Chamber of Commerce president: don't overreact to JPMorgan losses
US Chamber of Commerce president Thomas Donohue, at a Monitor breakfast Monday, advised a wait-and-see approach after JPMorgan's $2 billion in trading losses.
Michael Bonfigli/The Christian Science Monitor
Mr. Donohue argued that the best response is “wait and see what happens here,” when the bank is able to get out of the trading positions that have triggered the losses.
“Let’s see when the numbers come out. I think the bank will make a ton of money this quarter,” he told reporters at a breakfast Monday hosted by the Monitor. “So the amount they have to put out might be less than you think.”
The chamber is an important voice in Washington for the business community.
A different view of the potential outcome for JPMorgan came from Michael Platt, co-founder and chief executive officer of BlueCrest Capital Management in London. He told Bloomberg Television on Monday that if Europe’s debt problems worsen, JPMorgan’s potential losses could increase.
“If we end up with a catastrophe in Europe in the short run, they’re probably not [trading] positions that anyone would want to have,” Mr. Platt said.
JPMorgan CEO Jamie Dimon, speaking at a conference Monday organized by Deutsche Bank, said the firm is making progress in limiting the damage. And the bank’s balance sheet was “barely nicked” by the losses, according to a report from Bloomberg News.
At the Monitor breakfast, the chamber president criticized what he said was the Obama administration’s aggressive response to JPMorgan’s announcement of major trading losses.
“Immediately after Jamie’s guys announced this problem, the administration went hammer and tongs after these guys ... telling people they were going to do more than even what Dodd-Frank did,” Donohue said. Dodd-Frank is federal banking-reform legislation passed in 2010 in the wake of the financial crisis.
In his weekly radio address on Saturday, President Obama talked about the situation at JPMorgan without mentioning the bank by name.
“We found out that a big mistake at one of our biggest banks resulted in a $2 billion loss,” Mr. Obama said. “While that bank can handle a loss of that size, other banks may not have been able to. And without Wall Street reform, we could have found ourselves with the taxpayers once again on the hook for Wall Street’s mistakes.”
The president used the JPMorgan situation to push back against Republicans and members of the business community who are seeking to weaken implementation of Dodd-Frank, including the so-called Volcker rule, which limits banks’ ability to make speculative securities trades for their own portfolio.
“For the past two years, too many Republicans in Congress and an army of financial-industry lobbyists have actually been waging an all-out battle to delay, defund, and dismantle Wall Street reform,” Obama said in his radio address.
Donohue on Monday was caustic about the Volcker rule. “The Volcker rule is 270-some pages, and if you gave it to six experts on the subject, they would come back with seven interpretations of what it means,” he said.
Still, the chamber executive granted the need to keep watch on the biggest banks. “I do believe that it is important to look at these very big banks,” he said. But Donohue stressed the need to weigh the impact of both domestic regulation and new international rules, called Basel III, which require banks operating overseas to hold more capital.
JPMorgan is taking steps to prepare for these new international regulations, Mr. Dimon said Monday.
Since businesses rely on banks for funding, “we have to be very careful that we deal with this in a prudent way and we don’t do it because we are mad,” Donohue said.
Otherwise, “by the time you get finished with all of this, you could have one of these deals where the banks take all the money they have and put it in the vault and [don’t] want to lend any of it,” Donohue said, noting that he was exaggerating to make his point.