As chief executive of JPMorgan Chase, you would expect that Jamie Dimon might not be “all in” when it comes to the new financial regulation coming out of Washington.
Still, it was a little surprising to hear him launch into what could be seen as a barrage of complaints about how the regulations could be everything from a disadvantage to a “nail in our coffin”.
1. New Capital Rules/Standards
At issue is the amount of capital banks would need to have on hand to cover potential losses. Regulators are seeking to negotiate international capital standards for the biggest banks.
Dimon is concerned that regulators are looking to set the reserve requirements too high and that they might allow overseas banks to use a different calculation. In Dimon’s view, both could put U.S. banks at a competitive disadvantage and stifle economic growth.
Said Dimon, “If you want to set it so high that no big bank ever goes bankrupt… I think that would greatly diminish growth.”
Too large a disparity in capital requirements between Europe and the US would mean “you’re pretty much putting the nail in our coffin for big American banks,” he said.
Urging regulators to make a quick decision, he said the uncertainty meant banks were already restricting their lending. “If you think that’s helping growth, it’s not,” Mr. Dimon said, adding that a 7 percent capital ratio would be adequate.
2. Restricting Debit Card Fees Charged to Retailers
This is probably the area where Dimon gets the most support. The law could make it more difficult for consumers to use debit cards as banks would undoubtedly limit the dollar amount of a transaction.
In fact, John Tester, Democratic senator from Montana, has closed in on the 60 votes he needs to overturn the rule. He was supported on Wednesday by Mr. Dimon who called it “basic price fixing at its worst”.
“It basically penalizes us for having debit cards,” he said. “I think it was very unfairly done in the middle of the night with no facts and analysis whatsoever. This is not the way legislation should be done.”
3. Requiring Collateral to Trade Derivatives
Derivatives in all their forms have come under particular scrutiny with regulators. The new legislations will push many derivatives unto exchanges. That in itself will change the landscape on which these controversial and complex investments are traded.
But the idea of adding collateral would in Dimon’s words “damage America.” And instead of the derivatives business going away it would just move away. He cited as an example the possibility that Caterpillar would simply move its derivatives to Singapore.
He said the new law had failed to improve the regulatory architecture. “We had a system of too many regulators, too much overlap and too many gaps. Instead of simplifying and strengthening, we added more. It’s even more complicated now.”