“Time to Fight Back”: Jamie Dimon defies the rules

NEW YORK — Jamie Dimon spoke strongly against what he called an “onslaught” of regulation during a fireside chat Monday at the annual meeting of the American Bankers Association.

Dimon devoted more than two-thirds of his 30-minute speech to discussing how the banking industry has been regulated — not just under the Biden administration, but since the Obama era. Specific topics included the Basel III capital completion rules, the exchange fee rules imposed by the so-called Durbin Amendment, the Consumer Protection Bureau’s new open banking rule, FDIC insurance reforms, and the role of banks in advocacy.

“Dodd-Frank did a lot of things that were needed,” Dimon said, arguing that the 2010 law also did a lot of things that weren’t needed. “I once made a spaghetti diagram and looked at all the new agencies and all their overlocking rules. And we can’t fix mortgages. We can’t fix Durbin. We can’t fix millions of things, (and things) needed to be fixed. It’s an onslaught, and it’s unfortunate.”

“Banks are under so much pressure, and a lot of banks — the truth is — don’t want to deal with regulators because they’re going to come down on you,” Dimon said. “It’s disgusting. It’s time to fight back.”

“We don’t want to get involved in a lawsuit just to make a point, but I think if you’re involved in a knife fight, you better get a knife, and that’s where we are.”

Of the Basel III proposal, which is being revised due to stiff industry opposition, Dimon said: “The devil is in the details, and there are a lot of details.” He also said that many efforts to tighten capital standards were “not warranted.”

As banks await the finalization of Basel III rules, one key question that has emerged is whether regulators will revise their initial proposal or issue a re-proposal.

CFPB Director Rohit Chopra, who sits on the board of the Federal Deposit Insurance Corporation, said last week that he favors a review rather than a re-proposal to move forward.”as soon as possible.” Federal Reserve Vice Chairman for Supervision Michael Barr said last month that he supports re-proposing the rule. The Office of the Comptroller of the Currency has also said it favors a new proposal.

Dimon said Monday that he also favors a new notice of proposed rulemaking. “I was told the FDIC was not going to vote on it. The OCC and the Federal Reserve may (publish a notice of proposed rulemaking without the FDIC’s signature). I wish we could at least see and start commenting on it.”

Dimon said the collapse of Silicon Valley Bank last year highlighted the flaws in several key provisions of the Dodd-Frank Act, including resolution planning and stress testing. According to him, none of these measures prevented the collapse of the SVB or the subsequent crisis.

In response to last spring’s banking crisis, the best thing regulators can do is focus on reforming liquidity requirements, Dimon said. He also argued that changing the deposit insurance regime could be helpful, but warned that the process could be politically messy.

“If we open up FDIC insurance, which is possible, the problem is that … lawmakers are putting more and more things in there. It just becomes a Christmas tree of shit,” Dimon said. “So, I don’t mind. I’m just concerned about that particular thing.”

Debit exchange fees, which were cut more than a decade ago by Durbin’s Dodd-Frank amendment, also came under scrutiny Monday. Dimon has abandoned attempts to lower existing debit price limits.

“It was all wrong in the beginning,” Dimon said. “And while it was put into Dodd Frank, we don’t think the Fed got the numbers right. Now we are going a war with retailers — the big box guys — because they push it year after year.”

JPMorgan It is estimated that the first implementation of the Durbin Amendment left five to 10 million people unbanked, Dimon said. He argues that the second step will push more Americans out of the banking system.

Dimon also argued that the debate between banks and retailers over interchange fees is tainted by what he called a “big lie.” He was referring to the costs that retailers incur when handling cash.

Dimon said it costs small merchants 5-7% to handle cash, while large stores can cost 1% or 2% because of the costs like insurance, defalcation, logistics and fraud and counterfeit prevention that retailers must incur to actually move cash to the bank

“If (sellers) don’t like debit or credit, let them take cash,” Dimon said. “But to tell us it doesn’t cost any money and they want it for free … When have you ever had a government (dictating) prices between two big industries?”

Dimon also criticized the CFPB the rule of open bankingwhich was completed last week.

“Rohit (Chopra) is a very intelligent guy who has one major flaw – which I told him personally – that you use your brain to justify what you already think,” he said.

“No one is against open banking,” Dimon said. But he argued that the CFPB rule poses a risk to both bank customers and payment systems.

“Instead, responsibilities for data sharing should be clearly delineated,” Dimon said. “If someone takes all that data and then somehow the money is stolen because of what (the third party) did, they’re going to be responsible, not (the bank). We will fight and we will win this one too.”

Dimon appeared two weeks later JPMorgan reported third quarter profit it beat analysts’ expectations with strong revenue growth driven by improved investment banking results and higher net interest income. However, the bank warned of a potential deterioration in credit quality.

Other uncertainties remain for the banking industry, which is looking down compression is coming of net interest income in 2025 as the Fed continues to cut interest rates.

Dimon said that while the U.S. economy was “thriving” with strong home and stock prices, a strong labor market and increased wage growth, he remained concerned about the potential for persistent inflation.

“My concern is that inflation, in my view, may not go away that quickly,” Dimon said. Massive budget spending, remilitarization of the world, a green economy, and trade restructuring are all inflationary costs that can cause high prices for goods and services to persist.

“It’s a really big deal if we have stagflation, which is a recession with inflation,” he said. “And I wouldn’t rule it out. I’m not talking about next year. I’m not making a prediction, but from a risk management perspective for all of us, I’d give it some thought as well. “

Dimon barely mentioned next week’s presidential election Monday, even though he was asked about it. Dimon, who did not endorse the candidate, publicly praised the policies of former President Donald Trump, although he reportedly expressed support privately for Vice President Kamala Harris.

Kyle Campbell contributed to this report.