Dimon double gives Congress wasteful distraction
By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Americaās federal lawmakers need to get their priorities in order. Politicians from both chambers of Congress spent four hours over the past week publicly grilling JPMorgan boss Jamie Dimon. But they have far more pressing work to do.
Sure, Congress has a crucial role to play in ensuring the countryās banks are well supervised. And JPMorganās $2 billion-plus portfolio hedging loss does raise questions about risk management, the Volcker Rule and whether mega-banks like JPMorgan remain too big to fail.
But the bankās Chief Investment Office debacle has not put the firm in danger – let alone trigger any emergency assistance from taxpayers. Even if the loss took a $3 billion chunk out of JPMorganās net income, that would still leave it cranking out more than $15 billion this year. And it has had no effect on liquidity or capital.
That makes it primarily an issue for regulators and the bankās shareholders, who have seen $20 billion in value wiped off the firmās stock since the loss was announced in early May.
But lawmakers could not resist indulging in some good old politicking. Representative Barney Frank, among others, tried pushing Dimon to admit that regulators need the funding that the Republicans want to cut. Fellow Democrat Representative Maxine Waters characteristically muddled matters, asking whether a ādrop in share value affected shareholders in the U.S.ā – and whether the trades were put on in London to avoid U.S. watchdogs, even though the office is overseen by American regulators.
GOP members took the opposite track, as Representative Jeb Hensarling tried to cajole Dimon into supporting regular bankruptcy for financial firms over the governmentās new non-bank liquidation authority. Others stressed that the 2010 Dodd-Frank Act wouldnāt have prevented the loss.
But the showmanship is just wasteful distraction. Congress has serious fiscal issues to deal with, including a looming $600 billion fiscal cliff as well as weak job and GDP growth. The potential harm from not addressing that surely vastly outweighs using Dimon as an excuse for grandstanding. A government sliding toward another potential economic crisis should worry more about its balance sheet than JPMorganās income statement.