Dimon Says US Banks Should Dictate to Regulators « naked capitalism

Dimon Says US Banks Should Dictate to Regulators « naked capitalism

Now that Steve Jobs has retired from Apple, Jamie Dimon seems determined to assume his role as the CEO with the most effective reality distortion sphere. You can infer that from the magnitude of the whoppers he is telling and the size of the audience he is trying to bamboozle.
But while Jobs’ Svengali tendencies have gotten more than occasional mention, they weren’t a major failing. Jobs not only saved Apple, but he spearheaded the development of important new product categories. By contrast, Dimon has long been a bully, a smart and capable bully, but a bully nevertheless (I have reports going back to his first year at Harvard Business School, and it takes some doing to be memorably obnoxious by dint of the competition in that category).
Now on the surface, Dimon’s latest brazen remark isn’t quite as gross as my headline suggests. He is merely saying that US banks should not be subject to the new incoming international bank rules, known as Basel III. That might seem to be a narrower statement, but as we show, when you parse his logic, it amounts to banking uber alles.
Here is the relevant section of an interview published today in the Financial Times:

New international bank capital rules are “anti-American” and the US should consider pulling out of the Basel group of global regulators, Jamie Dimon, chief executive of JPMorgan Chase, has said….
The Basel III capital rules are designed to make the financial system safer by making banks build up risk-absorbent “core tier one” capital to at least 7 per cent of risk-weighted assets. The biggest, including JPMorgan, have to reach 9.5 per cent.
“I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are blatantly anti-American,” he said. “Our regulators should go there and say: ‘If it’s not in the interests of the United States, we’re not doing it’.”
Mr Dimon also criticised global liquidity rules, arguing that regulations that viewed covered bonds – a European market feature – as highly liquid but discounted government-backed mortgage-backed securities in the US were unfair and that other details hit investment banking activity core to US banks hardest.
Regulators say all countries compromised on agreeing the rules, which put eight banks – five from outside the US – in the top level of capital. But Mr Dimon said there was a threat that Asian banks, in particular, could take US market share because of the combination of US domestic and global 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,” said Mr Dimon. “If they think that’s good for the country then we have a different view on how the economy operates, how the world operates.”

Let’s start with some background. Treasury secretary Geithner said repeatedly during the Dodd Frank process that the shortcomings in the legislation didn’t matter all that much, since having banks carry larger capital buffers would do the trick, and that was coming with Basel III. In other words, Geithner argued the higher capital requirements to be imposed by international rulemaking process was where the critical banking regulatory fix would happen. And this is what Dimon is now, loudly, out to undermine.
Let’s go to the Dimon argument, such as it is. What about “international” does he not understand? If you want to play outside America’s borders, you can expect to be subject to different rules. The Eurozone, much to the consternation of US and UK players, has basically told the Anglo private equity firms to go to hell. They are forbidden both from doing deals in EU countries and from raising funds there unless they register and obey local rules. The Eurozone has gotten sick of rapacious foreign players buying decent European companies, cutting jobs, saddling them with lots of debt, and shrugging their shoulders when they miscalculate (often) and the rent extraction kills the company. The EU rules, among other things, will restrict how much a PE firm could lever up a portfolio company.

 http://www.nakedcapitalism.com/2011/09/dimon-says-us-banks-should-dictate-to-regulators.html

Bank of America hit hard

Here is a story from MSN money that talks about today's market collapse and some reasons why Bank of America went down so hard. 

Why Bank of America tankedBank of America was the biggest loser among Dow and S&P 500 stocks, down 20.3% to $6.51. Investors worried the banking giant won't be able to handle all the problems created by its mortgage business. The selling accelerated after a big hedge-fund manager sold out his stake.

It's not clear if the collapse today of Bank of America's stock price means the government may be forced to extend assistance again. Most of its problems are mortgage-related and directly the result of its disastrous 2008 acquisition of Countrywide Financial.

It was hit with two bits of bad news today: American International Group (AIG) sued the company for more than $10 billion over what it called a "massive fraud" on mortgage debt, deepening the litigation morass facing the largest U.S. bank.

AIG said it expects to pursue other litigation to recover losses from counterparties that "sought to profit at our expense." Taxpayers still own 77% of AIG, which received $182.3 billion of government bailouts.

The other was that hedge-fund manager David Tepper, who won big in 2009 betting on battered bank shares, now is bailing out on some battered bank shares.


CNBC said Tepper’s Appaloosa Management sold its position in the banking company.











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Depression may be the reality of the economy regardless of the spin

Washington's Blog has a great article regarding the fragile nature of the economy and the effort to fool the voting public into believing we are not experiencing a great depression. 

Washington makes case that we are in a depression at Washington's Blog

In addition, the percentage of Americans who owned houses during the 1930s was much lower than today, which means that a larger portion of the public is being hurt from falling home prices today as compared to the Great Depression.


Meredith Whitney, Nouriel Roubini (and here), Zillow, Case-Shiller and even S&P have been calling a double dip in housing.

States and Cities In Worst Shape Since the Great Depression
States and cities are in dire financial straits, and many may default in 201
California is issuing IOUs for only the second time since the Great Depression
Things haven't been this bad for state and local governments since the 30s.
Loan Loss Rate Higher than During the Great Depression

As I mentioned in a recent blog, Economy still in deep, we are not out of the woods yet.  The economy is not anywhere near recovery as we have heard.  There is no way to burn off all the "toxic" debt in the economy quickly.  The administration wasted over 2 years slow dancing with the banks.  The banks have been giving unlimited supply of cash at virtually zero percent interest.  They are able to buy bonds or make quick use of this free money to increase their profits. 

Does it make any sense for the banks to be making record profits with all the losses yet to be marked on their books? 

I don't think these excessive profits benefit any one (other than the banks) because they have just left the country in the dust.  USA to the rescue for the "almighty" too big to fail banks as they pull off the greatest heist with in  memory. The banks that are likely insolvent are being allowed to operate and make billions in profits making no accounting for the huge foreclosure losses.   
Washington has put together an excellent article that can be viewed in full here.