As everyone knows who reads this blog, I have never held back on attacks against Jamie Dimon, head of JPMorgan Chase. In truth I have been very vocal in my condemnation of him and his compatriots as major causes of the funk in which our economy now finds itself.
So it’s only fair that I acknowledge the fact that Mr. Dimon had the stones and the integrity to come on TV recently and acknowledge that JPMorgan Chase, under his direction, has screwed up- big time, in dumping over $3 billion into a losing bet on the safety of corporate debt. To be sure, Mr. Dimon was quick to point out that $3 billion was small change when JPMorgan Chases’ total worth was considered. $3 billion may be small change to Mr. Dimon but it sure sounds like a hell of a lot of money to me, money that could be put to way better uses than CEO salaries and crap shoot investments.
The basic problem is that the money Dimon is investing is depositor’s money, nit the bank’s money, and it is insured by taxpayer backing. It’s not like Dimon took the cash from his pocket and slapped it down on a number. Jamie Dimon is one of the smartest guys on Wall Street and based on his recent interview on meet the press, mea culpas aside, he seems to realize that he shouldn’t be playing with other peoples money. He even made kind of a half heated admission that we do need “certain” kinds of regulation.
Now in the real world, Dimon will be back to his old stance as soon as his company’s gaff gets off the front pages and he will once again be fighting to reduce regulation of the banking industry but even if nothing else crashes, it is imperative that the banks that were allowed to merge their commercial and investment banking subsidiaries be forced to separate them again.
There’s nothing wrong with banks gambling with investor’s money. Investors are in the market to gamble. Depositors are not. When you deposit your money in a bank you have a right to expect that the bank will put it in only the most secure investments. That’s why the FDIC backs those deposits. The FDIC was not put together to insure against commercial bank loss, nor investment bank gambles.
The first step in securing financial stability must be to separate commercial banks from investment banks so that the investment banks are not covered by the FDIC and are no longer gambling with taxpayer money.