Cam Fine, head of the Independent Community bankers of America didn’t much like Jamie Dimon’s letter to shareholders:
In a recent message to shareholders, JPMorgan Chase chief executive and chairman Jamie Dimon wrote that many large banks had “no problem” navigating the crisis, whereas many smaller banks failed because of it. . . . Not only did most of the massive Wall Street institutions survive, Dimon notes, but JPMorgan Chase itself graciously paid roughly $8 billion in Federal Deposit Insurance Corp. assessments in recent years to help pay for the resolution of the smaller banks that couldn’t hack it. . . .
Now that these megabanks are back on their feet and bigger than ever thanks to their government bailouts, they continue to reap the benefits of taxpayer support. As the Government Accountability Office confirmed last year, Wall Street firms continue to receive a tangible funding advantage over smaller institutions thanks to their too-big-to-fail government guarantee. . . .
Ridiculing the smaller financial institutions that have to answer to the free market — that do not enjoy an absolute taxpayer backstop against failure — is beyond hubris. It shows a complete unwillingness to accept responsibility. It shows that Wall Street, infantilized by privilege, has learned nothing from what it wrought in those panic-stricken months in 2008 and 2009 and in the years of economic doldrums that have followed. [Emph. added]
I continue to be mystified by Fine’s habit of vilifying the big banks. Big banks and community banks have a more interests in common than not, after all. If Fine had realized this and made common cause with big banks in lobbying Congress when Dodd-Frank was being considered, perhaps the final legislation wouldn’t have placed quite as large, and ruinous, regulatory burden on the banking industry—a burden that small banks in particular are ill-equipped to shoulder. As for big banks’ “too-big-too-fail government guarantee” that Fine complains about, if that’s such a competitive advantage, why are institutions twisting themselves in knots to be rid of it? (For that matter, smaller banks have several advantages of their own, such as exclusions from the Durbin amendment and CFPB oversight.) Oh, and the bailout. The large banks didn’t seek it or need it. It was forced on them whether they wanted it or not; the money was quickly repaid with interest. And if that bailout didn’t happen, the resulting lack of depositor confidence in the system would have been so pervasive that many more smaller banks would likely have failed than actually did.
Cam Fine seems to resent the fact that big banks even exist. That’s nuts. The financial system is best served by having large, broadly diversified financial institutions that can serve large, global clients. (If, in Cam Fine’s dream world, there were no big U.S. banks to do the job, those big clients would simply give their business to big foreign banks.) Nor is he right to complain about a “recession created by Wall Street.” The recession came about as the result of the bursting of the housing bubble. Small banks, by doling out all those loans to homebuilders, inflated that bubble every bit as energetically as the big banks did. That’s why so many smaller banks failed after the housing market collapsed.
As I say, I don’t get what Cam Fine’s problem is. Community banks have successfully competed against the big banks for years even without his whining, and will keep on doing so. Cam ought to find another scapegoat.
What do you think? Let me know!