Turn Banks into Utilities? That Would Be 'Irresponsible,' Dimon Says

Law and regulation

'Too Big to Fail' Forum: Plenty of Heat, Little Light

In a forum at the Federal Reserve Bank of Minneapolis aimed at examining progress made in ending the era of Too Big to Fail banks, academics engaged widely differing views on the nature of bank risk and how far regulators have come in addressing them since the crisis.

By John Heltman

April 4
Law and regulation

Fed's Kashkari Calls for Radical Approach to Megabanks

In what could be seen as a Nixon-to-China moment, Minneapolis Fed President Neel Kashkari, a former Goldman Sachs executive and one of the architects of Treasury's bailout of the largest banks, said that breaking up the big banks and turning them into public utilities may be the only way to solve "too big to fail."

By John Heltman

February 16
Community banking

Smaller Banks Depend on 'Big, Strong' Banks Like JPM, Dimon Says

JPMorgan Chase chief Jamie Dimon added to his defenses of megabanks, arguing that regional and community banks rely on them. The comments could inflame tensions among banks instead of easing them.

By Kristin Broughton

February 23

Jamie Dimon may not have attended the public forum on "too big to fail" earlier this week. But he used his annual letter to shareholders to weigh in on the issue.

The outspoken chairman and chief executive of JPMorgan Chase said Wednesday that turning banks into public utilities would encourage "irresponsible lending."

The comments provide the latest clash in the increasingly heated debate over the future of megabanks. The debate has gained steam in recent months, in part because of recent comments from Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis.

Kashkari shocked much of the financial world, in a policy speech last month when he said that banks – like utilities – should be required to hold "so much capital they virtually can't fail."

Dimon strongly rejected the argument in his letter to investors.

"There is nothing about banking that remotely resembles a utility," he wrote.

Dimon said that banks simply have a different relationship with their customers than utilities do, noting that they are "more like partners" in their clients' affairs.

Unlike utilities, they also have obligation to turn away customers who are deemed not creditworthy. Doing so is crucial to a well-functioning economy, he said.

"This does not always create friends, but it is critical for appropriate lending and proper functioning of markets," Dimon said. "Banks have to continuously make judgments on risk, and appropriately price for it."

Dimon also reiterated his defense of JPMorgan's size and scope. He noted that only large, multifaceted companies like JPMorgan could provide services such as international payments to the industry's smaller players.

"This is a story of symbiosis among our banks rather than a binary choice between big and small," Dimon wrote.

Additionally, Dimon used the letter to highlight the JPMorgan's recent investments in technology. Notably, the company has begun working on new ways to limit how outside parties – such as data aggregators and payment companies – access customer information, he said.

JPMorgan and other banks last year blocked access to sites such as Mint.com and Yodlee, amid concerns about data privacy.

You can read a copy of the letter here.

Kristin Broughton

twitter