Dimon, of course, has been Wall Street’s most vociferous critic of banking reforms, deploying an army of lawyers and lobbyists — at the cost of an estimated $7.4 million in 2010 — to try to delay, dilute and disembowel the Dodd-Frank legislation. The unrelenting legal and lobbying campaign has clearly intimidated the regulators, forcing delays beyond the dates mandated by the statute. Most recently, the bank lobby seemed on the verge of defenestrating the Volcker rule that would limit commercial banks from gambling with depositors’ money. That rule, itself a pale shadow of the Glass-Steagall Act repealed during the Clinton years, might have constrained the kind of opaque, risky bets that led to the losses.
Dimon, who was paid $23 million in 2011 (up 11 percent from the year before) has a personal stake in gutting reform. But it is inexcusable for Mitt Romney and Republicans to make repeal of all the Dodd-Frank reforms part of their campaign mantra. Banking is risky, by definition. Markets don’t self-correct. Unless banks are strictly regulated, panics and excesses are inevitable and big banks make them dangerous.
Richard Fisher, the conservative president of the Dallas Federal Reserve Bank, has been raising alarms about the big banks for years. The top five banks now control 52 percent of the financial industry’s assets; they had 17 percent in 1970. The six largest banks control assets equal to 62 percent of the nation’s gross national product. They may be not only too big to fail, but also too big to save.
The biggest of them, Dimon’s JPMorgan Chase, has $2.1 trillion in assets and more than 239,000 employees.
And like all the big banks, it acts with the assumption that the government has its back if things go bad. This, Fisher argues, is a disaster in waiting. “Complacency, complicity, exuberance and greed,” he notes, are in our DNA. These “human traits and weaknesses result in market disruptions,” Fisher says, that are “occasional and manageable. . . . Big banks backed by government turn these manageable episodes into catastrophes.”
Fisher would force the big banks to reorganize and get much smaller. And he would require “harsh and non-negotiable consequences” for any bank that ends in trouble and seeks government aid, including removal of its leaders, replacement of its board, voiding all compensation and bonus contracts and clawing back any bonus compensation for the two previous years.