It is time for policymakers to ask more questions not of banks and bankers but of themselves. That was the message from JPMorgan Chase Chief Executive Jamie Dimon delivered on Thursday—one day after he and other big-bank bosses met with Federal Reserve officials over capital stress tests, counterparty exposure limits and the Volcker Rule.
"We keep shooting ourselves in the foot," Dimon said, using "we" to refer to Washington policymakers. "The reason things are coming back so slowly isn't that things had to be that way. It was that we made it that way."
Dimon was speaking at a conference hosted by the University of Rochester's Simon Business School. Lauded as "executive of the year" and introduced as a "CEO Statesman," Dimon argued that the government should focus on resolving its own fiscal issues instead of reengineering a financial system that is healing itself.
"The consumer is in my opinion 80% repaired, business 100% repaired," Dimon said. "We have the widest, deepest and most transparent capital markets in the world. Why the hell are we so depressed?"
Four years after the financial crisis, regulation and poor fiscal policy decision-making pose a greater risk to the U.S. economy than do the residual effects of the crisis itself, he argued.
Dimon's remarks carried particular poignancy coming just one day after he and the heads of other major banks met with the Fed to discuss limits on the exposure a single bank will be permitted to have to a single counterparty. For JPMorgan Chase, the largest player in the derivatives markets, the topic carries particular weight.
Dimon's broader complaint is that the government is failing to focus on its own troubling problems.
"We've got to get it done,' he said of the need to pass a debt reduction plan along the lines of the Bowles Simpson proposal. "It's obvious and not that painful to do." Instead of tackling such issues, Washington has blundered into financial services and "denigrat[ed] great institutions," Dimon charged.
"We've lost the ability to have true collaboration," he said. "Honestly, no one is in charge... I would have preferred that Dodd-Frank was done … that we'd all shook hands and then moved on. Instead, we're litigating it now."
Despite the perception that large banks are the target of the law's key provisions, smaller banks will be hit the hardest, Dimon said.
"For JPMorgan Chase, I think we'll be fine," he said. "We've got [thousands of] programmers, a thousand lawyers, and we'll figure out how to get it right. But it's going to kill small banks."
Dimon said he understood the populist anger embodied by Occupy Wall Street protesters — "I have a few relatives down there," he said . However, he argued that the movement was misguided in criticizing banks like JPMorgan Chase.
"A lot of people made a lot of money, and their company blew up," he said. "I don't like that either. But is every bank guilty? No, that's just another form of discrimination."
Dimon also spoke about his company's approach to instability in Europe and emerging markets, arguing that prudent risk management meant weathering crises rather than avoiding them.
The company has about $15 billion exposed to the troubled countries in the European Union, but the bank is more concerned about its long-term position in those markets than whether it takes a hit from a catastrophe such as a country's disorderly exit from the Euro.
"If we lose $5 billion, I won't be sorry," he said of the potential fallout. "It will have been the right thing for the bank and its clients."
In the U.S., housing will soon become an engine propelling the economic recovery, Dimon said.
"We're at the turn," he said, citing pent-up demand for household formation. "It's happening right now … some of the worst markets we've already had are in repair. Phoenix and Miami are going up."
During a question-and-answer period, Dimon reassured a recent Rochester graduate and JPMorgan Chase equity analyst that investment banking would remain a wise career move.
"Investment banking is going to have a very bright future," he said. "It has always been well paid, because it's a high power, high pressure, highly intelligent business."
As for criticism of the industry, "this too will pass," he said. "If you read the history books, this has been going on for a long time. When things go wrong, finance gets blamed."