NEW YORK | Financial Times’s interview with Jamie Dimon was intended to create momentum. JP Morgan’s chief executive is now attacking new banking rules by Basel committee, trying to convince against the new regulation to water down Basel III the same way the major US banks have lobbied in Washington to water down Dodd-Frank Act, Obama’s new set of rules after the financial crisis.
Dimon’s argument goes like this: the Basel III capital rules are “blatantly anti-American” and designed to favour Asian banks. So, he suggests, Washington should get out of that global compromise: “I am very close to thinking the United States shouldn’t be in Basel anymore”, he says. Dimon doesn’t elaborate on why the rules put American banks at a disadvantage. Some analysts believe he was referring specifically to the fact that covered bonds–a financing tool widely used by European banks and scarcely if at all by U.S. banks–receive favourable regulatory treatment under Basel III.
He also uses the opportunity to attack Barack Obama’s Dodd–Frank and his acceptance of Basel III new rules.
“I think any American president, secretary of Treasury, regulator or other leader would want strong, healthy global financial firms and not think that somehow we should give up that position in the world and that would be good for your country. If they think that’s good for the country, then we have a different view on how the economy operates”.
Meaning: get out Basel III or you are damaging your own banks. Dimon seems to forget all that too-big-to-fail saga.
The whole point of this interview maybe just to make JP Morgan’s operation cheaper: Basel III will ask his another major banks (3 out of 8, Americans) to build up risk-absorbent “core tier one” capital to 9.5% of risk weighted assets, whereas other smaller banks’ figure is 7%.
For Felix Salmon, “Dimon wants to go back to the casino model, with himself sitting in the role of the house which always wins, except when it loses, and is bailed out by the government”. Moreover, “it is ironic- closer to moronic”, that Dimon would complain about international bank-regulation standards on the very day that British banks get the “most radical reform in a generation, and possibly ever”.
For The Atlantic‘s Daniel Indiviglio, Dimon needs to understand that limiting the profits of a couple of firms isn’t the same as limiting the growth of a nation’s entire industry: “If you believe that stronger competition leads to higher long-term growth (and I do), then forcing giant banks to face higher capital requirements would actually boost growth — not restrain it”. For him, Basel III capital requirements aren’t anti-American but anti-instability.