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Dimon To Bernanke: Reforms Hurt Economy

A little glimpse behind the curtain, via CNN’s Money.Com:

Jamie Dimon gripes to Bernanke

By Annalyn Censky June 7, 2011

NEW YORK (CNNMoney) — JPMorgan Chase CEO Jamie Dimon is still griping about financial reform, and this time, he took his complaints straight to the top official at the Federal Reserve.

"I don’t personally buy the argument that because it was a financial crisis it has to take a long time coming out," Dimon said in a Q&A session following a speech by Ben Bernanke at the International Monetary Conference in Atlanta Tuesday.

In his speech, Bernanke acknowledged that the economy was "below its potential," following a recent onslaught of negative economic news including a disappointing jobs report and weaker than expected-economic-growth.

Dimon blames financial reform for stifling growth. He gave the Fed Chairman a laundry list of ways regulators have already cracked down on the banking system, after the Dodd-Frank financial reforms were passed last year.

"Most of the bad actors are gone," "off-balance-sheet businesses are virtually obliterated," "money market funds are far more transparent" and "most very exotic derivatives are gone," he said.

Dimon, who is known for his vocal opposition of many of the Dodd-Frank reforms, said he fears those reforms may be hindering, rather than helping, the recovery.

"Has anyone bothered to study the cumulative effect of all these things?" he asked Bernanke. "Is this holding us back at this point?"

Bernanke responded at first with a quip. "Well, Jamie, that list you gave me made me feel pretty good there for a while, because it sounds like we’re getting a lot done," he said.

But in the end, Bernanke conceded that government officials have not examined the effect of stricter banking regulations may be having on economic growth.

"Has anybody done a comprehensive analysis of the impact on — on credit? I can’t pretend that anybody really has," Bernanke said. "You know, it’s — it’s just too complicated. We don’t really have the quantitative tools to do that."


This article was posted by Steve on Wednesday, June 8th, 2011. Comments are currently closed.

8 Responses to “Dimon To Bernanke: Reforms Hurt Economy”

  1. TerryAnne says:

    “Bernanke responded at first with a quip. “Well, Jamie, that list you gave me made me feel pretty good there for a while, because it sounds like we’re getting a lot done,” he said.”

    God, the arrogance of these people! And typical work-for-the-government; it’s all about metrics and measureable. Who cares if any of them were actually actionable, good or the like…it was an “accomplishment”!

  2. Petronius says:

    Gosh. Does this mean that the government’s boot-on-the-neck strategy for managing American business might not be working?

    Financial stocks have been taking it on the chin the last three months as they lead the market down. Revenues are falling. As Warren Buffett said, “U.S. banking profitability will be considerably less in my view in the period ahead than it was in the early part of this century.” The explanation most often given is regulatory changes introduced in the wake of the Dodd-Frank Act are making it too difficult for banks to do business, and limit their ability to advance and leverage credit.

    Main Street is having its revenge on Wall Street. Jobs are being cut as the banks shrink their businesses. “Without any change, the financial sector is definitely set to shrink,” said John Garvey, PWC’s financial industry advisor. “You don’t have to be a scientist to figure out that tighter regulation and more onerous capital rules without economic growth will shrink the industry. It has to.”

    Liz Ann Sonders, Schwab’s Chief Investment Strategist, said the key reason for low stock market volumes is that hedge fund managers are closing down funds because of the regulatory burdens of Dodd-Frank. She said Dodd-Frank is actually reducing liquidity and increasing investment risk in the markets.

    There are still plenty of banks out there that are good investments . . . just not in America. Keith Davis, analyst at Farr Miller, predicts that American banks will “devote resources to the build out of their international network, especially in the emerging markets, and more shrinkage in the U.S. as regulatory requirements get more onerous and returns fall.”


  3. tranquil.night says:

    “Has anybody done a comprehensive analysis of the impact on — on credit? I can’t pretend that anybody really has,” Bernanke said. “You know, it’s — it’s just too complicated. We don’t really have the quantitative tools to do that.”

    Because 2,000+ pages of Financial Regulations aren’t going to impact the flow of credit in any way. I guess it’s reasonable to think that nobody understood that though, since they probably didn’t care to even read it.

    Once again, all predicted. No sympathy for Dimon.

    After all, he supported it too.

  4. Curmudgeon says:

    Dimon makes some excellent points. Having several regulatory bodies leads to big problems
    1) Different ones enforce differently. In fact, banks have been known to change charters to change regulators to more easily get away with a practice.
    2) There too much of a problem in government work/regulation of lack of understanding vs. lax enforcement. You need employees to both follow the letter of the regulations but also understand the reasons for them so they can catch the new slick tricks as they inevitably emerge but also not over-regulate just because something is new. When you have several regulatory bodies dividing up the country, only the largest really gets a sense of what transactions are actually in widespread practice, how widespread, how troubling/risky that practice might be for the financial sector if it is multiplied by 1000, or 100,000.

    • tranquil.night says:

      Yes, you and he were/are right on those points. Making that clear since I’m not sure if you were responding to my article or just rehashing it for emphasis.

      The way I look at it though is the Dodd-Frank Plan he supported when arguing those points didn’t consolidate anything, nor increase efficiency or transparency.

      It created two massive, nearly all-powerful bureaus with an open pen to start dictating regulations, passed with the support of people who were fooled by the promise that they would do so benignly – probably in no small part because many of the bankers thought they had a special relationship with the regulators. After all, we’ve basically been dumping wheel-barrels full of freshly printed money on their stoops to keep up this illusion of a recovery.

      We not only knew that this would be the result of Dodd-Frank, we knew that they wanted to get their arms around this going back to the Financial Crisis, and we continued to warn about it before and after ObamaCare and then it, itself was rammed through: http://sweetness-light.com/archive/obama-blames-greed-for-financial-crisis

      That’s why 11 months of regulations later, only after it’s screwing him, is the wool off the eyes and CEO Dimon is sounding just a little bit more indignant about what they’re doing.

  5. BigOil says:

    Based upon the track records of Chris Dodd and Bawney Franks, why would you need to read a word of their financial reform bill to conclude it would burden the financial sector? They were key players in creating the financial mess.

    Taking it a step further, even if these two clowns had not written the bill, any regulation by definition impedes free market capitalism. A handful of jokers in DC cannot direct any industry better than the industry itself.

    Maybe Dimon is just upset his company is not as adept at crony capitalism as Goldman Sachs.

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