As the House Financial Services Committee hearing into recent failures at JPMorgan waned, bank CEO Jamie Dimon finally said what had already been obvious to everyone—he didn’t want to be there. “These are complex things that should be done the right way, in my opinion in closed rooms,” Dimon said. “I don’t think you make a lot of progress in an open hearing like this.” In the closed room, Dimon said, everyone would be “talking about what works, what doesn’t work, and collaborating with the business that has to conduct it.”
Dimon is indeed quite effective in closed rooms. He’s received personal audiences with Treasury Secretary Timothy Geithner to push back against a strong Volcker rule, and his staff has enjoyed several more. The closed rooms at JPMorgan are populated by throngs of former Congressional staffers and even former members. The bank has plied current members with millions in donations, including over $522,000 to the Senate Banking Committee, where Dimon testified last week, and $168,000 to members of the House Financial Services Committee just this year.
This works well for Dimon and his allies. The financial services industry was unable to defeat the Dodd-Frank legislation in public view because overwhelming numbers of Americans supported the bill—it was arguably the only popular piece of regulatory legislation in the Obama era—but Wall Street has operated in closed rooms over the past two years to delay and weaken the rules. Before the London Whale catastrophe, Dimon was on the brink of achieving a weak Volcker Rule that would allow a wide variety of risky proprietary trading.
Dimon admitted during today’s hearing that the moment he realized how large the losses at the bank were, he knew he’d end up in front of Congressional committees and that the Volcker Rule would become a hot topic of conversation. He presumably knew how serious of a problem this would be: a public flogging could revive popular opposition to weak Wall Street rules and draw unwanted attention to the backroom dealings.
This is why last week’s love-fest in the Senate was so troublesome—it was a valuable missed opportunity for Democrats in particular to focus and mobilize public attention towards stronger regulation of the financial sector.