Inside Financial Services

Elizabeth Warren May Not Be The Banking Expert She Thinks She Is

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Bloomberg provides an update on the Elizabeth Warren-Jamie Dimon spitting contest:

U.S. Senator Elizabeth Warren shot back at criticism from JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, saying bankers don’t dislike her because she knows too little but because she knows too much.

“The problem for these guys is that I fully understand the system and I understand how they make their money, and that’s what they don’t like about me,” Warren told the Huffington Post in a podcast interview released Friday. [Emph. added.]

Remember Donald Rumsfeld’s famous “unknown unknowns?” I think we may have stumbled on a case of that here. If Sen. Warren really “fully understands the system” as well as she says she does, perhaps she can describe how a bank computes its loan loss provision—or, for that matter, what the difference between a loan loss reserve and a loan loss provision even is.  She could enlighten us on the accounting implications of holding a security for sale versus holding it to maturity. And I’d be especially interested to hear her views on the calculation and reporting of other comprehensive income.

You’re thinking I’m being condescending and pedantic here, but you’re only half right. The fact is that the banking industry can be extremely complex, and its accounting rules wide-ranging and arcane. It shouldn’t be too much to expect, I don’t think, that as strident an industry critic as Elizabeth Warren to at least acknowledge that.  Instead, she says that she “knows too much” about banking, which is one of the many reasons why bankers like Jamie Dimon dislike her so. First off I doubt Jamie Dimon dislikes Elizabeth Warren. I bet he just wants to arrive at some sort of meeting of the minds with her. But secondly, no, Sen. Warren doesn’t “fully understand how banks make their money.” Which is to say, getting back to Don Rumsfeld, she doesn’t know what she doesn’t know. That’s the main reason so many banking executives have such a problem with her.

What do you think? Let me know!

16 Responses to “Elizabeth Warren May Not Be The Banking Expert She Thinks She Is”

  1. jsc173

    I’d also be curious as to her opinion of the potential impact on US banks if they adopted IFRS.

    • Jerry Goldstein

      Princess Pocahontis has trouble remembering her own ancestry, much less any definitive banking regulations.

    • Thalya

      “The concept of Chrislam, now eecrabmd by such preachers as Rick Warren and Robert Schuller, appears to have emerged from a program on the meaning of “love your neighbor” at Grace Fellowship Church in Atlanta, Georgia…”Paul L. Williams, Ph.D.Από μία πρόχειρη έρευνα.

  2. Dennis Roman

    the list of unknown unknows would easily include
    market risk
    currency risk
    reputation risk
    and similar

    Ironically the government is not well versed in any of these as simply none of them impact the govt. Since they simply print all the money they need or want after already taking away an unconscionable amounts from those working the various trades in the form of taxes niether market or currency risk are germane. And to add insult to injury reputation risk is not a factor either as the gov’t could care less what we think as no one is ever held accountable for anything they do. So the fact that 60% of people thing the country is headed in the wrong direction just does not register with the gov’t.

    Senator Warren may actual believe that as she has a mortgage and a credit card she knows how the banking system works. Gov’t stimulates one thing and one thing only in the banking sysem and that is regulation.

  3. etoleary

    I think Sen. Warren has figured out that the mix of aggressive incentive systems, lax regulatory attention, risky behaviors and management that has not effectively rooted out the criminal behaviors of some threatens the banking system’s safety and soundness.

    • Chineye

      If your arlteics are always this helpful, “I’ll be back.”

  4. WallStreetCritic

    Elizabeth Warren fully understands that the banks and financial firm created the recent great recession and knowing that is all she needs to know to help prevent it from happening again.

    • Bill

      Sen Warren does not understand the cause of the last great housing bubble thus her solutions to fix the problem are missguided. Any solution that is founded on a biased ignorance of the facts is bound to do more harm than good.

    • Cruncher Strongboy CPA

      Princes Summer Fall Winter Spring was best when she was on the on Howdy Doody show. Then she didn’t have to remember how the Affordable Housing program started under Clinton encouraged no income verification mortgage loans. Originally based on the 1990’s Community Relations program (I think that’s the right name).

      After all President Bill Clinton, Congress, Fannie Mae & Freddie Mac all said cheating was ok so everyone cheated. If you didn’t accept the cheating loan applicant information you were sued by the government as non-compliant with public policy and worse, institutionalized racial discrimination. After the financial disaster they needed to blame someone. Oh, not me the program creators said. Then they said of course not the ordinary fraudulent loan applicant, the person who got the money from the original faulty loan application (they were victims they said) as were already being penalized because they borrowed money and bought to pricy a house they couldn’t afford and then couldn’t or wouldn’t pay the loan.
      So they were left with only the companies they forced to accept the real cheaters. Rational? Companies are not real people. Unfortunately they are staffed, owned and administered by real people and thy didn’t count to the bureaucrats who were seeking to find anyone to blame but themselves.

      • Just a citizen

        You got it right Strongboy. She doesn’t seem to understand how government(Barney) pushed the whole issue of “local lending” to extremes, vis-a-vis liar loans!

  5. murphyman

    You were right when you said you were condescending and petulant… a snarky commentary that adds nothing of value to the greater discussion.

    • The Detail Devil

      Pedantic. Not petulant. Devil is in the details, which is the message I think he was trying to get across….

  6. charlie1939

    Your condescending commentary on Sen. Warren’s knowledge or lack of knowledge is a silly exercise of no value.

    If you wanted to make a useful and insightful commentary, you could have addressed SPECIFICALLY WHERE she is lacking knowledge of the banking system and what that impact could be.

    Personally, I feel she knows enough to know that the big banks are too big, that the leaders of the big banks are able to rely on goverment handouts if they screw up, that they can continue to draw ridiculous compensation for mediocre performance and that they will never suffer any real consequences for their corporate, financial and ethical misdeeds.

    • Keke

      wachovia is great, they are there for you when you need help with anything. they know there stuff. one time i had a huge chinkecg account problem and they fixed right up and found some extra cash (: check it out. i love it (:

  7. Xiaofei

    As a former bank examiner, I know that even the regulators who are full-time resident examiners of the large banks don’t understand the banks they inhabit, their supervisors and upper management of OCC and FDIC certainly don’t understand, so who would ever believe that Chief Lizzy Warren would have any significant understanding of the banking industry?

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