Jon Macaskill is
one of the leading capital markets and derivatives
journalists, with over 20 years experience
covering financial markets from London and New York.
Most recently he worked at one of the biggest global
was widely reported. "Everyone is claiming to be a boy scout
while accusing others of juvenile delinquency. However, neither
merit badges nor detentions will be self-selected but, rather,
determined by impartial peer review and mutual oversight," he
said in a speech to the Institute of International Finance, the
banking industry group, at the Washington gathering.
A similar sentiment had
been expressed to less attention two days earlier by Bill
Dudley, president of the Federal Reserve Bank of New York, and
Dimons home-town regulator.
Dudley concluded an
anodyne speech about the pace of reform with what appeared to
be a plea for temperance on the part of Dimon.
"Banking leaders and
industry trade groups should propose smart solutions to achieve
essential financial stability objectives and not simply lobby
against change. The industry has an interest in a healthy
financial system that can withstand shocks and adverse economic
circumstances. More statesman-like engagement is both warranted
and welcome," Dudley said.
If that was a call for
restraint from Dimon who sits on the board of the New
York Fed then it was embarrassingly rebuffed. Dudley had
barely issued his request for everyone to get along before
Dimon was tussling with Carney.
between senior regulators and bank CEOs are highly unusual and
could be taken as a sign that Dimon is starting to take the
King of Wall Street headlines too seriously.
There may be method in
Dimons apparent madness, though, based on his take on how
the coming US election can be used to weaken the impact of
In the week after the
broadside against Carney, reports emerged that Dimon had held a
meeting with Republican presidential candidate Mitt Romney.
Neither party would obviously benefit from an endorsement or
financial contribution by Dimon, who supported Obama in the
last election. Public backing from the face of Wall Street
would not help Romney, who is battling to shed his privileged
image as a former venture capitalist with Republican primary
voters. Nor would a public split with the administration suit
Dimon, even if his disillusionment with the White House is
The semi-public dalliance
with Romney will help to remind politicians of both parties
that Wall Street financial backing is very much up for grabs at
the moment, however.
With a Republican
majority in Congress, Wall Street already has allies willing
and able to stall the pace of change, such as Spencer Bachus,
chairman of the House financial services committee, who is
trying to dilute the impact of the Dodd-Frank reforms.
Democrats looking to
raise Wall Street funds before the election might follow suit,
potentially adding to the drumbeat of criticism of the Fed if
JPMorgan can convince politicians that the details of
regulatory reform could put US banks at a disadvantage to
But Dimon is playing a
dangerous game with this approach. For one thing, regulators
might fight back. The speech Carney delivered soon after his
disagreement with Dimon contained a withering rebuttal of a
recent estimate of the potential cost of reform by the
Institute of International Finance. Bank of England officials
including governor Mervyn King have also shown signs of
exasperation with scaremongering by banks. Regulators outside
the US might be able to stiffen the resolve of Fed officials
such as Bernanke and Dudley, even if their own central banks
play a less important role in global supervision.
The greater potential
risk is that Dimons aggressive tactics will exacerbate
the growing distrust between financial institutions in
different countries and undermine confidence in the ability of
regulators to liaise effectively just as market strains are
That would be a disastrous outcome for JPMorgan a
firm that is heavily reliant on the performance of its global
investment bank and runs the biggest derivatives trading book
in the world.