Simon Johnson Destroys The Myth Of Jamie Dimon's Bernanke Complaint (Crocodile Tears Fooled No One)
Solid beatdown of Jamie Dimon's desperate public plea to scuttle new banking capital requirements.
Watch the Dimon-Bernanke exchange here...
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Jamie Dimon's Faulty Capital Requirement Math
By Simon Johnson
Originally published at Bloomberg
When Jamie Dimon confronted Federal Reserve Chairman Ben S. Bernanke at a conference earlier this week, he spoke for dozens of bank executives who privately believe regulators have gone overboard in seeking to prevent another financial crisis. “Has anyone bothered to study the cumulative effect of all these things?” he asked. “Is this holding us back at this point?”
Dimon, the chief executive officer of JPMorgan Chase & Co., was pressing Bernanke to admit that the total cost of new financial regulations had not been fully calculated, and could well be holding back job growth.
What evidence does Dimon have? He is a very smart executive with an impressive track record, but his account of regulatory changes is incomplete, to say the least. Most of what he lists are the direct effect of a credit boom that ended in a severe crisis. Some badly run firms, including thrifts and mortgage brokers, failed; structured investment vehicles, which were used to hold mortgage securities off-balance-sheet, are gone; there are no more subprime or Alt-A mortgages; markets have become more transparent; and financial institutions have reduced their leverage and increased their liquidity.
As Dimon conceded in his question, risk needed to be brought under control and managed better by the private sector. There is nothing about this part of the post-2008 process that should be laid at the door of the government. If any financial sector blows itself up, firms fail, products disappear and everyone becomes more careful -- at least for a while.
Capital Surcharge
The substantive issue that seems to be bothering Dimon is capital requirements, and particularly the news that the Fed is leaning toward making large banks, such as JPMorgan, hold a 3 percent capital “surcharge” (a complete misnomer; the requirement for more equity financing relative to debt would be a buffer against losses, and not a tax.)
To adopt Dimon’s proposed methodology, what was the cumulative effect of the previous lower capital requirements in the U.S. and globally? This part is easy -- it was the reckless risk-taking and mismanagement that led us to 2008. If you pay executives and traders on the basis of return-on-equity, unadjusted for risk, they will want to take a lot of risk, boosting payouts in the good times and handing the downside risk to someone else (ideally, from their point of view, the taxpayer).
According to Sanjai Bhagat and Brian Bolton, executives at the top 14 U.S. financial companies pocketed about $2.6 billion in cash (salary, bonus and the value of stock options sold) during 2000-2008. Much of that compensation would not have been paid if there were proper adjustment for risk.
Total Crisis Costs
The realized downside risks, as handed to the taxpayer, should be measured not merely as the cost of the Troubled Asset Relief Program (TARP) or Federal Reserve rescue plans, but in terms of the increase in federal-government debt the financial crisis caused. According to the Congressional Budget Office, the financial crisis will end up increasing government debt by at least 40 percent of gross domestic product. (I’ve covered the details of this calculation elsewhere; this point is not controversial among fiscal experts.)
So, to turn Dimon’s question around, we know that previously low capital requirements led to social losses (those borne by taxpayers) in the trillions of dollars, as well as millions of jobs and homes lost, while the private gains were in the low billions.
Lower Growth
What about the cost of raising capital requirements? On this the Federal Reserve tends to hem and haw -- as did Bernanke when questioned by Dimon on June 7. The Institute of International Finance has published estimates that suggest higher capital requirements will directly lower growth. But the institute represents global banks. And the people on its board of directors -- top management from the largest financial firms in the world -- are paid primarily for return-on-equity, unadjusted for risk. They have every incentive to lobby for lower capital requirements.
And the research that says increasing capital requirements will slow growth has no merit -- a point made at length by Anat Admati, Peter DeMarzo, Martin Hellwig and Paul Pfleiderer. Increasing capital requirements means more equity financing for banks, relative to their debt. Admati and her colleagues show this makes both their equity and debt safer, and shouldn’t significantly affect the cost of credit.
Higher capital requirements will naturally change the way banks such as JPMorgan do business. That’s a plus, not a minus. Big banks today benefit from implicit subsidies because the market expects the government to step in and save them whenever necessary.
Mispricing Risk
If you scale back the likely subsidies by requiring much more capital, perhaps the megabanks will get smaller -- but the market can sort that out for itself. The important thing is to withdraw the implicit government support that makes JPMorgan and other large banks today’s government sponsored enterprises and contributes to the mispricing of risk throughout the world.
Dimon is right to ask for the math; this is finance, after all. But he and Bernanke should be aware that the right math is staring them in the face.
Calculate the true social costs of the existing system and weigh that against the nonexistent social costs of significantly increasing capital requirements. We should be going far beyond the higher capital requirements that the Fed wants to impose on JPMorgan Chase.
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Reprinted with permission from Bloomberg.
(Simon Johnson is a Bloomberg View columnist. The opinions expressed are his own.)
To contact the author of this column: Simon Johnson at sjohnson@mit.edu
Simon Johnson, who served as chief economist at the International Monetary Fund in 2007 and 2008, is a professor of entrepreneurship at the Massachusetts Institute of Technologys Sloan School of Management.
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Jamie cries for the Helicopter to ease up...
Get more detail on this clip here...
Jamie Dimon Questions Bernanke On New Bank Rules, Complains About TOO MUCH Regulation, Becomes Wall Street Hero (VIDEO)
Jan 19, 2012 at 11:49 AM
Reader Comments (10)
Meanwhile, after watching a rare fellow (he has made himself scarce), I can safely say that YES, HAARP exists as a weather weapon and has been repeatedly used over the past few months to bring about SEVERE deadly weather phenomena in the U.S. I followed this site as he showed and described satellite photo sequences of chemtrails directly followed by HAARP circles during my later observation and then in 24 to 48 hours, massive flooding and rain in the Mississippi river system and another serious rain storm centered just south of Everett, Washington just north of Seattle.
The Mississippi twin HAARP circles seemed to act as polarized circles a couple hundred miles across, which by their polar nature of the same polarity as the approaching storm front, repulsed the front into itself like a narrow gate, thus channeling a storm starting to disssipate after clearing the south Rocky mountains back into itself and guiding it up the river valleys feeding the Mississippi River. Yes I copied it. And now it has been difficult to find on the net. Imposters or a different format or different voices are there as far as new material. A few older videos are easy to find at dutchsinse,com on Youtube, which changed the video cluster.
Both the Bernanke pirates and the England owned Alaska based HAARP facility are parts of a manifold attack by a foreign entity with domestic assistance (Hint: Think CFR and the Fed) Please do your homework on this, even if your family starts barking at you. This is WAY BIGGER than Dancing with the Stars or American Idol.
This is not a drill or accidents.
The alaska facility is just that, an improved version of OTH-B and nothing more. I suspect that it might also be used for satellite and space junk tracking judging by the position of the dipoles.
Silver Iodide and Barium compounds are at times air-sprayed for different reasons, including weather manipulation.I don't believe you did not know this, so I will have to use further research and honesty to be had among the scientific community to find out more details. Have a nice day.
Oh. Do you know General Michael Aquino? Is he really like everybody says?
I am aware of other uses such as cloud seeding etc. exist and obviously there are those who could and are in a position to possible do other things though it is unlikely but then again nothing surprises me anymore.
The Alaska facility indeed was built by British based BAE (who was involved in spying on domestic communications here in the US during the Bush Admin. (They did the monitoring from Canada to circumvent the law regarding domestic spying during Bush 1).
Haarp does have a radar component to it and several other functions that are communications and ionospheric research related. The beam is slightly 'steerable' but can only be pointed skyward nearly straight up. This is why the array looks like a
300 acre field of 'T"s ...... Again the most secretive thing to this is research on communications such as submarine communications but satellites with lasers seem to be the up and coming thing. I expect that like the OTH-B, the alaska facility will be closed and mothballed probably in the near future.
Speaking of Radar, It's first wartime use was during WW-2, The british were getting hammered by german aircraft so the new and top secret 'radar was installed along Britains' coast. The british now could see the german aircraft comoing over at night and shoot them down. The germans were perplexed as to how the allies knew they were coming so the allies made up the story about being able to see at night by having spotters ingesting large amounts of vitamin A (think carrots and bugs bunny)..... and made certain that the german spies caught wind of this info.
This was a classic psyop bullshit operation. The germans upon finding out this info tried consuming huge amounts of Vitiman A (it is toxic in large amounts) and found it sickened them and didn't work. The same game is still played now although technology has changed. The real issues that face us are pretty much in the open now and the BS is flying all over the place. Watch the banks and MIC!
Evergreen Air.... I have heard of them. Jeppeson Dataplan is an interesting outfit and has been renditioning since before 1995. Check out the name Kingfisher too.....
Mike Aquino and many others are involved in some pretty bad shit. You can vote out congress, presidents etc... but these guys are in there for life and have no real 'supervision'. Therein lies the real problem... here is a documentary you might appreciate.
http://topdocumentaryfilms.com/human-resources/
Again, I apologize if you feel I was being hostile. Just expressing my opinion on the subject and for the most part I enjoy your posts and am in agreement on the issues. Have a good weekend.
The planes the Air Force use to spray Chemtrails, are nothing like anything your refuring too. The Air Force has a supper stelth, think B-17 on steroids......
They sprey at FL51, and a little higher depending on the jet stream. The reason they sprey us is to weaken our lung tissue so the Backtiera- Viures can infeltrate them deeper to make us very sick and surcom to the Ugenics for their depouptlation....
I hope i can find the link to the pics and story yeat. You wont belive the inside of this monster. The men and woman on board have no real clue what they are doing, other taking out the beer with the garabge.
I have a link on Haarp, where the SOB, is lyeing threw his teeth knowing dam well whats realy going on. Try n find it after supper. The chemtrails link i need to go threw 4 years of snooping.................it will be worth it if i can find it Howard....
If you stand in front of my 18" Peavy Bass Speaker an I play the "Low B" string, you can walk out 120' and the sign wave will cary the sound out as loud if you was standing right in front of my Amp..........
This is how they direct the engery. They cant make weather, but they can alter it. Best trick up thAre sleeve is making earth quakes........
http://www.atlanteanconspiracy.com/2011/03/japan-tsunami-caused-by-haarp.html
Clip one gets good with the goverment lye at 4 min. All the clips are worth your time.
http://milkhouse-mouse.blogspot.com/2008/06/western-bankers-threatened-japan-with.html
Hey, back in Sconsin when our Araey on the Roof was iced up all we had to do was turn on our 1,000 Watt Linyear Ammplafier, and one hour later the ice was gone.....
So understanding 1. Freq....... 2. Wave Length......3. How Sign Waves Work..................4. Amplatude Power...............5. Ionisphere 750mi. up in the sky and how radio waves bounce back to earth 750 mi. or more away from the TNX Antenna.
How LFW's can make your teeth rattle in your gums.......How Microwaves can cook your brain cells..................and it all starts to make a lot of sence.
The bouncing of the clouds, rainbows in the clouds, thats all about the Sign Waves and high power at differant Freq.
Now the Chemtrails, thats some realy cool shit and the planes they use. I will work on that one, but it is a secret file and im not sure whAre i put it..............Would the goverment do this to the little people, you dam right they would when they dont get their way.