The fallout from JPMorgan Chase’s $2 billion trading loss continues. Following Monday’s departure of three high-ranking execs, including CIO Ina Drew, the focus is now shifting to the firm’s chairman and CEO Jamie Dimon.
At Tuesday’s annual shareholder meeting in Tampa, there was a proposal on the ballot to strip Dimon of his chairmanship. The measure failed, as was widely expected, and shareholders reaffirmed Dimon’s $23 million 2011 pay package.
But the ballot is noteworthy because it received 40 per cent of the vote and comes as outside observers, including MIT’s Simon Johnson and “Currency Wars” author James Rickards, have called for Dimon’s resignation.
Dimon’s vocal opposition to many of the new regulations, most notably the Volcker rule, has animated those on the other side of the debate. Lawmakers in both the House and Senate are calling for hearings on JPMorgan’s $2 billion loss and the SEC opened a preliminary investigation into the trade.
“Jamie’s problem…is he’s running an institution that’s not only ‘too big to fail’, it’s too big to succeed and too big to manage,” says former New York Governor and NY State Attorney General Eliot Spitzer. “The size, commingling of purposes and the lack of management capacity when you get to this scale tells me something is wrong here.”
In the wake of JPMorgan’s big loss a number of proposals have resurfaced, including breaking up the big banks by limiting the amount of assets they can hold as a per cent of GDP, strengthening the Volcker Rule and reinstating Glass-Steagall.
Spitzer, currently the host of “Viewpoint” on Current TV, praised Warren Stephens’ recent WSJ op-ed which called for a cap on bank assets to five per cent of GDP vs. 10 per cent currently. But he doesn’t believe there’s a “magic number” for assets or that the size of the bank matters as much as the activities of the bank.
“They shouldn’t be doing multiple things at same time,” he says. “Being a depository institution at same time you’re playing investment banker, playing prop trader and playing hedge fund. That is the problem.”
One other structural issue Spitzer would address is the construct of the New York Fed. In perhaps the ultimate example of regulatory capture, the New York Fed is a private institution owned by the very banks it is designed to regulate; along with other bank executives, Dimon currently sits on the NY Fed’s Board of Directors.
“Jamie is not a bad person…but for chair and CEO of Morgan Chase to be on the board of Fed lobbying and pushing back against the Volcker Rule, people know immediately there’s something wrong with that.”
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