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Everyone in Washington is talking about JPMorgan Chase's botched hedge. Everyone, that is, but the federal regulators in the Office of the Comptroller of the Currency who actually know what's going on.
May 23 -
The $2 billion loss not only helped proponents of a tougher Volcker Rule and punctured the myth of CEO Jamie Dimon's infallibility. It also strengthened calls from regulators like Tom Hoenig for stronger action against big banks.
May 11
Jamie Dimon is getting plenty of unsolicited crisis-management
Industry experts at a panel discussion on Monday offered several suggestions for how the chief executive of JPMorgan Chase (JPM) should go about repairing his bank's reputation, after a London trader's bets lost the bank at least $2 billion.
Their suggestions ranged from breaking up JPMorgan Chase into smaller pieces to giving customers a certain percentage of its profits. While the panel was assembled to discuss how the banking industry in general could rebuild its reputation, conversation kept returning to JPMorgan Chase.
The news of JPMorgan Chase's trading losses garnered the attention that it did because the "wound hadn't really healed yet" from the financial crisis and "this kind of picked at the wound a little bit," David Reavis, the external communications director at KeyCorp (KEY), said during the discussion.
The panel's participants criticized Dimon for how JPMorgan Chase announced the trading losses, with Reavis saying that people may have felt that the bank wasn't being transparent about the extent of the losses.
When a crisis strikes at KeyCorp, the Cleveland bank imagines the worst possible headlines and then works backwards, Reavis said. The bank has employees that monitor traditional and social media 12 hours a day, and it also has a response team of employees from its legal, compliance, communications and marketing department and its business lines that will be called in to handle a crisis.
KeyCorp recently faced its own negative publicity, when news surfaced that the bank hadn't forgiven the student loan of a
Michael Campbell, CEO of wealth management firm Dominick & Dominick, said that Dimon could have deflected some criticism by relinquishing his chairman title. Two proxy advisory firms had urged JPMorgan Chase shareholders to strip Dimon of that title; a shareholder vote this month to do so failed, though 41% of shareholders
Renouncing the chairman title "would have taken 50% of the noise out of the issue," Campbell said. "He would have said, 'It's too much for one person.' It would have held him more accountable than standing up and doing a quick dance and a fast talk. It would have been real action where he would have recognized the seriousness of it."
Campbell also blamed JPMorgan Chase's problems on its size, and said that banking should return to being boring. JPMorgan Chase, the largest bank by assets, and its competitors would be well served by shrinking their businesses and becoming a bunch of smaller firms with new names, Campbell said.
Although banks entered other lines of business so that they could increase profits by selling more products to their customers, this hasn't happened, he added.
"There is no cross selling. There is no vertical integration," he said. "They are too big to manage and now the stock price has collapsed."
Besides shrinking, banks should also "do something for the benefit of the customer, not the shareholder" to regain trust with the public, Campbell said. He suggested that JPMorgan Chase pay 1% of its money funds back to customers. This would be "an absolute statement that our customers are important to us," he said.
Mary Joan Hoene, a former Securities and Exchange Commission regulator, agreed that too much concentration is a concern for the industry. But Hoene, who is now a counsel at the law firm Carter Ledyard & Milburn, argued that adding regulations and creating new regulatory agencies does little to control risk, and instead creates compliance burdens for companies and coordination problems for regulators.
The panel discussion in New York was hosted by public relations firm BlissPR.
