There’s an interesting backstory to JPMorgan CEO Jamie Dimon’s fight with Bank of Canada Governor Mark Carney over regulatory pushes for higher capital requirements on big banks.
Globe and Mail points out that the fight might have started last year, when Mark Carney took a slight dig at something Dimon said to his daughter in a speech.
Carney cited the quote and referenced Dimon as a “jaded bank CEO” a year ago on September 14, at the Deutsche Bundesbank’s annual Bundesbank Lecture, in a speech called, “The Economic Consequences of Reforms.
He didn’t call Dimon’s name out in public, but the source of the quote, Jamie Dimon’s testimony to the FCIC, is footnoted in the public record of the speech on the Bank of Canada’s website.
Carney used Dimon as an example of someone who is on one end of two extremes. On the other end, there is game-changing regulation that’s enacted after identifying what’s destabilizing markets and proposing rules to curtail the found risk.
On Dimon’s end, according to Carney, there’s an acceptance of “dreary” cyclical economic upheaval. And less regulation, which is mostly in vain.
The relevant part of Carney’s speech is in the beginning:
Keynes wrote prophetically of the economic consequences of the Treaty of Versailles. Could the same be said of current financial reforms? Are policy-makers taking for granted the essential role performed by finance in a vain pursuit of its risk-proofing? Do we assume that our “late advantage” of an open, global capital market and trade environment is a “natural, permanent” feature of the economic landscape?
Or is the other extreme possible? Are we being too timid? Consider the jaded attitudes of the bank CEO who recounted: “My daughter called me from school one day, and said, ‘Dad, what’s a financial crisis?’ And, without trying to be funny, I said, ‘This type of thing happens every five to seven years.'”
Should we be content with a dreary cycle of upheaval?
Such resignation would be costly. Even after heroic efforts to limit its impact on the real economy, the global financial crisis left a legacy of foregone output, lost jobs, and enormous fiscal deficits. As is typically the case, much of the cost has been borne by countries, businesses, and individuals who did not directly contribute to the fiasco…
Surely, and contrary to what some in the industry would have you believe, there is some price worth paying to reduce such tail risks in the future. This past weekend’s historic Basel III agreement strikes exactly the right balance.
Carney’s speech read in full is a thoughtful explanation of the top 3 priority goals of the G20, which are still relevant today, and why financial reform — and regulations — is the way to achieve them. He also details his position on capital requirements.
The speech provides a lot of background about the origins of Dimon’s and Carney’s fight this weekend.
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