Bank-rupt-cy:


From Italian: banca rotta, lit. “a broken bench,” from banca “moneylender’s shop,” + rotta “broken, defeated, interrupted”

I’m no fan of JP Morgan, as they’ve played the political crony game better than anyone, but I have to credit Dimon with speaking the hard truth to the politics of finance.

Mr. Dimon’s best comment was to remind lawmakers that there is a better way to handle a failing bank than a “resolution” process. It’s an old-fashioned word, but one worth resurrecting: Mr. Dimon called it “bankruptcy.”

Dimon Takes the Hill

The J.P. Morgan CEO has an old-fashioned word for Senators.

J.P. Morgan CEO Jamie Dimon swallowed his share of humble pie Wednesday on Capitol Hill, but along the way he also delivered some lessons to his Senate inquisitors. For starters, Mr. Dimon declined to blame anyone but his own management team for the bank’s $2 billion trading loss, saying “the buck stops with me.” You won’t hear that in a thousand years of Senate debate.

A particular goal of the Banking Committee session seemed to be to browbeat Mr. Dimon into giving up his public battle against excessive regulation. But the CEO, who happens to be a Democrat, didn’t back down.

He said, in particular, that he thinks regulators won’t be able to write an adequate Volcker Rule banning proprietary trading because it is difficult to define the difference between hedging (which is allowed under the law) and trading with your own funds (which is supposed to be outlawed).

In any case, he said, the rule isn’t necessary on top of the many other new regulations. J.P. Morgan now has about $1 billion a year more in compliance costs since the financial crisis, and Mr. Dimon said “I believe there are hundreds” of full-time regulators on site at the bank. These legions nonetheless didn’t seem to know what was going on at the bank, much less how to respond, even after the Wall Street Journal had reported that Morgan’s “whale” trades were the talk of London and Wall Street. So has the 2010 Dodd-Frank Act made the financial system safer? “I don’t know,” Mr. Dimon replied. We’d say no, but then Mr. Dimon has to live with these guys.

Mr. Dimon also reminded the Members that the bank’s losses have all been its money and that Morgan is also sitting on unrealized portfolio gains in the neighborhood of $7 billion. As Republican Jim DeMint quipped, the Senate loses $2 billion or so every day.

The problem remains that J.P. Morgan is still a too-big-to-fail bank, a fact that Dodd-Frank has only reinforced. In that context, Mr. Dimon’s best comment was to remind lawmakers that there is a better way to handle a failing bank than a “resolution” process. It’s an old-fashioned word, but one worth resurrecting: Mr. Dimon called it “bankruptcy.”

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