Dimon Forecasts Five More Years of Finger-PointingNicholas Comfort, Ambereen Choudhury and Dawn Kopecki
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon today deflected blame from the banking industry for causing the financial crisis and predicted more accusations for years to come.
“It’s going to be another five years of pointing fingers, scapegoating, using misinformation” and people thinking they have improved the system, Dimon said during a panel discussion at the World Economic Forum’s annual meeting in Davos, Switzerland.
Dimon, 56, has led financial-industry executives in warning that new rules meant to curtail risk in the wake of the financial crisis may result in unintended consequences and hurt the economy. At the forum in 2011, the CEO sparred with France’s then-President Nicolas Sarkozy over “bad policies” that Dimon said would impede growth.
“We’re trying to do too much too fast,” Dimon said today.
He and UBS AG Chairman Axel Weber, speaking on the same panel, criticized global regulators for making capital and liquidity rules for banks too complicated across different jurisdictions. Weber, 55, said the lack of worldwide standards has made bank regulations too “complex.”
Dimon’s stature in the regulatory debate was undermined as a wayward bet on credit derivatives cost New York-based JPMorgan, the biggest U.S. bank by assets, more than $6.2 billion in 2012. Last week, the company’s board of directors faulted Dimon’s oversight of the botched trades and cut his pay package by 50 percent to $11.5 million.
Other panelists including Zhu Min, deputy managing director of the International Monetary Fund, and Paul Singer, founder of hedge fund Elliott Management Corp., said the financial sector and some individual banks are still too big, too leveraged and too opaque.
“It’s five years after the crisis, we still haven’t fixed a lot of the things that you’re talking about,” Dimon told Zhu. Policy makers and executives need to sit down together and “figure out what we’ve got to fix now,” Dimon said.
Government support, including direct cash infusions and implied guarantees, was the only thing that “stemmed the cascading transmission of the financial collapse,” Singer said. While the sector is less leveraged than it was in 2008, it’s still not enough for “outsiders to understand the financial condition of the major financial institutions,” he said.
Dimon, addressing Singer, said it’s for those “who sit on the sidelines” to criticize.
“Paul, with all due respect, you know hedge funds are pretty opaque, too,” Dimon said, inviting Singer, 68, to read JPMorgan’s annual regulatory filing, which totaled 326 pages last year.
The CEO defended banks from blame and said other firms deserved more scrutiny, including Fannie Mae and Freddie Mac, the mortgage-finance firms seized by the U.S. government in 2008, and American International Group Inc., the insurer that received a $182.3 billion taxpayer bailout.
“Everybody thinks it’s that one thing that sunk the system,” he said. Fannie Mae and Freddie Mac were the “largest financial catastrophe of all time.”
Zhu, 61, reminded Dimon that the world just experienced the worst financial crisis since the Great Depression.
“Two-hundred-million people still don’t have jobs today,” Zhu said. “With all the debating going on, the financial market structure didn’t change very much. We’re not safer yet.”
There’s been “zero deleveraging” in the financial sector since the crisis, he said. “The size is still big, the product is still complicated. And the market-based activity hasn’t actually decreased, rather increased.”
While extraordinary measures by central banks kept the financial crisis from worsening, Dimon said governments now need to devise policies for growth.
“Most important now is good sustainable growth to make the central bank job easier,” Dimon said. “It’s incumbent on governments to do good fiscal policy.”
Singer said that policy makers have been “lulled into security,” believing that quantitative easing, is “costless.”
The Federal Reserve in September said that it would expand its asset-purchase program, known as quantitative easing, to stimulate the economy. European Central Bank President Mario Draghi pledged in August to buy bonds to prop up some euro-region countries and has loaned more than 1 trillion euros ($1.3 trillion) in three-year loans to banks to bolster credit supply.
Weber said the “short-term fixes” imposed by central banks will be paid for by future generations.
Central banks’ attempts to counteract the financial and sovereign-debt crises are “pushing the problem down the road,” said Weber, a former head of Germany’s Bundesbank. “We are heading to a very dangerous environment.”