In yesterday's WSJ, while JPMorgan/Chase CEO Jamie Dimon managed to give skirting approval to Obama's reforms, he also had this to say -
DENIAL
One ugly example that came from these companies: certain adjustable rate mortgages with absurdly low introductory "teaser" rates that didn't even cover the monthly interest on the loan and resulted in rising principal balances. These loans are now a poster child for the meltdown. What many people forget is that hardly any commercial bank regulated by the Office of the Comptroller of the Currency offered these products. Rather, these loans sprang from lightly regulated mortgage brokers and thrifts.
1. Here's another ugly example, Jamie - at least $30 billion in sub-prime loans JP Morgan made? Are they poster children too? How many of these loans should have been structured as prime loans? How many people did you rip-off? You and your OCC cohorts pushed that junk, then you bet (and made) billions that they would fail. Who doesn't love a sure bet?
- Jamie - You and your Office of the Comptroller of the Currency Regulated Wall Street buddies bought up and bet on those loans in the trillions. Your firm JP Morgan is the largest by far handling $87 trillion of the derivatives of those "certain types of loans" and their ilk. So, you may not have "planted" the originating seeds of the product, but you sure as hell distributed the fruit. You're like the drug dealer and user blaming the Afghani opium farmer. Without you the farmer would not exist. And you and your firm did sell and broker and use this junk you hold your nose at, just like every other bank. You counted and relied upon these mortgage firms being unregulated. You exploited their "light" regulation.
DERIVATIVES
Then Jamie seems to contradict himself or at the very least push for the destruction of the very derivatives he's begging to keep -
All financial institutions, wherever they're regulated, must stand ready with strong capital reserves to serve as a cushion during times of unexpected market and economic difficulties.
So on the one hand he calls for strong financial reserves... On the other hand...
However, let's not forget that businesses large and small still need customized derivative products to hedge risk.
Those derivative products are impossible to provide enough financial reserves for. If you could provide the necessary reserves, you would and you'd sell them as what they are - Insurance policies. But you can't and so you want to keep pushing junk. It's one or the other, Jamie.
CONSUMER PROTECTION
Jamie then goes on to promote Consumer Protection as an idea but not as a practice -
I absolutely agree with the need to strengthen consumer protection. Some of the most abusive practices involving mortgages and other financial products for consumers who could not afford them came from parts of the industry that were either poorly regulated or wholly unregulated.
Now here, Jamie, goes populist and denial in the same paragraph. He promotes the idea of consumer protection but says it's not about him and his bankster buddies who made what those brokers did possible. Again, he's blaming the unregulated brokers and ignoring his own bad practices towards working folk. But, how does he really feel about a new Consumer Financial Protection Agency
Before creating an entirely new federal bureaucracy, policy makers should first examine ways to strengthen and refocus the authority of existing regulators. The primary regulators of financial institutions must be responsible and held accountable for protecting consumers. Creating duplicative and overlapping functions could increase costs and reduce credit opportunities for the consumers we are trying to protect.
Here's the major contradiction in his own argument - The banks' "primary regulators" have always had the power to stop these crap mortgages and practices. Why didn't they stop them? Because, as Jamie says - their primary concern "is the focus on strong capital and liquidity requirements" not consumer protection. Those crap products were good for the industry so the Fed let them exist. The Fed can't serve two masters. Noone can.
No matter how hard you try to "refocus" them The Fed can't drive with a bi-focal windshield. At least, not safely. It's an interesting concept, and it would be great if our minds and bodies worked that way, but they don't. Our founding fathers understood this basic truth and created a system of "Checks and Balances". Given the terminology, you'd think bankers would understand that idea better than most.
It's simple. Any regulatory agency that is concerned with the strength and financial reserves of a bank; can not inspect the consumer products which provide that strength and those reserves; without an inherent conflict of interest slanted towards the banks.
This requires another agency to perform the specific task of consumer protection for the sake of the consumer's "financial reserves" and not Jamie Dimon's bank.
As far as "increasing cost" and "reducing credit" are concerned, JP Morgan Chase has been doing plenty of that on it's own as it gouges its customers before the new credit card reform takes effect. "Much needed" reform that the Fed recognized, created, then delayed for a year and a half requiring Congress to step in and more rapidly and securely codify the changes.