMorgan Chase & Co.
In his first direct comments on the bank’s missteps, Romney said, “I would not rush to pass new legislation or new regulation.”
The presumptive Republican presidential nominee was interviewed in a podcast yesterday with blogger Ed Morrissey of Hot Air in which Romney also addressed his work as a private equity executive. As for JPMorgan, he cautioned, “This is, in the normal course of business, a large loss but certainly not one which is crippling or threatening to the institution.”
Though regulators should investigate the trades to understand what happened at the company, Romney framed the loss as an example of capitalism at work.
“This was not a loss to the taxpayers of America; this was a loss to shareholders and owners of JPMorgan and that’s the way America works,” he said. “The $2 billion JPMorgan lost, someone else gained.”
JPMorgan Chairman and Chief Executive Officer Jamie Dimon, who disclosed the loss last week, told shareholders there was no justification for the “egregious mistakes” by the biggest and most profitable U.S. bank. In two suits filed this week in Manhattan federal court, shareholders sued the bank and Dimon over the loss.
Central to Message
Romney, co-founder of private-equity firm Bain Capital LLC, has made repealing the Dodd-Frank law that seeks to strengthen financial regulations a central part of his campaign message, calling it one of several overly burdensome laws backed by President Barack Obama that costs jobs.
He has remained mostly silent on what, if anything, he would replace the law with to prevent the types of risky behavior that sparked the 2008 financial crisis.
A 59-point economic plan released by his campaign in September 2011 calls for replacing the law with a “streamlined regulatory framework” guided by three themes: More transparency for inter-bank relationships, enhanced capital requirements and “provisions to address new forms of complex financial transactions.”
For Obama’s re-election bid, the JPMorgan difficulties have offered 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 on May 14.
While Romney supported the federal bailout of the banking system, known as the Troubled Asset Relief Program, he said in yesterday’s interview that the economic climate has changed and banks now should be allowed to fail.
“My own view is that if a large bank gets in difficulty, why, it can fail,” he said. “There’s no reason why the shareholders or bondholders of a bank can’t lose their funds if a bank were to get in trouble.”
In the course of his campaigning, Romney has 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 on 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.”
Romney also in yesterday’s interview addressed attacks over his record at Bain Capital, saying he wasn’t responsible for job losses at GST Steel -- the subject of an Obama’s campaign advertisement this week.
“The most recent attacks are really off-target,” he said. “Their problem, of course, is that the steel factory closed down two years after I left Bain Capital. I was no longer there. So that’s hardly that was something that was on my watch.”
Romney left Bain Capital in 1999 to go run the Winter Olympics, two years before GST steel went bankrupt.
He also repeated a claim often made by his campaign that under his tenure the firm created 100,000 jobs. Neither Bain nor the campaign has been able to document that figure in response to repeated requests by Bloomberg News. Bain Capital doesn’t track jobs lost or gained as a result of their investments.
Democrats have cast Romney as a corporate raider eager to sacrifice jobs for higher profits. An outside group backing Obama released an ad attacking Romney over GST Steel, which fired workers and declared bankruptcy in 2001, eight years after being bought by Bain.
“If we lost, they made money. If we survived, they made money,” said Pat Wells, identified as a former GST employee, in the ad funded by Priorities USA Action. “He’ll give you the same thing he gave us: nothing. He’ll take it all.”
Obama campaign officials also continued their efforts to turn Romney’s business experience into a political liability, highlighting what they have termed “consequences of Romney economics.”
On a conference call with reporters featuring former employees of Dade Behring Inc. and American Pad & Paper, deputy Obama campaign manager Stephanie Cutter said Romney was focused on creating wealth for a handful of investors like himself instead of jobs for everyone else.
“Romney once again made a fortune on the backs of their misfortune,” Cutter said.
Vice President Joe Biden scorned “Romney economics” in a speech in Ohio, saying the Republican’s approach is “as long as the government helps the guys at the top to do well, workers and small businesses and communities, they can fend for themselves.”
Bain fired back, wading into the debate with an unusual public statement.
“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,” the company wrote in a statement distributed to reporters. “We are extremely proud of our employees and management teams.”
The public statement is a rare step for the usually media-shy firm and illustrated concerns among private equity investors that the politics of the presidential campaign will further tarnish their industry.
Trade Group Video
The Private Equity Growth Capital Council, a trade group for the industry, released a video this week describing their business model.
“We expected the general election would bring new attention to private equity, but what is lost in the politically charged debate is the fact that private equity has pumped hundreds of billions of dollars into the U.S. economy, supporting and strengthening tens of thousands of businesses in all 50 states,” said Ken Spain, a spokesman for the organization.
Bain said the firm invested more than $100 million and “many thousands of hours” into turning around GST Steel, which would have closed in 1993 without their investment.
“This was unfortunately at a time when the steel industry came under enormous pressure, and nearly half of all U.S. steel companies went into bankruptcy,” the firm said in its statement.