|Copyright:||(c) 2011 The New York Times Company|
|Source:||New York Times Digital|
In a surprisingly public demonstration of his aggravation, Mr. Dimon, the chief executive of
“I have this great fear that someone’s going to write a book in 10 or 20 years, and the book is going to talk about all the things that we did in the middle of a crisis that actually slowed down recovery,” he told
“Do you have a fear like I do that when we will look back and look at them all, that they will be the reason it took so long” for our banks, our credit and our businesses and “most importantly job creation” to get going again?, he asked
His question, which was quickly cheered by traders on
“I see a lot of amnesia setting in now,”
Nearly three years after the collapse of
I called Mr. Dimon, in part, to challenge his view. But I was somewhat taken aback by his response, which was far more nuanced than his seeming diatribe to the Fed chairman.
“My point wasn’t that we shouldn’t regulate the industry,” he said. “But we should think twice about how exactly we’re doing it and the cumulative impact of the changes if the main goal is to help create jobs.”
The more restrictions put on banks, he said, the less lending and financing of businesses that will take place. To him, it’s simple arithmetic.
“I want job growth like everybody else,” he said. The problem, he contends is “we’re trying to do two very different things at the same time,” referring to regulating the industry and stimulating the economy.
“I would stop trying to solve every perceived problem at once,” he added. “The highest and most important thing we can do right now is to get the economy growing and adding jobs.”
It’s easy to dismiss Mr. Dimon as another banker crying wolf. His firm has vigorously lobbied to prevent the Federal Reverse from raising capital ratios to 10 percent from 7 percent, fearful it will crimp lending — and probably profits (and yes, compensation.)
But it’s also an uncomfortable truth that Mr. Dimon should be taken seriously, at least his suggestion that policy makers can’t predict the full impact of the coming regulation.
“Jamie Dimon is right that it only makes sense to look at the effects of financial regulation holistically,” said
That was an unsatisfying answer and an uncomfortable truth, too.
Indeed, Mr. Dimon may be right: Strict regulation could hamper the recovery in the short term.
But his comments also raise a larger policy and political question: Can we afford to risk another collapse of the financial system — even if it doesn’t happen for another 100 years — by going lighter on regulation today? It’s an idea, by the way, that is very hard for regular Joes to swallow.
“My instinct is that the Fed must be right to push for raising capital requirements from 7 to 10 percent,”
Other academic studies have come to similar conclusions.
In a perfect, less politicized world, perhaps we could follow Mr. Dimon’s advice and wait to increase regulation until the economy is on steadier footing. (It’s worth noting that most of the Fed’s proposed rules and requirements already would be phased in over time.)
But will bankers — or even regulators and lawmakers — think the industry needs new rules when the economy and the job market are in full-on growth mode?
After all, the financial system only gets tested in times of crisis — at which point regulation comes too late.