Tags: banks

Dimon: Dump Too Big To Fail

Friday, 30 Oct 2009 07:12 AM

By Dan Weil

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Jamie Dimon, CEO of JPMorgan Chase, rejects the notion that banks are too big to fail, even his own.

“We think everything should be allowed to fail,” Dimon said at a conference in New York.

“But we need a resolution mechanism so that the system isn’t destroyed. To dismantle a bank in a way that doesn’t damage the system should be doable.”

Dimon said debt holders should be wiped out just like shareholders. The government has received criticism for its inconsistent treatment of others on the hook for failed financial institutions.

In some cases, such as Washington Mutual, bondholders were wiped out. But in other cases they weren’t, and in the case of AIG, even counterparties were made whole.

Dimon says he supports the idea of a systemic regulator, but opposes President Obama’s idea of a consumer financial protection agency, because it would fragment the regulatory system rather than simplify it.

Dimon called for balance on the compensation issue, saying that JPMorgan needs healthy competitors for the sake of the banking system. He said JPMorgan, which doesn’t face pay restraints, won’t take advantage of the situation by raiding other banks’ talent.

FDIC Chairwoman Sheila Bair agrees with Dimon on too big to fail. “I hope we see other measures taken that will create a more resilient, transparent and better regulated financial system including an end to the too big to fail doctrine,” she said in a speech.

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